David Novak 0:04 

Welcome to How leaders lead where every week you get to listen in while I interview some of the very best leaders in the world, I break down the key learnings so that by the end of the episode, you'll have something simple you can apply as you develop into a better leader. That's what this podcast is all about. And today, my guest is Carol toe May, the CEO of UPS. And let me tell you, there aren't a lot of leaders out there who have the smarts, and empathy. And let me tell you, energy that Carol has. She actually retired in 2019, after nearly two decades as the CFO of the Home Depot. She was already a legend. But then the opportunity to take the helm at UPS came along, it got her out of retirement and back into doing something that she absolutely loves, which is helping people develop. And boy, does that passion for people come through in this conversation. But that's not the only thing. You can also hear just how committed Carol is to being financially successful. Now, if you've ever felt like you had to choose between focusing on your people are making money, then just keep on listening. Carol is proof positive that you can do both. Everything changes when you see your people as an investment, not as an expense is such a powerful mindset. And it's one you can learn from Carol right now. So here's my conversation with my good friend, and soon to be yours, Carol Tomi.

Believe it or not, you and I have a lot in common from our college days, we were both lousy students in college until we found out what we loved. Yours was finance. And mine happened to be marketing. And we both were with our future spouses at a Roman toga party. Oh, my boss.

Carol Tomé 2:05 

Crazy funny. Good.

David Novak 2:08 

Crazy funny and true, right? Crazy

Carol Tomé 2:11 

funny and true.

David Novak 2:13 

Tell me, how did it how did you discover your love for finance?

Carol Tomé 2:17 

Well, you know, it's, it's really interesting, I should have known it as a little girl because my dad was a community banker, but I didn't think so I thought I was going to, you know, be a botanist, and actually save the world by saving rare plants. That didn't work out so well for me. So I started working for my dad, during the summers of college. And that really introduced me into the world of finance. And I found that it was my true love.

David Novak 2:42 

So your dad was a banker? Do you have a story from your childhood days that really impacted the kind of leader you are today?

Carol Tomé 2:47 

Oh, yeah, you know, my parents both taught me the importance of giving back. You know, they taught us to whom much is given much as expected. And I'm so grateful for those life lessons that I learned as a little girl, because that really pushed my leadership agenda forward.

David Novak 3:02 

Who believed in you before you might have even believed in yourself, Carol?

Carol Tomé 3:06 

Oh, for sure. My parents and my grandmother's, they told me I could be anything and do anything that I wanted to, and I believed them. And you know, I grew up in a town of 3000 people in Jackson, Wyoming. So I thought I could rule the world because they told me

David Novak 3:18 

I could, how do you instill that belief in others?

Carol Tomé 3:22 

Well, every day, I believe that my job is to invest in people and help them reach their highest potential, whatever it may be, you know what I find that a lack of confidence holds people back sometimes, because they don't believe that they can do it. And yet we know time and time again, if you put people in opportunities that show us how high they can go. So I try to do that by providing people stretch opportunities,

David Novak 3:47 

you know, without mentioning any names. Can you give us a little example of where you really got turned on by really helping somebody discover how much power they had from within?

Carol Tomé 3:56 

Perhaps it was the biggest lesson I learned early in my leadership days was the importance of putting people first I had a woman who was working for me who really needed some coaching. She wasn't hitting it on all cylinders, and she needed some coaching. And David, I didn't want to do it. I didn't understand the importance of leadership that's about investing in them and putting them first. In fact, I was so not wanting to do this, that it was time to give her her performance review. And I actually gave her review on the phone. Well, you can imagine what she did. She quit. And you blame her? Of course not. But what was in my face is that she didn't quit the company. She quit me. She quit me because I was a bad leader. So I vowed on that day, that from that moment on, nobody would ever quit me again. If they loved me they were leaving me because it was a great opportunity. Or they were going to leave me because it was time for them to go retire or the job wasn't right for them, but no one was going to quit me. And since that incident, which happened in the 1980s No one has ever quit me because I'm laser focused on putting people first.

David Novak 5:03 

You know, that's just such a great example of learning from something that doesn't necessarily go your way. And then what have you learned about giving feedback? And what's a one on one coaching session with Carol Tomi like today?

Carol Tomé 5:16 

So feedback is a gift, if you're willing to receive it, I think it's a gift if you're willing to give it as well, because sometimes people are conflict avoidant. And they think that feedback is conflict. It's not conflict at all. It's development. So I call it tough love. I'm a straight shooter. And it's in the moment, I don't let time pass. If I see something that's awesome. You know, I I'll call it out on the moment, if I see that there's something that needs some adjusting, I'll pull a person aside and give them that feedback, right then, and then oftentimes will agree upon, well, what are the next steps so that I can continue to give feedback as they're working on the next steps?

David Novak 5:57 

That's great, you know, and as you were climbing the corporate ladder, How'd you learn to balance the need to collaborate and at the same time, differentiate yourself from others? You know, it's not easy. I could tell you, I'm very competitive. And I'm sure you're competitive as well. How do you find that balance?

Carol Tomé 6:15 

Well, I realized, particularly in companies of scale, where there are a lot of people that you have to collaborate to succeed, and I looked at it through the lens of a banker, I was a banker in my early career, and I realized that the power of building deposits by collaborating really, really helps when you need to take a few withdrawals to get some things done. And as a finance leader, I was oftentimes taken withdrawals, telling people, they couldn't have that capital they wanted or we needed to cut the budget. But because I had built up deposits with them, by helping them achieve their business or personal objectives, I was able to take those withdrawals.

David Novak 6:52 

So you started out as this I'm sure hard driving finance expert. And do you recall the time that aha moment where you said, you know, I've got to really evolve from being an individual contributor to actually be in a leader.

Carol Tomé 7:07 

When I was named the CFO of the Home Depot, it was just a really special day for me, and Bernie Marcus, who was the chair of the board at that time, called me into his office. He's an iconic retail leader, and I had never been called into his office before. But I was thrilled to go in and I sat down on the couch in his office, he said, Carol, I have two pieces of advice for you. He said, The first piece of advice is this, I think you're very charming, and you should use your charm on Wall Street. And I said, Well, I can do that. And then he said, I won't know you're doing your job until somebody calls you a, b. And you can fill in the rest of the letters, as well, I can do that, too. So my first year as CFO, I was the be fill in the rest of the letters. And at the end of my first year, it was time for 360 reviews, you know, when you get reviewed by your peers, and your subordinates and your bosses, and my 360 review came back and it was terrible. And I'm like, Oh my gosh, I leaned into this too hard, I gotta lean back and understand that in my position of power, I need to actually lead and lead by collaboration, and lead by inspiration, and lead by just being the bee, you fill in the letters.

David Novak 8:27 

And Carol, you seem to be a big proponent on taking on tough jobs in new areas that will really grow yourself. Give us an example of how that worked for you.

Carol Tomé 8:36 

Well, my mother told me that every day should be a learning day. And I've had so many opportunities to take advantage of that great advice during my career. For example, Home Depot, entered China through an acquisition and was running 12 retail stores in China and the business model was not right for China. And I kept talking to the leaders of the company, we should shut this down, we should shut this down. We're not making any money. We've got the wrong business model. And I was finally told China's too big, it's too important. We're not going to shut it down and you're gonna run it. I'm like, I'm gonna run it. Yes, you're gonna run China, and you're gonna stay the CFO of the company. I'm like, Alright, I'm going to run it. And it was such a great learning opportunity for me because I was able to do everything in our power to fix the stores. But we still didn't have the right business model. So I put together a different business plan, pitch the plan to the board, which was to close the existing home improvement retail stores, but open up standalone paint stores, because as you know, with your business and former business in China, the paint in China isn't very good. I'm like I can stand up standalone paint stores have the paint manufactured in the United States, ship it over to China sell it to China makes 35 points of margin and make the stores profitable in the first year. So I convinced the board I could do that. And we did the stores were for a while profitable in the first year. So then I went to the board and said, Okay showed you that we can make a buck in China, but we can't scale it, it's going to take too long to scale. So we should shut it down and close this business and exit the country. And so we did. What a great learning for me. Fast forward now to 2022. And we've been dealing with all kinds of challenges in China UPS is a huge business in China. So I took my lessons and learnings from that experience back in the 90s. Today, to make sure that we can stay essential that we can continue to operate and make a buck in China. It's a really good learning.

David Novak 10:33 

You know, it's really interesting that whoever you worked for at the time, you were the naysayer in China, and then they handed the problem to you. Do you do that? Now? Is that something you do? Oh, all the time.

Carol Tomé 10:45 

Be careful when you start complaining about things, because we'll just give you that opportunity to fix it.

David Novak 10:54 

And it leads to such a great growth experience, no matter what the outcome is. You mentioned Home Depot, and how did you find your way to Home Depot in the first place? And and as I understand it, you were the first officer to come into the home depot from outside the company. What was that like? And and how did you get acclimated?

Carol Tomé 11:13 

Well, my husband and I moved to Atlanta, Georgia in 1992. As a result of my work, I had just completed an IPO for a paper and packaging company called Riverwood. International at the time, now known as graphic packaging. And as a result of the IPO, they asked me to come down and join the company. And I did and my husband Ramon followed me in the early 90s. I had never heard of Home Depot at that time. Home Depot did not exist out in Colorado where we were living. And my husband didn't move with me originally. So I would commute between Atlanta and Denver. And that's a long commute. So I wouldn't go home every weekend. And on the weekends where I didn't go home, I would drive Atlanta getting to know our city. And one day I was driving down the street and I saw the corner of my eye, a parking lot filled with cars and a store with a bright orange awning. I'm like, I wonder what that is. And I love to shop. So I drove into the parking lot and walked into my first Home Depot store. And I was blown away. The merchandise was piled high. The associates had aprons on it, and they were having fun with the customers. And like this is just way cool. So I walked the store for about two hours. Just love love the retail experience that night I called my husband Ramon, I said, you know, there's this company. It's called the Home Depot. I don't know much about it, but we should buy stock. So we did. And then he moved to Atlanta, right? He moved to Atlanta, and we bought our first house and we're home home do it. Di wires, you know, we'd love to do it ourselves. So we were in the stores every weekend, we loved Home Depot. Then one day I'm happy at work. And I got a telephone call from my search firm who said, you know, Home Depot is thinking about going outside of the United States. And they've never done that before. And the company I was working for had a global presence. They said they really liked to talk to you about joining their team and helping them grow globally. I'm like me, you know, I love the store. I'm a shareholder. Okay, I'll go over, I'll talk to them. So here's the true story. I had my first interview. And after my first interview, I'm like, I don't think this is for me, man. I love the company. But I don't know if I'm going to be challenged enough. The cash pours out of the stores, it's you know, it's got a great credit quality. I was working for a company that was junk rated at the time. I'm like, you know, this is I just don't know if I'm going to be challenged enough. So they said, Do you want to take a minute before you tell the company? No. I said, Well, I probably should take a minute. So they said why don't you go meet with one of the founders Arthur Blank. I'm like, alright, I'll go meet with Arthur. And so Arthur is another retail icon. And he said to me, he's like, Carol, we don't know how high is up for you. That's for you to show us. But we will give you every opportunity to reach your highest potential. I'm like, oh, every opportunity to reach my highest potential sold. And so I joined in 1995 when the company had like just 400 stores and revenues was just $14 billion. And I'm so very glad that I didn't say no, because it's an incredible company. And I had an amazing experience there.

David Novak 14:10 

And you were the first person to come in from the outside. And it's I think it was probably a very male culture as well. You know, how did you get acclimated and you know, did they kind of put you through the wringer.

Carol Tomé 14:22 

They hired me for a particular purpose. They wanted to grow outside of the United States and they wanted to actually increase their financial acumen. Because for so long everything that Home Depot touched, just turned to gold, but the company was maturing and they wanted to increase their financial acumen. And every time I would open my mouth and talk about things like economic value added or return on invested capital, or we should be hedging the Mexican peso, they would just look at me like, Who are you and what are you talking about? So I'm like, Oh, dear, this isn't gonna work. And you know, Arthur was really he had such a big impression You're not me, he's like, you know, Carol, you kind of decide if you really like retail. And I'm like, I'm an amazing consumer I shop all the time, I need to learn retail from the other side, from the merchandising side, from the supply chain side, from the customer service side. So I would put on an apron and I would in my free time, evenings, weekends, I would work in the store. And I learned so much about the business and fell just in love with the business. Now I'll tell you the truth, I tended to stay out of the electrical and the plumbing aisle, because I didn't want to have anyone burned down their house or flood their house because advice I gave them. I was really really good at the gardening aisle. I was great. The garden now.

David Novak 15:39 

You got to know what you're good at, you know? Yeah. And you were very good as the CFO of Home Depot, you know, the shareholder value grew 450% In that time. What do you think you did as CFO to really make such a huge difference?

Carol Tomé 15:53 

My learning is that the best finance people are business people first and finance people. Second, I knew the business inside and out. All the dials that you could turn to create value was really focused on capital allocation and appropriate capital allocation. Because there can be strategic adventurism that doesn't create any value. And we see that happening. Lots of companies and I was laser focused on how we allocate capital. And one thing that Frank Blake did when he became our CEO is he added strategy to my portfolio. And I think that makes so much sense to have Strategy and Finance aligned because it's so much about how you allocate capital. I also walked in the shoes of our people of our associates. Know Home Depot's leadership construct is an inverted pyramid, where the leaders of the company are at the bottom of the pyramid, because they bear the weight for the actions that they take. And the decisions that they make, bear the weight to free up the associates to take care of the customers. Because Bernie Marcus said, if you take care of the customers, everything will take care of itself. And I actually believe that to my core, I believe that what Peter Drucker said, he said, culture eats strategy for breakfast. I think that's right. If you've got a culture where you put people first, you're serving them right leaders second people first, it makes a huge, big difference on the customer experience and the financial results.

David Novak 17:20 

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Well, you've been very focused on delivering a great bottom line, you've done that terrifically at Home Depot, and you're doing it now again at UPS. And you believe in putting people first a lot of people think he can't do both. I mean, how do you balance putting people first and still be this results oriented executive that you obviously are?

Carol Tomé 18:21 

Well, I think it depends on your philosophical approach to people. Are they an investment? Or are they an expense? I think they're an investment. And if you invest in people, they're gonna give you great customer service and great and deliver great results. And I've certainly seen that in spades here at UPS and I saw it at Home Depot to that doesn't mean that you shouldn't constantly look for opportunities to optimize your organization's and drive productivity through technology and other innovation. But if you invest in your people, they'll do amazing things for you.

David Novak 18:59 

So you retire from the Home Depot, and 2019 and out of the blue ups where you've been on the board since I believe 2003 has the CEO leave and you get asked to be the new CEO. Tell us a story about how this happened.

Carol Tomé 19:14 

So I was very happily retired. I had groomed my CFO successor when he was ready for the job. I got out of his way and Richard MacPhail who replaced me at at Home Depot is doing an awesome job so proud of him. So I was happily retired. I was on my farm in the northwest part of Georgia with my husband joined a number of corporate boards and Ramona and I had created our own family foundation and we were starting our philanthropic work. So it was all good. I had was not looking for this. I had not planned for this. And when the UPS board came to me, I should back up and say well, why did they even look outside? They worked diligently as David Abney was getting ready to retire to think about the skills and attributes that the next CEO should possess. And they came up With a persona of what those skills and attributes are, or were at the time, and when they match that persona against the existing leadership team, well, UPS had a terrific leadership team, there was no one that really matched that those skills and Persona they were looking for. So they decided to go outside and they launched a formal search. And as they launched the formal search, they came to me and said, Would you like to be considered? And I'm like me, you know? Don't you think I'm too old? I'm pretty tired. I'm in my 60s. Don't you think I'm too old? And they're like, no, no, we don't think you're too old. And we'd really like you to think about this. So I'm like, Ah, alright, I'll think about it. So I thought about it. And I'm like, Well, why would I do this? Why would I go back into the workforce? And the first reaction was, well, I love ups. It's, it's a value based company whose values are aligned with mine. And that's super important to me. Secondly, is, you know, I love to create value. And the stock price at UPS had been flat for about six years, and the operating margin was contracting, and the return on capital was contracting. And I'm like, Huh, I wonder if I could get in there. If I couldn't figure out how to turn the dials, you know, working with the team, turn the dials to create some economic value, wouldn't that be fun, because I like to do that. But more importantly, I love to develop people. That's what I really love to do. And I'm like, gosh, this company has over 500,000 people, I could really develop a whole lot of people. And wouldn't that be fun? So all of those questions were being answered in a favorable way. But then I realized that I needed to have the support of my spouse, because we've been married nearly 40 years. And it was really important to me that we stayed married. So I said to remote, I'm like, What do you think? What do you think about this opportunity? And he's fully retired, and he said to me, would you please go back to work? You are driving me crazy. So that I had his affirmation, which was awesome. So you know, I said, Yes, I'd love to be considered. And I was just honored and privileged to be asked to take this role.

David Novak 21:56 

Well, it's such a great company, and it has such an impact all around the world. And what did you learn Carol, as CEO, that you didn't know, as a board member,

Carol Tomé 22:06 

you know, I had some big aha was actually, it was board members, we drop into a company of four or five times a year, we hear what management wants to tell us, you can't step over and get into running the company. So there's a line right at the questions that you can ask and those that will be answered. You know, I didn't know as much as I thought I would know coming in. But I was really very fortunate to be, I'll call it an insider outsider. Because this is the first time that UPS had gone to the outside for a CEO. And its culture is very, very deep and very unique, 115 year old company. So I was so worried that I would be rejected, you know, like a transplant being rejected by the body. But I wasn't I was actually very much welcomed, which I was so grateful for, because I knew I couldn't do it by myself. But here are some of the big learnings that I had, you know, as a board member, we hadn't paid enough attention to associate happiness. And when I got into the company, and I said, How do we measure associate satisfaction? I was told, Oh, well, we take surveys and we measure satisfaction. I'm like, well, what's the score? How do we measure they'd like, well, we roll up all the survey into a likelihood to recommend, okay, well, what's the number? What's the likelihood to recommend? And the response was, Well, it's 51%. And I'm, like, 51%, that means a 49% of UPS just wouldn't recommend us as a place to work. I'm like, hair on fire, what are our action plans, and we didn't have any. And so that wasn't gonna work for me. So we put together action plans to start to move the needle forward and actually set a North Star and said, we want that likelihood to recommend number to be 80%, not 51%. And it's now north of 60. So we've moved it in the right direction. We've got a ways to go. But we're moving in the right direction. I also learned that we had a lot of a lot of initiatives and flight. There was so many initiatives and like I couldn't even count them. I'm like, Oh my gosh, how do we know what's going on? Who's doing who's on first? What's going on? So I'm like, we're gonna focus on what's wildly important. We're gonna really narrow down what's wildly important to our customers and our, our shareholders and our people. So we had all the inflight initiatives up on a wall in a huge room and all the inflight initiatives are up in the wall, and I gave the leadership team, green dots and red dots. And I said, put the green dots up on those initiatives that we should continue and put the red dots on those initiatives that we should stop, all the green dots went up, not a red dot went up. I'm like, No, we're not leaving the room until you put the red dots up. So the red dots went up. And then it was fascinating to see all the initiatives that had no dots, no energy to keep or stop, because they weren't wildly important. So we narrowed the list down to those initiatives that were critically important to drive our strategy forward. which is customer first people at innovation driven. And I think that strategic clarity and focus and the narrowing has really translated into better performance and higher satisfaction from our customers, as well as our people.

David Novak 25:14 

Tell me about the monthly wildly important video that you send out to UPS employees.

Carol Tomé 25:20 

Yeah, so it's just what's wildly important to me. It's not scripted, we film it on an iPhone. And it's what's Top of Mind wildly important to me. And it runs the gamut. It can run from safety, to mental health, to you know, kicking ass and taking the competition. It's just whatever is important to me. But it also allows me to get a personal connection with UPS errs, because that one, I have very few regrets. But one of my regrets is I will never meet everybody in our company face to face, I never will. It were just too big, the scale is just to enormous I never will get to meet everybody face to face. And so I try to have a connection with them, at least virtually.

David Novak 26:00 

Now, Carol, I understand in these wildly important videos, you also tell people when you screw up or you make a mistake? I do. Tell us about that. What Why do you make yourself so vulnerable?

Carol Tomé 26:11 

Oh, well, I think it's really important to show vulnerability as a leader. And look, we're not perfect. And if I screw up and I do, I'm gonna be the first one to call it out. And also talk about the learnings from it. This is an important part of our culture transformation. Here, too. We were a company that didn't like to bring bad news forward, we thought, well, if we just worked it, we can work this issue and it will disappear. That's very dangerous. Actually, it's very dangerous. I'd rather have the bad news be brought forward. And then we can work on it together to solve the problem. And if you mess it up, it's okay to bring it forward, because we can work it through. So I do it really to teach that it's okay to show vulnerability. And to learn from it. This is every time something goes sideways here. My question is, what have we learned?

David Novak 26:57 

Your I know you're a big believer in culture. And you mentioned you joined ups because it was value based? What have you decided to preserve about the UPS culture? And what are you changing?

Carol Tomé 27:09 

Has, so I have never in my life seen that company like UPS, no matter what comes its way it gets it done. Think about this, I started, you know, onboarding in March of 20 became the CEO of June of 20. You know, in COVID, world UBS's were essential workers. You know, when I onboard, we're like, okay, everyone's starting to shelter in place, everyone's shelter in place. And yet, we had to continue to deliver essential goods so that people could live as they're sheltering in place. And you wouldn't believe what this company did to enable itself to do that. We didn't have PPE hanging around, we had to source that from around the world, so that we could protect our employees, we had to change our operating procedures, we had to get authorization from governments around the world that we could continue to fly our planes and enter their space. So we could pick up those goods to get them delivered on believable in the second quarter of 20. We had to hire 40,000 People just to manage the volume. And UPS did it and they did it beautifully, no complaints, they got up every day, went into the office, if you will, you know went into the packing centers, the sorting centers, were flying the planes driving the package cars and delivering packages. And since then, you know, we've had so many really amazing opportunities to just show up. You know, when the COVID-19 vaccines were approved, we were the first company to deliver those vaccines. And we delivered every vaccine with 99.9% efficiency, we never missed it. We never missed a delivery and we kept those vaccines cold, we manufacture dry eyes to make sure we could get those vaccines delivered and keep them safe. So you know, ups are doers. And I would never change that our service levels for the past five years of beat every competitor and they're going to do it again this year. We are the best in the world. And we're not going to change that.

David Novak 28:59 

So what are you trying to bring to the culture? That's different? Yeah. So

Carol Tomé 29:03 

sometimes our behaviors don't match our values. Sometimes they don't, you know, and in this world, the world needs more empathy. We need more listening, we need to take a moment to say, Hey, how are you doing? Right? Lots of people are dealing with lots of issues. We've got mental health issues all over the world. And we need to make sure that our leaders, our people are more empathetic. That's just really, really important to me. So we launched a new leadership framework in 2022 is a very, very simple framework. It's head, hearts, and hand head is all about strategy. Heart. Well, that's the empathy and then hand. Well, that's the doing aspect of our culture that we never want to change on the strategy part. You know, I think our strategy is clear. But I will say we like everybody else we need to improve our digital fluency. The world is being eaten by technology. We need to Make sure that we understand that and that the solutions that we are providing for our customers are really powered by technology. Because every every experience is off of your phone. So we are teaching, we took all of our leaders, our top 150 leaders and put them through digital fluency training and 2022. And we're going to expand that around the leadership team, and 2023. Because it's critically important,

David Novak 30:21 

you know, when you make changes as a leader, especially in an environment where you didn't necessarily build from the ground up, you know, you can always get pushback. Has this been true for you, Carol? And if so, how have you handled it? And is there an instance where you had pushback, and you had to work through it to get to where you really wanted to go?

Carol Tomé 30:42 

Yeah. So when I joined the company, it became apparent to me that some of our policies are not contemporary, and actually, were impeding our ability to attract the best and brightest. And by that, I mean, we didn't allow natural hair. So if you were a African American, and you wanted to have an afro, or a twist or a braid, we didn't allow that. We didn't allow tattoos. So if you had a tattoo, it had to be covered up. I'm like, for heaven's sakes, aren't, you know, our tattoo policy was more restrictive than the US Army. I'm like, we gotta let this go. We got we got let people bring their real, genuine, authentic self to work. I'm okay with natural hair. I'm okay. With facial hair. For men. We didn't allow that either. Oh, by the way, in today's world, you see a lot of facial hair. You see a lot of natural hair, and you certainly see a lot of tats. I think the latest statistic is like 40% of Americans have a tattoo. So I'm like, we gotta let that go. We don't want facial tattoos, we will don't want anything disrespectful. But we gotta let that go. Our people, for the most part, loved it. Our retirees sent me a lot of nasty grams. They didn't love it so much. They didn't. But and I really, I appreciate you reaching out. I appreciate your feedback. I do. But I believe that to move this company forward, we need to allow people to bring their real, genuine, authentic self to work.

David Novak 32:01 

Now, that's great. And, you know, I know you've thought a lot about the importance of understanding your personal purpose, how did you end up defining your purpose for yourself. And give me an example of how you use that in the way you make decisions?

Carol Tomé 32:17 

Well, for a long time, I thought my purpose was to make a difference. And that's a good purpose. And I really tried to do that every day. But when I got to UPS, I first asked the company to work on its purpose. We knew we were a values based culture, we knew that we move 6% of the US GDP every day and 2% of the world's GDP every day. We knew what we did, but we hadn't declared our purpose. So I put together a cross functional team. And I said, your job is to define our purpose. So they did a masterful job of interviewing UPS errs and retirees and customers and suppliers and communities. And they iterated and iterated and landed on our purpose, which is moving our world forward by delivering what matters. And I love that purpose so much, because it's not just about moving goods, it's about doing good, too. And as the company was working on its purpose, I started reflect on May, and say, Carol, you kind of spend some time here you need to really think about your purpose, making a difference is good. But it's not deep enough. So I spent a lot of time I was very reflective. And this is what I landed on, which is lead to inspire, serve, to create give to remain. And this purpose for me really drives me every day. So I know that one way I can make a difference here is to inspire over 500,000 people every day to get up and continue to do it. So my I spent a lot of time talking to people virtually, or in their starting centers or on the package cars, right along it trying to inspire people to reach their highest potential to continue to do great service, you know, serve to create is all about investing in people and helping them reach their highest potential. This gives me joy. I know it's my purpose. You know, if I have lost count of the number of CFOs, who are people who worked for me, who are now CFOs of publicly traded companies, I am super proud of the people who have worked for me who are now CEOs of publicly traded companies, including Ted Decker, who is the CEO of Home Depot. I hired him 20 years ago, how Lawton who's the CEO of Tractor Supply, and I can go on and on. So I love to invest in people serve to create help people reach their highest potential and then give to remain. No, I love Hamilton. And one of the lyrics and Hamilton is you know, when you're gone, who's going to tell your story. I'm not giving the justice, but that's kind of what it says, when you're gone who's going to tell your story and I'm like, Well, if I give, if I've given my time if I give my money, then maybe when I'm gone somebody will tell my story.

David Novak 34:49 

I love all three of those things and it's great that you've thought that through and and you encourage people to develop the purpose and then not just develop it Did you say go public with it? You know why?

Carol Tomé 35:03 

Well, first of all, I think we all should do it, we all should have a purpose, it changes your life. You know, when I declared it, I'm like, it just changed how I interacted with my family and with my friends and with my colleagues and with God, it changes your life in a very positive way. It also gives you direction. So if you wake up in the morning, and you're on the wrong side of the bed, you're like, Well, I know what my purpose is. And it gets you back on the right side. So you can go on declaring it, I believe in declaring it because if you declare it, you own it, and you do it. So I think it's just really important to make it public, because then other people can actually hold you accountable to it. Remember, feedback is a gift. And so if you're not living your purpose that you've made public, then people can give you feedback on that.

David Novak 35:49 

We'll be back with the rest of my conversation with Carol Tomi in just a moment. Now, Carol mentions this inverted pyramid concept that she and the other executives at the Home Depot lead with. It's such a powerful idea. And you really need to hear Frank Blake, unpack it. He's the former CEO of the Home Depot. And the conversation I had with him, will help you see your employees the way they should be seen. And it'll help you lead your business.

Frank Blake 36:15 

Everything you do is uphill, nothing cascades down. When I hear leaders say that they've got a message cascades down through the organization, I go, Oh, no, it doesn't. Gravity is not your friend in an organization, you have to push your message up. Because in the end, people really don't know why they care what you're talking about. You have to provide that motivating force for them to care about what you're saying,

David Novak 36:45 

go back and listen to my entire conversation with Frank, Episode 19 here on how leaders lead. You know, you've had an amazing turnaround. And since you've become CEO, and Wall Street, I obviously loves what you're doing with your better not bigger strategy. Tell us about it.

Carol Tomé 37:08 

When I arrived and said, I've got to get inside the business model to determine really how we can create some economic value here. What I discovered is that we were treating every package the same, well, all packages are not the same. All packages are not created equal. So instead, I said, let's step back and think about the customer segments that we want to serve. And those segments should be the ones that value our end to end network and are willing to pay for it. So through that analysis, we determined that one of the segments we wanted to serve most were the small and medium size customers. We had been losing share and that segment for seven straight years before I joined. And this is a segment that really does value end to end networks. And my question to the team is, well, why? Why are we losing share? They're like, well, we don't have the fastest time in transit. And I'm like, Well, what is it going to take the best of time and transit and they're like, Well, money, and I'm like, Well, we have money. Let's do it. So we did it, we accelerated a project that wasn't fly but not scheduled to complete for a couple of years, we got it all done in the first year I was there, we started to take share. And since then we've never lost share we gained share every quarter sequentially. So that then said, Alright, let's pivot into the areas of the market that value our network, let's grow there. And if the revenues or the boxes have to equal 100%, that means some things are going to shrink. While some things grow. Our largest customers, Amazon, we've been very public about this. We love Amazon as a great customer, our largest customer, but they're building out their own supply chain too, as they are delivering more of the inventory that they hold in their stocking DCS. So we reached agreement with Amazon about the volume that we would take from them and deliver for them and the volume that they will deliver for themselves. And by reaching that agreement, it creates a glide path down with Amazon. They're still our largest customer. But a glide path down that allows us to build a network up with the segments of the market that we want to grow. Healthcare logistics would be another of those segments where we want to grow. We've been in the healthcare logistics business for about 15 years, but we are on a tear. This is a very growth business for us it'll be over $10 billion. Next year, the addressable market is 60 billion we can double this so we're gonna lean into healthcare logistics because we're the best in the world at cold chain logistics. So that's really better, not bigger. We also took a look at the portfolio and we had an LTL or less than full truckload businesses called UPS freight, capital intensive, low margins, slow growth, and like I hate this business, so we sold it. We just shrunk you think about you know, that was a real clear indication of getting not bigger, but smaller. But it allowed us actually to improve our margins, so the profitability of the company improved greatly. Now, that's worked for us very well. And we always want to be better. We always want to be better, a better customer experience, a better experience for our people. But we believe now is Time to get bolder to make some bolder moves. And by that I mean leaning heavily into the areas of the market that really will benefit from what we have to offer them. And cold chain logistics, healthcare Logistics is certainly one of those, we just completed an acquisition of a cold chain logistics company in Italy called Bomi. This is the largest acquisition that we've made since I joined the company. You know, that's a bold move, really excited to welcome the Bomi folks to our team, we're building out logistics as a service, we got this amazing network, the Hub and Spoke network powered by our air and ground. Now the network works now we want to grow on the edge, and we can grow on the edge with logistics as a service. And those are big bold moves. Because if you think about ups, you can think of us you know, we were like a trucking company. And now we're turning into a technology company. So that's, that's pretty cool.

David Novak 40:47 

You really redefining the business, but sticking to your core and better and bolder sounds like it makes a lot of sense. You know, and, and I understand when you're doing strategy, you actually do war games to help you formulate it. Walk me through that process.

Carol Tomé 41:03 

Yeah, I love war gaming as a part of strategy. So the first time we did it, everybody thought I lost my mind. But what I asked the team to do was to assume the personality of one of our competitors, and to attack us, and to tell us what the attack plan was. So they did and the attack plans were super scary and really thoughtful. So they attacked. And then I said, Okay, now assuming that persona are returned to UPS persona, and fight the attack, because by fighting the attack, it actually created opportunities for initiatives and growth. It's a really, really clever way to think about strategy.

David Novak 41:41 

You talked about the need to be bold, and you can't be bold, unless, unless you're truly innovating. Tell us about your innovation process. And what's the most exciting thing you see happening right now it's coming up and new at UPS?

Carol Tomé 41:55 

Well, there are a couple of things I'm pretty excited about. One is we have used RFID technology on our health care packages, those packages that carry vaccines, because we wanted to make sure we never lost that package as it was on its journey across the network. That's really powerful, actually, from a customer service perspective. But I said, could we actually think about it through the lens of productivity, and put RFID technology on all of our packages. And so we pilot that in 2022. And I'm super pleased with what I'm saying, we now have an RFID technology on all packages, and 101 of our buildings. And the implications of this are twofold. One, we don't lose the package, because we know where the packages because we've got the sensors and we know where the package is, which is helpful from a customer service perspective, even though our on time delivery is north of 97%. Sometimes we lose a package. So it's important to know where that package is. But here's the productivity side that I hadn't really thought through. But it's pretty cool. So we have employees, we call pre loaders, who put packages into the package car to load the car for delivery. And they are actually scanning the packages into the car. But we didn't have the RFID labels. So it was a more of a manual scan. One and 400 packages are Miss loaded. In other words, it's put into the wrong package car. If it's put into the wrong package car, that package goes out for delivery, but it can't be delivered, it's in the wrong car. So it comes back, it has to be resorted and go back out again. So that's a customer dissatisfied. And actually it's not good for the package to get it resorted. So with the RFID technology, the Miss loads are diminishing. We went from one and 400 to one and 800. Now one in 1000. That's six sigma perfection. I'm like, holy crap, this is really good, because we're going to drive productivity. And oh, by the way, those manual scans that the pre loaders are using to get the packages into the car. Guess what the car can scan the package because the car is smart. So we're gonna drive a lot of productivity. So this is this pretty excited about that. The other thing I'm excited about, and this is really early days, but we're working with a company called betta technologies to work on the creation of a battery powered aircraft. We were the first company that was authorized by the FAA to fly drones. There's not really a commercial application for drones, but aircraft that actually carries cargo that could be powerful when you think about it through the lens of sustainability. So we're working with betta technologies on an electric vertical takeoff landing aircraft that carries cargo about 1400 pounds of cargo. It could replace fossil fuel powered theater aircraft, and we're working with the FAA to get that authorized to carry packages and we were very fortunate just to have that cool aircraft, if you will, down at Worldport which is our big air hub in Louisville, Kentucky. We were there with your hometown, by the way. Thank you very much. So we were there with Secretary of Transportation and it was really fun to see the Jackson position between the 747 cargo plane. And next to this battery powered theater of aircraft. So cool. So I'm excited about what technology will be for air travel, you know, we are greenhouse gas hogs as you would appreciate, we have made over 35 million metric tons of greenhouse gas every year, we've pledged that we will be carbon neutral by 2050. You know, part of it's not so hard, we can power our buildings with renewable energy, we can use alternative fuels for our vehicles. The long pole in the tent for us is aviation aircraft. There's not a solution right now for all the planes that fly every day. So we've got to we've got to work as an industry to find some solutions there for sustainable aviation fuel.

David Novak 45:41 

Do you have anything unique in your processes churning out these big ideas? Because you just mentioned three or four. And I think based on your excitement, I think you could keep on going.

Carol Tomé 45:50 

I could, I could, if you think about this, our strategic platform customer first people add innovation driven, innovation driven is where a lot of this activity is happening. All of this to get a better customer experience, and drive productivity and our business.

David Novak 46:06 

You know, it's often said that that CEO job, it's lonely at the top. If you ever felt this, Carol, or if you have, what advice would you give to leaders who may be experiencing that kind of reality?

Carol Tomé 46:17 

Yeah. So people told me that before I took the job, and I'm like, Oh, how lonely can it be? can't be that bad. It's really, really lonely. It's, like really lonely. Because you're the boss, or, you know, I was always like a member of staff, right? And now I walk out and nobody's walking out with me. Like, okay, so I'm like, okay, I get it. You know, I understand why. So what do I do? I'm really fortunate, I have an amazing spouse, who's just a great sounding board. For me, I've got a few, just a handful of really close friends that are like my personal board. Some of them are former colleagues. Some of them are just friends. But they're a personal board that I can talk to without sharing, you know, confidential information, but just more thematic, some things that were challenged with. And then candidly, I joined the Business Council, which David, do, you know, these groups, the Business Roundtable, the Business Council, I think these organizations are really, really helpful for CEOs. Because we're all faced with the same issues. How do you get people to come back to the office? What are you doing about the macro environment, we're all faced with the same issues. And it's helpful to have, it doesn't matter what industry you're in, it's just helpful to talk to other leaders about how they're thinking about it.

David Novak 47:26 

You know, this podcast is all about leadership. And I know you mentioned earlier, you're passionate about leadership development. Tell us what you're doing unique at UPS to bring your leaders along?

Carol Tomé 47:37 

Well, we have for my executive leadership team, I have defined development plans for each of them. And we meet frequently to go through the development plans to measure progress against those development plans. And oftentimes, development plans are confused with operating plans, we have operating plants, that's not what I'm talking about. I'm talking about leadership development plans. Those are harder plans to put together than operating plants. Candidly, it's much easier to talk about the numbers, right, you hit it you didn't you missed it, what are you doing? But leadership? You know, how are you showing up in front of people? How are you developing your people. So I spend most of my time on people development. And it's not just my direct reports, but how they're developing their direct reports. And I know, I know, our people, I know them, you know, everyone gets motivated by different things. And you got to understand that, you really got to understand that. So you can help invest in them and help them reach their highest potential, whatever it may be. We have, you know, we've got the traditional training programs and external partners that we use to help on this, but I believe the leadership development is personal. And if your boss takes a personal interest in you, you're gonna grow differently. We also have coaches we bring in too, I think that's important. Sometimes it's necessary. But for me, it's personal.

David Novak 48:55 

You know, I've heard you say that you really want the next CEO to come from within, you know, this is really important to you. What do you do along those lines to make sure that you've got that next person.

Carol Tomé 49:09 

I have made some pretty hard calls since I've been here about people who are who are here and people who are no longer here, trying to make sure that I've got the you know, just the best leadership team and investing in each of them. So that as we continue to work on CEO succession, and I'm not going anywhere right now, I'm not. But I've already started CEO succession. I'm talking to the board periodically about CEO succession and people that I'm investing in and what their investing plans are, and what I expect to see. And I said, If I don't see this, this is what I'm going to do. So I kind of have laid out a plan. I have worked with a third party on this as well. We've created a CEO scorecard of the future, what I think the attributes and skills are for that next CEO. I'm really, really committed to this because I do not want to put the board through what the board went through. I think you risk a lot when you go to the outside there. Are there lots of cases that it works just fine. But there are lots of other cases where it doesn't. And when I think about my personal legacy, it's not going to be about the financial results for the shareholder value. Although I hope we can, you know, check the box there. It's going to be about people. It's gonna be about people, I will fail miserably if I don't have a solid successor behind me,

David Novak 50:20 

Carol, you know, this has been so much fun. And I want to have some more with my lightning round of q&a. Are you ready for this? Okay, what's one word others would use to describe you prepared? What would you say is the one word that best describes you prepared? If you could be one person beside yourself for a day, who would it be and why?

Carol Tomé 50:42 

I am not afraid of anything except for flying. I really have a serious fear of flying, and I have to fly all the time. I think the person I would want to be is Houston mills. Houston, is in charge of all of our pilots. He is a captain in our air network. And he's a lovely man. I think I would like to be Houston and actually fly. And then maybe I wouldn't have such a fear when I returned to Carroll.

David Novak 51:09 

What's your biggest pet peeve?

Carol Tomé 51:11 

I have a few. But I don't like to be surprised.

David Novak 51:16 

You love to fish. What's the largest fish you've ever caught?

Carol Tomé 51:20 

I love to fish. I love to fish. Brown Trout. In fact, I was just fishing on the Green River in Wyoming this fall. And I think the biggest fish I ever caught. Actually, I have to say even though I love to fish trout, I was a cat fish out of my lake on my farm. It was enormous. But I throw it back in because I don't want to eat that fish. Now.

David Novak 51:39 

What's the single biggest thing you learned from being a downhill skiing racer? And I understand you're quite good. Yeah,

Carol Tomé 51:45 

no, I'm fearless, right? But the thing I learned about it is you need to walk the course before you race it down. And if you if you know downhill racing or any slalom racing or grand slalom, you actually walk up the hill to learn the course. You sidestep up the hill to learn it. That goes back to this preparedness thing. You know, you walk the course. And then when you get on the skids to go down, you can go really fast.

David Novak 52:06 

What's your favorite quote?

Carol Tomé 52:08 

My Angelou don't make money your goal. Instead, do what you love and do it so well. That people can't take their eyes off of you.

David Novak 52:17 

What's something about you that few people would know, Carol?

Carol Tomé 52:22 

I can read upside down.

David Novak 52:25 

We are out of the lightning round. I just have a few more questions. I'll let you go back to work. Carol, you're a real trailblazer in the Fortune 500. There are very few, not as many CEOs as we would really like to see that are female. Tell us about the velvet hammer.

Carol Tomé 52:43 

Well, at Home Depot, I created the first resource group and it was for women. And we had our very first meeting at my home. And we couldn't even fill up the living room. That's how few of us there were. But it was really great to get that organization started. And as we were thinking about what we should call ourselves, I reflected on a woman who had a huge impact on my life. And that was Fe Wilson. Fe was a member of the Home Depot board when I joined the company and she was wonderful to me. She took me under her wings and really helped me navigate that the company. Fe is just something else. You know, the first time I went into her office, it was pristine. There was nothing there, except a book on her desk. And when I looked at the cover of the book, The title was The Art of War. You know, I just learned so much from Faye. And when I thought about how we might honor her by naming this resource group. I'm like, Well, we could call it the Wilson group. And then that sounds like a musical group that doesn't work. So I'm like, Well, what is it? You know, Faye is she's very petite. She's from North Carolina. And she's just got this little teen voice. It's just like now that it's just so smooth. And like, you know, she's smooth like velvet, but she is hard like a hammer. So we decided to call ourselves the velvet hammers. And it was just it was great way to honor her and a really fun way for our group to come together.

David Novak 54:04 

You have something like that at UPS. Yeah, we do. It's

Carol Tomé 54:07 

called the Women's link that works that were to turn works but the women are powerful here.

David Novak 54:15 

What three bits of advice Carol, would you give to aspiring leaders?

Carol Tomé 54:19 

Hmm. Well, I think it's really surround yourself with the best and brightest people, people who are smarter than you faster than you better than you. They lift you up and give you wings to fly is just critically important to talent selection that people that work for you because it will really push you forward. I would also say build strong networks. Networks are critically important to help you grow your career and help you develop as a leader. These are networks that you can have inside of the company outside of the company. And remember as you're building those networks to build those deposits, so if you need to take a few withdrawals you can and then I Let's say become a master of your art, whatever your art is, become a master of it. Because that certainly is kind of important. As you think about developing others, you need to be a master of whatever your artists,

David Novak 55:13 

any particular advice for women leaders.

Carol Tomé 55:15 

So for women, I think it's really important to be you and not to assimilate, it's easy to think that you need to be like everybody else, if you're the only one in the room are one of our few in the room. But actually bring your real, genuine, authentic self to work. I think that's just so important. And to remember, this is a lesson I learned, I used to get together with a bunch of women as member of various women's groups. And we would get together and say, Gosh, how come there aren't more of us in leadership? And how come this? How come that? And how come the other thing and I'm like, we're talking to the wrong people, we need to be talking to the man. So it's like he or she, right? So it's like, how do you bring men into the conversation to help you grow? And I've certainly been lucky, because most of my mentors have been men. It's been fantastic.

David Novak 56:01 

You know, Carol, you are definitely inspirational. It's clear that you're passionate about raising people up within your organization. And you talked a little bit about the fact that you and your your husband have a foundation. So you're obviously focused on on giving back to others that need you. And I think you've definitely walked the talk. And you know, I, as we talked about, at the top of the show, before we started this interview, I'd heard so many good things about you. And now I know why. You're, you're an incredible, and congratulations on all your success. And good luck. And what's your unfinished business at UPS?

Carol Tomé 56:39 

Oh, we got a lot to do. We got a whole lot to get done.

David Novak 56:44 

I figured that. I figured that. Well, thank you so much for sharing everything. I really appreciate it.

Carol Tomé 56:51 

Thank you, David, it's great being with you, thank you.

David Novak 57:02 

Well, I think if you looked up the word Dynamo in the dictionary, you could just put Carol's picture in there as the definition. I'm so inspired by all the great work she's doing at UPS. And the incredible strides they're making to improve and innovate is clear, she's focused on the bottom line at UPS. But she's also focused on her team. A lot of people think he got to pick one over the other. But Carol shows us there's another way, we can focus on both. When we learn to see our people as an investment, not as an expense. When we pour into them and develop them and look out for their growth. They're going to turn around and grow your company. This week, I want you to think about a person who invested you take the time to express your gratitude to that person. Handwritten notes are always classy, but hey, just sending a thoughtful text works too. But more importantly, I want you to think about a person that you can invest in the same way, that person that invested in you, because you have the power to help that person become the leader, they could never be without you. I want you to remember just how much it meant to you, when someone saw you as an investment. That's going to help you apply that philosophy with your people. And you know how important this is. So you want to know how leaders lead. What we learned today is the great leaders see their people as an investment. Coming up next on how leaders lead is the great Bernie Marcus, the co founder of the Home Depot, whom you heard Carol referenced earlier in this episode,

Bernie Marcus 58:35 

if I would be in the store, it would be six or seven people around me and I would see a customer down the aisle, I would leave them and take care of the customer. I set the example. So after a while, if there was a customer down there, people would split off and take care of the customer leave me by myself, which is what I wanted them to do.

David Novak 59:01 

So be sure to come back again next week to hear our entire conversation. Thanks again for tuning in to another episode of how leaders lead where every Thursday you get to listen in while I interview some of the very best leaders in the world. I make it a point to give you something simple on each episode that you can apply to your business so that you will become the best leader you can be