Tony Tye, Post-Gazette Daniel Sullivan -- "I really liked the fact [Pittsburgh] was a learning center with a great university center."

By Joyce Gannon
Pittsburgh Post-Gazette Daniel Sullivan, president and chief executive officer of FedEx Ground, was a founder of its predecessor, RPS, a small package delivery business launched in 1985 to challenge United Parcel Service. Memphis, Tenn.-based giant FedEx Corp. in 1998 acquired the business, which in the latest fiscal year that ended in May reported operating income of $705 million on revenue of $5.3 billion, accounting for 23 percent and 16 percent, respectively, of the parent company's results. Mr. Sullivan will retire Jan. 5.

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Q. The original business, RPS, started as a subsidiary of Akron, Ohio-based company Roadway Express. How did it end up in Pittsburgh?

A. I was a district manager in Atlanta for Roadway Express. Our company was looking for opportunities to branch out into different markets subsequent to deregulation [of the trucking industry]. We started to talk about this idea of small package transportation to compete with UPS. I was asked to head up the research and development. ...

Listen In: FedEx Ground CEO Daniel Sullivan talks with PG reporter Joyce Gannon Why Pittsburgh? Employees ... traits, what did you look for? Why did the FedEx Ground plan work? Any advice for your successor?

We looked at several major cities around this area with some proximity to Akron. I really liked the fact [Pittsburgh] was a learning center with a great university center ... that would provide an opportunity for us to bring on people as we needed them to build our headquarters.

I liked the spirit of Pittsburgh, its ethnic strength, the differences people had, a hard-working kind of sense to them. When you put all that together, that's why I thought this would be a great place to come.

Q. Why did the idea work?

A. Because we listened to the customer. We visited many large customers in this town and all around the country. We tried to find out what they wanted in a small package provider, what would make us successful and we set to building that kind of business. It was not just the all-around efficient and effective movement of packages themselves but capturing information about those packages and providing it to customers.

Never before in small packaging could you track or trace a shipment. We built our whole system around bar coding and scanning technology and used that same information internally to allow us to be more efficient. That helped us close the gap between an entrenched competitor like UPS that had a huge scale advantage over us. Because of the technology, we could be different.

Q. Did you expect it to grow like it did? Your revenues last year were $5.3 billion and you have 58,000 employees and independent contractors.

A. I have to say yes. I was very optimistic we would bring to market a unique and different service. With good sales and marketing approach, we would be able to grow the business. I like to say that one of the most important attributes of a leader is vision. I think I have some of that. Did I have the vision to look out 21 years? No. But looking out five to 10 years, I was really optimistic. And indeed, we did pretty much meet our plan for profitability.

Daniel Sullivan

Job: President and chief executive officer, FedEx Ground Age: 60 Hometown: Fall River, Mass.; resides in Sewickley Education: Bachelor's in psychology, Amherst College, 1969 Career: 1969-70: Army; 1970-71: supervisor, construction firm, Waterbury, Conn.; 1972-83: Roadway Express, started as dock supervisor in Waterbury and held several management jobs including district manager in Atlanta; 1983-90: Roadway Services, helped launch and then became president of its Pittsburgh-based small-package delivery business, RPS; 1990-93: vice president and group executive, National Carrier Group, Roadway Services; 1993-94: senior vice president and president, National Carrier Group; 1994-95: president and chief operating officer, National Carrier Group; 1995-98: chairman, president and chief executive officer, National Carrier Group; 1998-present: president and chief executive officer, FedEx Ground.

Q. What was the significance of using independent contractors rather than a work force of unionized drivers? Can you comment on some of the recent lawsuits some of them have brought against the company alleging they should receive lost benefits and expenses?

A. The decision to use independent contractors to do pickup and delivery was critical in our business plan. We wanted to find people with an entrepreneurial spirit who through good, hard work could expand their business and build equity in their businesses as we grew ours. I call our contractors the cornerstone of our success.

The vast majority of our contractors want to be independent business owners and have absolutely no interest in becoming employees -- that's not why they signed on in the first place. By becoming employees, they know that they lose the opportunity to own and grow a business whose potential far exceeds those of a traditional employee driver. But we live in litigious times and FedEx is an attractive target. Nonetheless, these lawsuits have had no impact on our business and our ability to meet customer needs.

Q. Is there anything you would have done differently as CEO?

A. One thing I would do differently in retrospect was how we expanded. We did it on a region-by-region basis to keep good quality and good control. I think I would have moved faster and expanded to major markets versus a regional approach. But I have to say, with the profound success we've had, there's not a lot I would do over again or differently.

Q. What was it like to become part of the FedEx organization?

A. First was the strategic significance of the merger. FedEx had no real ground services; RPS had no overnight express service. Our competitor had both. So you bring those two types of companies together and there was a tremendous amount of synergies.

I had the opportunity during the negotiations to put this company together and work with [FedEx Chairman and founder] Fred Smith for almost a year. I got to know him pretty well during that time. I think he's just the greatest visionary I've ever met. I think we found the cultures of our two companies to be quite similar: very focused on the customer, very focused on our people and focused on the workplace. FedEx really opened its arms to our company and made us feel part of the team from day one.

Q. What was the hardest thing you faced during your tenure?

A. The startup experience itself. In the first few weeks, everything didn't go exactly as we had planned. There was a lot of traveling, a lot of phone calls, a lot of tweaking of the technology to get the business right. I think if there was any consternation it was in those early days: to really carry through the initial business plan and make it work and ultimately it did.

We've had our challenges; every business does. In my mind, if you are always walking the tightrope, living on the edge, then to get better and provide better products and services, you're always going to need those challenges. But I don't think they're extraordinary at all. I just take them as normal course.

Q. What advice do you have for your successor, David Rebholz?

A. He comes from FedEx Express, so he has good experience in small package transportation. I would say to make sure that as he gets to know the subtleties of our business, that he understands that change is good, change is positive and that he should do whatever it takes to move this company in the right direction. Our mission is to be the best small package carrier in North America in both commercial and residential markets. Certainly, I would want him to carry on that tradition but always to look for ways to improve the business and change the business.