Old School Cool — Lessons on Building a Lasting Business From an 89 Year Old Trucking Company
An 89 year old has been kicking ass and taking names.
Old Dominion Freight Line (ODFL) was founded in 1934. In the last decade, their stock is up 1300%. That is 2x the growth of any company in FAMGA.
In the last 5 years, they are top 5 in the S&P 500 in terms of Total Shareholder Return (TSR). That is elite company.
How did they do it?
Over a 10 year time-frame, ODFL appreciated 1300%. Almost 2x of any other FAMGA stock.
History
ODFL was founded as a single truck operating between Richmond and Norfolk, Virginia by Earl Congdon Sr. and Lilian Congdon in 1934. They operated out of their family kitchen. When Earl was unavailable, Lillian drove the truck, making her one of the very few women (if any) that drove trucks at that time.
In the early days, trucking was regulated. Companies had to get licenses to operate specific routes. Initially ODFL managed to just get just a single license between Richmond and Norfolk, Virginia. Over the next 40 years, they slowly expanded their trucking network within the US through a series of carrier acquisitions — one step at a time.
1980, the trucking industry was deregulated, sending a shock wave through the industry. Nevertheless ODFL continued to grow, regardless of recessions, or slowdowns in the economy. In 1991, the listed in the stock market with an IPO. In 2007, they entered China. Today, as an LTL carrier, they span the globe.
The entire time, they have been a family owned and a family operated business. David Congdon, the grandson of the founders continues to run the company.
How did they accomplish this?
👨👩👧👦 Permeating a family culture and staying union free
In the trucking industry, labor unions are a key operating factor — for wages and availability of drivers. As early as 1939, their drivers tried to unionize. Over their history, there have been strikes, drivers moving out and yet, they have never unionized.
While unions seem favorable, they have managed strong labor relations by creating a deep sense of a family culture. That family atmosphere has existed for years and do so to this day. Leaders operate by doing → Every member of the family that joins the company operates as a driver and works up. Company leaders attend family events, hand write birthday cards, attend long-time employee family funerals — even when the company has 1000s of employees.
💡Strong internal culture can make up for externally perceived gaps. Such a culture is lived up in the smallest ways
💡The best leaders motivate with a deep interest in lives outside of work
🤝 Growth through acquisitions and shrinking via divestitures
Trucking has network effects. The wider your network, the more distribution you can service. In a regulated trucking world (until 1980), the only way to grow your network was to acquire other companies to get route licenses. ODFL did this smartly and sensibly. Small sensible acquisitions that made the sum greater than the parts in terms of traffic network effects.
Even with acquisitions, they operated service centers as it’s own separate business — with the overseer as an independent CEO. This is exactly how the best CEOs in history have operated their large businesses (decentralized with little management oversight).
More importantly, they grew by divestitures too: They were unafraid to unload subsidiaries holding the company back and not fitting into the strategy. Even if it was an expensive acquisition (shedding Skeeter Bass Boots, Vulcan Trailer, and Deaton as examples).
💡Grow with strong assets that are accretive. Operate in a decentralized way with strong leadership
💡 Decisive shrinking in the short term often is right for long term growth
💸 Always keeping an eye on costs and profitability
Boom times or bust — they paid attention to costs and sought to maintain profitability. They paid attention to details that mattered, which others didn’t: They specified the tire pressure guides for drivers, optimal RPMs to run trucks at, freight weight inspections, ran price experiments — practices unheard of. Small changes aggregated to major savings. Such cost reductions always kept them at or close range of profitability.
Further, they had to shrink with the economic cycles. They were not hesitant to let people go and once even let their favored COO go to keep costs under check. Each time, they bit the bullet and did what needed to be done. Most importantly they were able to balance and still keep the sense of family with the departures.
Being cost-conscious allowed them to withstand price shocks in the market (especially post-deregulation when other carriers tried to compete with them on price). And when there were times when everyone was laying off, they were hiring.
💡 Small changes in costs and profits can aggregate more quickly than you realize
💡 Operating on strong fundamentals can allow you to be contrarian as economic cycles change → gives a massive advantage over the long term
🔭 Long term (management team, thinking, vision and strategy and more)
The longevity and continued success of ODFL are an outlier. Their competition over the decades have gone out of business. The long term view is aided by an intact management team. The average tenure of the executive team members at the company is multiple decades(!). The management team works very well together and has been together for a long time. It’s created the sense that they will stick together through the thick and thin. Goes back to this sense of family.
Aiming long term meant that they were more able to look beyond short term challenges. In 1980, de-regulation suddenly made their interstate route licenses worthless, for which ODFL had shelled millions for. They were losing a lot of money in the short-term, though they capitalized on the opportunity to expand long term with no regulation.
💡 When senior management operates like a family, long term thinking gets easier
💡 Seek to be adaptable and anti-fragile over short-term shocks
🙋🏽 Service Centricity
This one is no surprise. World-class companies are customer centric and operate on a relentless focus on customers. This creates meaningful differentiation and a brand based on service.
In e-commerce, we have stories of Amazon with its timeless customer-centric principles. Long before, ODFL had championed the 4 primary and universal needs of their customers: Best-in-class service, claim-free handling, accurate billing, and cost-effective pricing.
Having a best-in-class service meant, allowing customers to call ODFL for anything. When you call, a real person picks up the phone. They do their best in handling the question. This is exactly what Zappos did too. This meant higher prices, but customers were more than willing to pay this for premium service. And in recessionary environments, the ability to charge higher prices made all the difference on the bottom line. Being so close to customers helped anticipate needs, give them what they need, and help them grow their business. All this created a virtuous cycle leading back to ODFL.
💡 Some secrets to success aren’t secrets at all: deeply care about your customers
💡Brand and service are the real differentiators in otherwise commodity businesses
References
[1] Old Dominion Freight Line Wikipedia
[2] Old Dominion Freight Line: Helping the World Keep Promises
[3] Motivating your team by Matt Mochary
[4] The Outsiders: Eight Unconventional CEOs and Their Radically Rational Blueprint for Success
[5] Delivering Happiness: A Path to Profits, Passion, and Purpose
Thank you for reading! I’d love to hear from you if you have any feedback! Originally published on my personal website.
