Creating Long-Term Value
In August 2019, I, along with most other members of the Business Roundtable, signed on to a statement on how successful companies thought about long-term growth. The statement has been described by some as stakeholder management. While I did not think of it in those terms, I understand why others have characterized the statement that way. From my perspective, it was a little different. I believe you cannot create long-term value for your shareholders if you do not treat your clients correctly, treat your employees well, have appropriate governance and are good corporate citizens.
The statement struck a nerve with many. Some characterized it as a move away from shareholder primacy, others thought it was “window dressing,” and others agreed with the statement but wanted to know more about what corporations were doing to fulfill the vision that the Business Roundtable statement espoused. Let me describe for you how Pitney Bowes is working to fulfill that vision.
For me, and the rest of Pitney Bowes, our North Star as we work to transform the business has been our clients. Since 2012, we have worked to make the client the center of everything we do. We don’t always get this right, but we have made substantial progress since 2012. Each year we survey our clients and benchmark our results against best-of-class companies. We continue to improve with each of our client satisfaction metrics and in our Presort Services business we have best-of-class client satisfaction results. Serving clients is something you are never done with, but we have made demonstrable progress over the past several years.
An engaged and motivated employee base is considered the most predictive factor, next to revenue growth, in the transformation of a company. In 2018, we used the benefits from the tax bill to permanently increase the wages of the majority of our hourly employees. We also focused on skill development. As a result, just over 40 percent of our internal openings are now filled by our own employees rather than outside hires. While bringing in talent from outside the company continues to have an important place at Pitney Bowes because they provide outside perspectives and functional expertise, our internal “fill rates” are now better than the industry average. Building our employees’ skills is the right thing for the business and the right thing for our team. In 2019, we built on those actions with a new contemporary performance management system that put much more emphasis on coaching our employees. The efforts paid off. Our team rated their relationships with their managers as comparable to other high-performig companies and gave Pitney Bowes high marks for providing opportunities to build their own skills. There is no doubt that in the 21st century skills are the most important currency in our economy. Importantly, Pitney Bowes also receives high ratings from our employees from a diversity and inclusion perspective, comparable to other high-performance companies. In fact, Pitney Bowes was once again recognized by Forbes as one of the best from a diversity and inclusion perspective.
Diversity and inclusion are not just important to our employee base; they’re important to our Board of Directors. There has been much conversation in the public domain about gender equality on boards. Many have called for at least 20 percent of directors to be women. It’s about time, but Pitney Bowes has been there for a while, and, as of 2020, 50 percent of our independent directors are women. I’m particularly proud of this number. I can say clearly, we did not set out to have a certain percentage of women directors. We simply looked for the best and the brightest that could provide relevant skills on our journey. The only thing we did differently is we cast our net broadly to find great candidates. No surprise that we ended up with a diverse board. In 2019, we also amended our bylaws to do away with term limits in favor of encouraging tenure diversity — put another way, a purposeful mix of new, medium and more tenured directors. I consider this a best practice for boards today.
Pitney Bowes has long enjoyed a special relationship with the communities in which we operate. Our team donates their time and treasure to support their local communities. Our focus has been on education and there is no better return on investment for society than investing in K–12 capabilities in the communities in which we live and work.
We also recognize the importance of climate change and how, as BlackRock Chairman and CEO Larry Fink said so well, it is driving a fundamental reshaping of finance and the world of business. We are heeding his clarion call and taking a fresh look at every aspect of our business in that light — looking for ways to build on our long tradition of environmental and social responsibility.
Sustainability has been a focus for Pitney Bowes for some time. Over the past 50 years, we have worked to minimize our waste streams; expand on our use of returnable/reusable packaging designs; maximize the use of water-based inks; evaluate greener alternative waste stream disposal practices and outlets; use partnerships to improve the recovery of equipment for reuse, recycling and end-of-life stewardship; employ responsible waste management vendors; and manage the remediation efforts from legacy site contamination. In addition, we have taken numerous steps to help our transportation fleet reduce GHG (greenhouse gas) emissions and conserve fuel, including limiting idle time to five minutes before shutdown, using route optimization software to minimize distances and travel times, and fitting trucks and trailers with fairings to reduce drag. Recently the company was awarded a 2020 Climate Leadership Award.
In the end, all of this work is focused on one objective: increased long-term value for our shareholders. That’s the rationale for the transformation journey we are on. It is the point of the investments we’re making in our business, our people, our clients and our communities. It is why we are committed to leading for the long term and why we’ve continued to take important actions to create long-term value. Specifically, we exited direct operations in six smaller European countries, and divested our Production Mail business and, most recently, our Software Solutions business. Alternatively, we announced Wheeler Financial from Pitney Bowes, our equipment financing business dedicated to helping our small and medium-sized clients acquire the critical equipment required to run and grow their business.
Our vision is clear. We are continuing to build off of our strong mail and financial services core to enter logical adjacencies: ecommerce shipping and the financing of mission-critical assets to small businesses. Both are compelling opportunities and growth areas where we have a clear right to win. In 2020, we are already seeing 50 percent of our revenue coming from shipping and, with the accelerated growth in ecommerce happening now, Pitney Bowes will continue to grow.
In 2019, we also took aggressive actions to improve our balance sheet. We reduced our debt by over $500 million. If you look at 2018 and 2019 together, we have reduced our debt by over $1 billion. We have addressed our debt towers over the coming years and substantially strengthened the balance sheet. The combination of repositioning the company for growth, focusing our portfolio, investing in our capabilities and strengthening the balance sheet has created the conditions for profitable growth and long-term value creation going forward.
2020 marks our 100th year. Very few companies achieve that kind of longevity. You don’t get to 100 years by taking the easy way, short cuts, or making expedient decisions.
As we look to our next 100 years, we know full well what drives enduring value. The ingredients for sustained success and our strong prospects going forward are clear: putting the client first, ceaseless innovation, exceptional people, deep ties and commitment to our communities, and a culture of doing the right thing the right way.
President and Chief Executive Officer