Enrique Alvarez is the Co-Founder and Managing Director at Vector Global Logistics, which is dedicated to changing the world through the supply chain. We discuss the benefits of having financial transparency in an organization, how the self-managing “sell-cells” at Vector work, and the secrets of great results in an organization.
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Groom Self-Managing ”Sell-Cells” With Enrique Alvarez
My guest is Enrique Alvarez, the Managing Director of Vector Global Logistics, a Fortune 5,000 company. Vector provides world-class logistics services to make partners and clients more successful. About bettering the lives of everyone who come in contact with them. Enrique, welcome to the show.
Steve, thank you very much for having me. This is exciting. I look forward to our conversation. Thank you.
It is an exciting conversation. Your background is pretty crazy. How in the world does a Mexican engineer end up at Wharton Business School and then launch global logistics business?
A short answer to that question is that I was fortunate enough to be born into an amazing family. My parents took good care of us. One of their main things was their education. For the most part, in many other stories out there, it’s luck that I was born into that family. There are many millions of people that don’t have the privilege that I’ve had, so I have to be very thankful and acknowledge the fact that, of course, I did work hard throughout the way. I had great mentors. I had great teachers. I had a great family and an amazing wife that supported me. At the end of the day, it’s a team effort, mostly, I was lucky, and that’s why I feel so passionately about giving back. I feel responsible for giving back to people that might not have been as lucky as I happen.
It’s very interesting. I was at a conference, and a friend of mine, projected a personality test, and we had this conversation afterward. I asked him, “How much of the result of these tests is nurture versus nature?” He said, “You personally get logged in that there’s this dispute about that when it’s at the age of 8 or 12 but it’s very early in life. I’m wondering how you describe your family, the support, the mentors, the coaches, whether this is what also prompted you to this background or this nurture to focus on culture.
Vector is a very culture-driven company. In our pre-talk, you came up with a framework, which maybe we can call the Vector Culture Model, to create a simultaneously purpose-driven, as results-based culture. I’m very curious about how does the Vector Culture Model work? How did it came come about and how does it work, and why does it work?
This was a very collaborative effort. I don’t think that it was me that came up with it. I have a good business partner, Brian Oxley, with whom I work for the Boston Consulting Group before starting this company. As we were hiring new employees, the 1st one, the 2nd, we all came together, and this whole thing made sense. I will tell you what it is, and then I will explain a little bit more about what I’m trying to say. The culture is very simple and straightforward. We are measuring performance by results and results only.
This is based on a book called Why Work Sucks. That I strongly recommend people to read it, and at the end of the day, it says that you take the time and space component out of the equation, and you measure performance by results and very simple key performance indicators that make the most sense and make the companies thrive.
You focus on those things. You don’t care if people come here at 8:00 in the morning. You don’t care if they have one-hour lunchtime. You don’t care if they go at 5:00. At the end of the day, all of those things don’t make sense. The only thing that matters is that people are empowered, self-sufficient, and proactive and that the results are there.
For example, someone on our team loves to play the guitar. They take guitar lessons throughout the day. I take my kids to soccer practice Tuesdays and Thursdays. At the end of the day, it’s a culture based on results. We are measuring performance. The whole pressure falls on the people that are managing and empowering people because all of a sudden, you have to be very clear as to what’s expected, what’s agreed upon, what are the goals for the month, and what are the goals for the quarter. You have to have a system in place to make sure you can measure all those things effectively and efficiently so that they can then create a feedback loop and provide suggestions and comments to the people that might not be performing or might not be reaching their goals.
It’s a daily thing. One thing is the performance-based mentality. The second pillar of our culture is the passion for giving back. We believe that we happen to be in logistics. If you were to ask everyone in our team what we do, we are trying to change the world and make it a better place. We have the slogan “Logistics with purpose.” We believe that through logistics, which is a good industry to start in, you can get a lot of impacts if you do the right things and you do them for the right reasons.Through logistics, you can make a big impact if you do the right things and do them for the right reasons. Click To Tweet
The third thing of the equation is the Sell-Cell Model. The organizational structure, compensation structure, and transparency we have as a company. That’s key as well. We are organized into small, independent, fully functional teams that can tackle any challenge or issue that we are faced with in a very dynamic way, which is perfect for the logistics and the supply chain industry, as most of us now realize after the pandemic.
How I understand this culture model, you have the results. You’ve got the purpose and the sell-cell concept. Now I would like to dig deeper into the sell-cell model. You showed me a chart where there were all these semi-autonomous cells, and what does it look like? Is it like the two pizza-size teams, where you want to have the team’s limit to eight people? You can feed them with two pizzas kind of idea. How are these cells coordinated so that they are still working and rowing in the same direction? Can you speak a little bit about that?
First and foremost, everything is glued with the same culture and values. That is very important for us. Culture is something we talk about every day. It’s very real, and you have to have that. You have to make sure that everyone you are hiring before starting this unique organizational structure. You must understand that everyone has the same values, shares the same principles, and understands why we are doing this. We are doing this to leverage logistics to change the world. Everyone is well aware of that. As long as there’s alignment when it comes to this principle, the rest of the pieces fall in place a little bit more easily.
The way it works is in logistics. In particular, we believe that the silo mentality is not a good way of adding value to our customers. We believe that accountability is key. We believe that disability and communication are key. Since we are moving products all over the world, the one thing that made more sense to us was to have smaller teams that are fully independent. They are working independently to delight our customers and resolve any potential issue that they might face to give the clients the best experience possible and the best service possible in the industry. We currently have around twelve fully independent sales. They are growing, and it’s a good thing to do.
Our ultimate plan is to make entrepreneurs and make business owners. Vector is set up in such a way that in the next couple of years, we are going to start awarding some equity to the people that are running those cells in those cells. Down the road, maybe the 10 to 15-year plan for us, and my hopes and dreams, if you will, is to see some of these sell-cells being owned not only managed, run, and coordinated but also owned by the people that are leading them. That’s something that I believe it’s very powerful and will ultimately change the world even faster if we can create better entrepreneurs, more entrepreneurs, and more business owners with this mentality.
That’s very exciting. These cells, are there a certain size limit? Are they geographically organized? What does that look like? You said they could grow, could they grow indefinitely and then become their own entities or it becomes a network support company? What is the vision?
The way we are thinking about this, and as I mentioned before, is something that will never be settled. This is something that’s going to always be a work in progress. The culture, the model, and the organization itself are always going to hopefully feel like a startup company. We are reinventing ourselves very quickly. To answer your question, the sell-cells grow to a certain size in both amounts of people and profits because that’s the one thing that’s key to us.
At that point, we have the younger people that are coming up in all the different positions. We have sales, administration, operations, and marketing. Once we have these younger individuals, in particular, the business development guys or the junior sales reps. They start to want a little bit more and go after bigger accounts.
The minute we see that these guys are ready to graduate, and there are certain milestones that they have to hit, we take out some of these younger people on that sell-cell, we graduate them, and we build another cell around them. That’s the way we are expanding. It can’t grow indefinitely. It can become quite complicated and complex because they are all handling all sorts of shipments. They do ocean freight. They do project cargo. They do trucking. They do air freight.
It’s not that there’s not that there are experts in one single type of movement. We believe that truly creative, effective, and efficient solutions in logistics come from that diversity, not only in culture and people but in thought. The more we handle, the more we are going to learn and the more mistakes we are going to make. We are okay with making mistakes as long as we learn from them, and the more we are going to be successful.Truly creative, effective, and efficient solutions in logistics come from that diversity not only in culture and people but in thought. Click To Tweet
You have these sales and then you graduate people who are perhaps more entrepreneurial, who can go after bigger accounts than they need to have. The flexibility to do that, and then you create another cell. How do you then coordinate all these cells?
That’s a fair and good option. The way we are doing it, going back to the results mentality. It’s by focusing on the top 3 or 4 performance indicators and, honestly, forgetting about the rest. We are not trying to coordinate how they do things. We are trying to make sure that there is two access. On one access, you have the values and culture.
As long as all the different cells are aligned when it comes to our purpose, giving back mentality, values, and principles, and when it comes to the system, the software they use, the service levels that we are requesting, and are hitting their target, they literally can do whatever they want, and they do. Some cells meet at different coffee shops. Some cells don’t meet. Some cells have different approaches to how they are handling their accounts, and we are totally fine with that. At the end of the day, it comes down to identifying the process and the system, trusting the people that you hired and letting them run with it, so there’s no managing.
It’s like, “We trust you. We are empowering you and competing.” Everyone knows exactly where they are, which is the other component of the equation that I believe we might talk a little bit about later. As long as you know where you fall com relatively to everyone else, you can be a very good judge of how you are doing. People can self-manage because we believe they are all adults and wouldn’t have to babysit them.
These cells are profit centers on their own.
Absolutely. They have their own PNLs.
They have their own PNLs, and then maybe you provide some support services to them from the center. Essentially, they are sales-driven profit centers. They go after businesses and hunt customers and serve them. That’s very interesting.
There are no regions that are interesting and very unique. At the end of the day, we believe that technology allows us to do all this. We don’t want to go after the same client. We have a CRM system that allows us to make sure that everyone knows what client they are handling regardless of where they are. Setting certain limits when it comes to regions, especially in logistics, didn’t make much sense to me at the beginning.
You might have friends in Poland, the Czech Republic or Alaska. Why wouldn’t you go after those accounts? Just because you are not in charge of Europe, the Northeast of the US or the Southeast. Logistics is broad and comprehensive. We don’t want to limit our team to going beyond what we believe it’s possible and what they usually do. People are if you trust and empower them, and they all have the same vision and the system to getting there. It’s very exciting. It’s empowering as well.
Essentially, you are leveraging entrepreneurial energy. You are creating your own franchisees but it’s not even franchisee.
You are right. That’s a good comparison. It’s a little bit more like the French and sea model that you would see maybe in the early days of McDonald’s and some of the other bigger franchises, for sure.
That’s very unique. That’s a great approach to entrepreneurial growth to avoid becoming bureaucratic. Now the other thing that we talked about, which struck me, was when you said there’s complete financial transparency across the organization. A lot of the entrepreneurs that I talked to are open about their books. I also did that in the past. There were some pros and cons to that, especially when the business was doing great. When we hit the rocks during the financial crisis, suddenly, it became negative. I wonder what you are thinking and what makes you comfortable opening up your accounts, and how people respond to that.
It’s one of those things that you will never get the right balance. You always have to cultivate this mentality and make sure that you are okay with resolving issues and having open conversations and arguments about this. We are all in favor of that. We have built a culture that’s very open in the sense that we are not only transparent with everyone. Everyone is transparent, open and vocal. They know that we are not just going to fire people because they express their opinions and make mistakes. We are challenging everyone to make mistakes.
In the beginning, if we were going to do this, be results-oriented, and have this amazing culture and organizational structure, we had to let people know everything. At Vector, people know not only how much other people make. They not only know how much the bonuses are awarded, how much someone got, how much the company has in our banks, how much we have in collections, and how much we revenues, everything.
It’s very open to everyone, and I get it. It creates this dynamic that might generate some extra conflicts but those conflicts that they generate are worth talking about openly and straightforwardly. For example, this has happened twice already. If someone comes back to us after a bonus discussion and says, “Why did this other person get this much, and I got this much?”
We then have the system to show them, “Here’s the performance indicators. Here’s how much this person scored. Here’s how much this other person scored. Here’s the feedback that they get every six months from their peers, and that’s the feedback that they get from their supervisors.” We present them the information, and 99% of the time, at least in the experience that we have so far at Vector, people understand it, and they are like, “This makes sense. I will probably change this, do that, and try to do more.”
They approach the whole performance evaluation process in a different way. They believe that they can not only trust the system but also believe that they have the tools they need to go and improve. That’s what we want. On the other side of the equation, not everything is great. In the last few years, we’ve had two cases where we reviewed this, and we made a mistake. We said, “You are right. You should have gotten a little bit more. We made a mistake, and we apologized. I’m glad that you brought it up.”
At the end of the day, we ended up reimbursed like paying that person the difference so that it would be fair, and that helps too. Again, there’s accountability. We are okay with making mistakes. We can make mistakes. If we acknowledge that we make mistakes, and we make tons of mistakes, then people will see that.
If nothing else, we respect our values and culture and try to do what’s fair. Can you always achieve fairness? No, never, but we are not striving for that. We are striving to set a system and a process in place that allows people to be themselves and that allows everyone to openly acknowledge mistakes and try to improve upon them.
I have seen my clients who are opening up their books and sharing, “This is our revenue. This is our profit. We want to improve this.” When people understand how they can impact those numbers, then they feel much more likely to make the effort to impact.
It’s very powerful and fun to witness too. All of a sudden, for example, in logistics, you have the operations team. You have these younger operations associate that goes into the fire and looks at the profitability of that one shipment. He goes back and talks to the sales rep and questions him, “Why did you sell it for that low? We could have made a little bit more here or there or you are charging too much.”
That way, we are not going to get this. If you charge too much, you are going to lose a client, and it’s a short-term gain as opposed to a long-term investment in the relationship. I could not agree with you more, and we are leaving proof that this works. People are aware. People are smart and try to be successful. Everyone is trying to maximize their value in life. Not necessarily money but its value, impact, and purpose in life. This has been very powerful.
A lot of companies miss the boat on not giving the full picture to their people, so they feel like they are a cog in the machine rather than having an important impact on the whole system. When you create that transparency, it’s very empowering.
I have to say, and being fair to every company out there that has been around for a lot longer than mine, it’s a lot harder when you are trying to change what you already have as opposed to when you are starting from scratch with this mentality. We started with this mentality. We started with this transparency. Once you start, you keep adding new people to something that you already have, which I believe must be a lot easier than having everyone and all of a sudden starting to figure these things out and trying to change. It’s not easy but it’s worth it. I’m totally in agreeance with you.
It can be done. You don’t have to do 100%. You can be gradual. Your first year, show them maybe the gross profit, and then you explain what the overhead looks like and eventually share the net profit, and then you go from there.
It’s trust. At the end of the day, the reason why we are transparent is that we want people to trust in what we are doing, who we are, and why we do it. It’s the right thing to do. Even if it doesn’t reflect in anything, that’s the way companies should be run.
I agree that some people are afraid that if they show people how profitable they are, they are going to demand higher salaries. In most cases, people think that the company is even more profitable. It’s not very rare that the employees think, “We are making so much money.” It’s more of the opposite. It’s an unfounded fear in most cases.
If you are afraid, then maybe there is some true to it. Maybe you are paying them a little too less, and maybe you should be a little bit less. It’s greedy. It works around well. It keeps this system of checks and balances. Trust and people believing in what they are doing are key, and it’s going to be the future for sure. Purpose-driven organizations are going to be the future of the world.Purpose-driven organizations are definitely going to be the future of the world. Click To Tweet
It’s also a reflection that when you show them the numbers, it communicates your trust to them. Trust is always a mutual thing. If you feel that someone trusts you, then it’s a vulnerability. They are vulnerable enough to expose themselves to you, so you are going to be able to trust them a lot more, and that’s awesome. I would like to switch gears here and talk about what you are doing in Ukraine, which is quite amazing that you have already delivered, you said, 550,000 pounds of equipment to Ukraine. What is this program that you launched? Why did you launch it, and how could people participate?
First and foremost, this is not a new program for us. It’s not something that we recently launched. Our culture is about making the world a better place. We have a team in charge of disaster relief efforts and everything that has to do with helping others when something like this happens. This is one more event, a very tragic one.
We had helped before in the earthquakes and sent stuff to Haiti with the relief efforts and all. This is one of the things that we do, and it’s a good example. Now, Ukraine is particularly important to us because it has not only affected good friends of ours. We have agents and an agent network all over the world, including Russia, and we have good friends in Russia.
This is not something that I believe the Russian people are doing. There are very few people in Russia, primarily their leadership, that is making this horrific event come true. Ukraine is important because it’s connected with the supply chain and logistics of the world in many different ways. It was not only affecting our friends but disrupting supply chains around the world.
We all felt it because of the gas, microchips, minerals, and grains. If you go one by one, of all the things that have at least some influence by Ukrainian or Ukrainian companies, there are many like technologies and other big ones. We felt that we had to do something. We came together and started by donating a couple of containers, so we shipped a lot of containers for free to Ukraine. We are still shipping them. If someone is reading and has some product that they want to donate and could donate it, Ukraine needs a lot of heaters, batteries, and generators.
The winter is coming, and they are going to struggle even more because of the weather. If you have any of those things or any other thing that you can probably donate, just contact us because we can probably ship them for free and help more people that way. The other thing we did, which is the most important one, was to bring people together.
We reached out to the steamship lines. We reached out to our agents around the world. We reached out to the clients, community, and trucking companies in the US. We had a meeting which Ukraine coordination meeting a month and months ago and from that meeting, we saw the need of having these conversations regularly.
We went from having weekly meetings to now we have them once a month again. If someone is reading and wants to participate, we had ours a few days ago. They are more than welcome to join, and I will send you all the information so they can do so. It’s amazing. It opens up the opportunity for people to come together and talk about this, and all of a sudden, you are starting to make all these connections and not doing much more than putting people in touch with each other.
All of a sudden, we had trucking companies donating freight for free and then we had someone couple of our clients that are in the medical device industry donating medical devices, so they talked to the other trucking company. We were not even participating in much of this other than opening up the communication channels, and it has been great.
It has been a great example of how people come together when there’s hardship in the world, and it has been inspiring. It has been a good experience despite the fact that it’s a horrible thing that continues to happen I strongly believe that as a citizen of the world, we cannot let this slide. I know the media cycle is starting to come down, and you don’t hear as much as you probably hear about other things. There’s still war out there in a lot of other places too. I would say stay involved and pick a cost or two and continue helping because there’s a lot of need as well.
That’s wonderful that you are doing this. Those of you reading and you have something that you could donate to help the Ukrainian people to get through this bitter winter that’s coming, then Enrique’s company, Vector Logistics, can freely deliver those things in containers, so reach out to Enrique. Where can people connect, find the communication, and how can they reach you? Give us something.
Before I give you that, I wanted to make a quick note. At the end of the day, we are looking for more corporate sponsorships and products. I know there are a lot of caring individuals out there that are willing to donate personal effects and things. From a logistics standpoint, we are not doing that at this point.
If anyone is manufacturing something or has a couple of pallets or a couple of containers that they can donate, we could move that for free. The other thing is you can look for us on our website. That’s probably the easier way to find out a little bit more about us, our culture, and then our initiatives. The Ukraine one as well, www.VectorGL.com. You can also look for me on LinkedIn. It’s @EnriqueAlvarez in Vector. I should pop up. Send us an email, contact us, and we will be more than happy to help if we can.
Enrique, your Sell-Cell Model of Growth, looks very unique. We recorded over 130 episodes, and nothing like this has come up yet congratulations. That is exciting. Check this out, and also the support for Ukraine. If you are a company that can contribute to this, then please check out VectorGl.com or ping Enriquez on LinkedIn. Enrique, thanks for coming on the show and sharing your wisdom and being so generous. For you, readers, Stay tuned over the Thanksgiving week because we are going to keep bringing you episodes to a week, even during the holiday. Thanks for joining Enrique.
Thank you so much for having me, Steve.