Other than founder Brad Jacobs, no one has been more instrumental in XPO Logistics Inc.’s decadelong success than Mario Harik, its chief information officer (CIO). Harik, 42, has been with XPO (NYSE:XPO) since its founding in 2011. He built the company’s platform, ensuring the systems were in place before the company launched its unprecedented roll-up program. Harik then managed the technology integrations of 17 acquisitions in four years, a remarkable accomplishment by any measure. Following XPO’s burst into the LTL business with its 2015 acquisition of Con-way Inc., Harik spent much of the next six years developing digital tools that ramped up the unit’s efficiency and helped transform the normally IT-averse segment.
Whether a vote of confidence, a leap of faith or a reflection of IT’s increasing relevance in LTL, Jacobs burnished Harik’s credentials late last week in a way no one in the more-than-century-old industry can remember. With no public announcement, XPO (NYSE:XPO) named Harik the acting president of its all-important LTL division. Harik will also keep his position as the company’s CIO.
Tony Brooks, who headed the LTL division, retired, a move that sources said would have happened earlier if not for the COVID-19 pandemic. Harik’s new role took effect immediately. A formal search has begun for a permanent head of the unit. Until then, it’s Harik’s ball to run with.
No one could think of a situation where a company’s CIO and not an operations executive was named to run an entire LTL operation. That Harik retained the CIO role only added to the surprise. XPO would not publicly comment beyond confirming the management change. A person close to the company said the 59-year-old Brooks, who is a traditional operator, was a good fit for the first phase of the company’s LTL evolution. However, Harik is “perfectly suited” for the CEO role in the second phase, which the person said is to “take the business to the next level.”
That next level no doubt includes a continued heavy dose of digitization as Jacobs pushes toward his goal of achieving $1 billion in adjusted earnings before interest, taxes, depreciation and amortization for the unit by 2022. Through increased efficiency and a solid ongoing pricing backdrop, the unit’s adjusted operating margin has increased more than 1,000 basis points since 2015, according to company figures.
Harik assumes the role at probably the most critical period since XPO’s founding. In early August, XPO spun off its logistics operation, now known as GXO Logistics Inc. (NYSE:GXO). The LTL business, along with XPO’s brokerage and final-mile divisions, stayed with the original company. Jacobs has made no secret of his desire to increase XPO’s valuation to or near the lofty levels of pure-play LTL companies like Old Dominion Freight Line Inc. (NASDAQ:ODFL) and Saia Inc. (NASDAQ:SAIA). Both companies, whose share prices have been on fire for months, trade at between 25 and 30 times their 2022 earnings estimates. XPO trades at around 16 times its 2022 estimates. With the LTL business being the tail that will wag XPO’s valuation dog, Harik has a big job ahead of him.
By all accounts a brilliant technologist, Harik steps into a different culture with LTL. A tough-as-nails business once dominated by organized labor, LTL’s network model is also extremely complicated and very costly if not run efficiently. The nature of LTL operations has typically required seasoned operators like Brooks to manage. When truckload carrier Knight-Swift Transportation Holdings Inc. (NYSE:KNX) acquired LTL carrier AAA Cooper Transport earlier this year, it kept all of ACT’s executives and personnel. It remains to be seen how well Harik’s managerial skills transfer to LTL.
The person close to XPO said that “Harik understands the LTL business better than anyone” at the company. In February, Harik was named XPO’s chief customer officer, according to his LinkedIn profile. That move might have foretold his ascension to the top LTL job.
Don Newell, who spent years in LTL operations and today runs an LTL consultancy, called shifting an IT head to the top operations job a “tricky proposition.” Newell said he’s unsure that an IT specialist would be able to fully grasp the operations, pricing, costing and customer service duties required for the job. One benefit is that LTL operations people should have an easier time getting IT support for their efforts, Newell said.
Newell said that Harik, whom he doesn’t know, “might prove me wrong, but my guess is that it will take significant time for him to adjust and make it work, if it happens at all.”