Earlier today, Minneapolis, Minn.-based global logistics services provider and freight forwarder C.H. Robinson announced a major executive leadership change.
The company said that, effective December 31, 2022, Bob Biesterfeld, president and CEO, stepped down from those roles, as well as a member of the company’s board of directors.
For the time being, CHR Chair of the Board of Directors Scott Anderson was tabbed as Interim Chief Executive Officer, effective January 1, 2023. What’s more, CHR said that its Board has formally kicked off a search for a new permanent CEO and retained national executive search firm Russell Reynolds, in assisting in identifying both internal and external candidates.
And with Anderson named interim CEO, the company said Jodee Kozlak, founder and CEO of Kozlak Capital Partners, whom joined the company at Director in 2013, is now independent Chair of the C.H. Robinson Board, with Kermit Crawford, former president and CEO of Rite Aid Corporation and CHR Director since 2020, named chair of the CHR Board’s Governance Committee.
"On behalf of the Board of Directors, I thank Bob for his many important contributions over the past three years as CEO and his 24 years with C.H. Robinson," said Anderson, in a statement. "Since joining Robinson in 1999, Bob has played an important role in positioning C.H. Robinson for long-term success, most recently leading the company through a challenging period, which included COVID-19 and dealing with supply chain disruptions. We wish him all the best. I am honored to take on the role of Interim CEO and am committed to ensuring this will be a seamless transition for all C.H. Robinson stakeholders. Now is the right time for C.H. Robinson to accelerate our strategic initiatives and the Board is focused on identifying a CEO successor who can execute on the opportunities ahead for Robinson. I look forward to working closely with our talented employees to continue to improve our customer and carrier experience, and scale our digital processes to foster sustainable growth.”
Anderson has been on the CHR Board going back to January 2012, serving as Chair since 2020. Other positions he has held over the years include: President and Chief Executive Officer of Patterson Companies from 2010 to 2017 and was elected as Chairman of the Board of Patterson Companies in April 2013; and as a director on the Board of Duke Realty Corporation prior to its acquisition by Prologis in October 2022.
In February 2019, then CHR Chief Operating Officer Biesterfeld was named CHR CEO, which took effect in May 2019. He replaced C.H. Robinson Chairman and CEO John Wiehoff. Before being named COO in March 2018, Biesterfeld served as President, North America Surface Transportation and prior to that he served as Vice President, Truckload and Vice President, Robinson Fresh, where he started his logistics career path in 1999.
At the time of his hiring as CEO, Biesterfeld told LM in an interview that one of the company’s key objectives was turning the page to a more digital future, where CHR is very focused on the three core components of people, process, and technology, with technology continuing to be a more important piece of that overall puzzle.
“That is how I am thinking about it directionally, and our senior leadership team is focused on that strategy,” he said at the time.
In September 2019, CHR said it planned to make a $1 billion investment to be allocated in technology over the next five years, which the company said is twice as much as it previous $1 billion in investment into technology over the last ten years. In terms of personnel, C.H. Robinson has more than 1,000 data scientist, engineers, and developers.
Evan Armstrong, president of Milwaukee-based supply chain consultancy Armstrong & Associates, told LM that Biesterfeld did a very good job as the leader of CHRW and helped it expand into a more integrated 3PL with sizable international transportation management and value-added warehousing and distribution operations.
“I think the likely replacement would be CCO [Chris O’Brien] who has significantly helped CH expand internationally and continue to grow its domestic transportation management operations,” he said.
And Ben Gordon, Managing Partner of Cambridge Capital, an investor in niche supply chain leaders, and also Managing Partner of BGSA Holdings, a leading mergers and acquisitions advisory firm focused on the transportation, logistics, and supply chain technology sector, observed that it is noteworthy that Biesterfeld resigned without a permanent replacement in mind.
“Typically when a company’s chairman becomes ‘interim CEO,’ it means the company hasn’t lined up a complete transition,” he said. “This has been a challenging year for the entire freight industry, and CH Robinson hasn’t been immune, as evidenced by the announced layoff of 650 people in November. It’s also worth noting that CH Robinson has captured the attention of activist hedge funds like Ancora that are calling on the company to make shareholder friendly moves. Could this be a catalyst for CH Robinson to make more aggressive changes, potentially including cost cuts, personnel transitions, or deals?"
This development was viewed as not unexpected but still likely a surprise, wrote Morgan Stanley analyst Ravi Shanker in a research note.
“The change was driven by the Board’s belief that the time was right to accelerate the digital transformation strategy,” observed Shanker. Some investors have considered whether deeper management changes at CHRW were a possibility after the poor earnings trajectory at NAST [North American Surface Transportation] through the biggest upcycle in history but the street will likely still be surprised by the nature of the transition with the Chairman of the Board taking over on an interim basis on the first day of a new year, without a transition period for the outgoing CEO and no replacement readily identified.”
And he added that the executive leadership changes may have been a reflection of what Shanker called the idiosyncratic earnings challenges at CHRW in the last several years.
“In the last 5 years, CHRW EPS has grown ~140% vs. the group average ~250% and since 2019, EPS has grown ~89% vs. group average ~105%,” he wrote. “Perhaps more relevant is the fact that NAST net revenues have only grown 23% 2022 over 2019 vs. Logistics net revenues at asset-light peers JBHT ICS, RXO, LSTR being up ~75% on average. Even with two of the biggest upcycles in history and two deep downcycles in the last 5 years, CHRW has been unable to capitalize – despite the brokerage model being tailor made to succeed in boom-bust cycles and CHRW’s dominant market position in the space.”
In its third quarter earnings, the company said that operating income fell 7.5% annually, to $287.6 million, with adjusted operating margin off 440 basis points, to 32.4%, and diluted earnings per share falling 3.8%, to $1.78. C.H. Robinson’s fourth quarter earnings release is scheduled for February 1.
On the company’s third quarter earnings call, Biesterfeld explained that those declines reflected an expected deceleration in demand, for the second half of 2022, for freight, including weakness in the retail market, and further slowness in the housing market.
“We’re now seeing those expectations play out, with slowing freight demand and price declines in the freight forwarding and surface transportation markets,” said Biesterfeld. “Throughout the changes in the freight cycle, we have maintained our focus on continuing to improve the customer and carrier experience and scaling our digital processes and operating model to foster sustainable, profitable growth. Today, we believe that we are entering a time of slower economic growth where freight markets will continue to cool from their peaks and will operate more reliably and at more normalized rates, with fewer disruptions. These changes in market conditions, coupled with many successful endeavors on our digital roadmap directed at scaling our model to be more efficient, are allowing us to take actions to structurally reduce our overall cost structure.”