from staff
David Kulik, former CEO of CEVA Logistics, is the chair of the Jacksonville Port Authority, which accepted the resignation last week of Executive Director Rick Ferrin and is seeking a successor. In 1997, Ferrin joined the JPA, which ran both the airport and seaport. After the JPA separated from the Jacksonville Aviation Authority in 2001, Ferrin was named the JPA executive director. Kulik met Monday with the editorial staff of the Daily Record.
Can you give us a timeline from when you decided Rick Ferrin’s resignation was a possibility to last Thursday in the boardroom?
I’ve been on the board for three years. We had just completed a reorganization of the port when I was vice chairman. One of the comments that was made by someone that this has been in the works for a year - not true. The reorganization occurred about a year ago, and that’s when we took the span of control of all of our senior people and put it more in line with the business.
Rick’s direct reports went from a dozen to five. We then put more responsibility onto the chief operating officer, the chief finance officer and the chief marketing officer. The organization was reset with very specific responsibilities for people. That was to allow all people to become more effective in their positions, and in Rick’s case, he was also given the responsibilities to get some really big issues completed.
There’s no question that the core of some of those big issues has to do with water, whether it was Mile Point or whether it was the progress of getting financing for deep water. But it had to do with water. There are natural progressions when it comes to expanding your port relative to getting deep enough water to facilitate world trade.
That issue aside, we also had a new set of challenges occurring in the port, where we could no longer expand like we had in the prior 10 years. Real estate, the physical plant, the physical footprint of the port had gotten to a point where there were far fewer options to bring in new customers. So that was one limitation.
The other was the fact that our customers were making more and more demands because their customers were doing the same thing. Two years ago, we fell into a global malaise from a financial standpoint, and I think that we still haven’t recovered from that.
So as I entered the scene as chairman, it was clear that we had to do things much quicker. We had to do things differently, because we didn’t have the same advantages that we once had. We didn’t have the property, and we didn’t have the bonding capacity, and if you look at the port, you can see our revenue, and our profitability, has not grown exponentially.
We have some limitations that must be fixed, Mile Point being the most critical.
We have to have a definitive answer on (the) cruise (terminal site), because we don’t want to lose the contribution that makes to our bottom line. And we’re really good at cruise, we have a great relationship with Carnival.
So these are great challenges, and on top of all this, we have this financial meltdown, which is impacting our customers, and us as well.
So these are very, very important times for us, and they take a different turn than leadership or management has ever had with the port.
Did it happen 10 months ago? No. It certainly wasn’t a year ago, and it certainly wasn’t last week.
How did the timeline unfold?
As the chairman, I am in the port every week, and I’m talking to the senior management team about these challenges all the time and they, through the normal course of business, update the other board members.
But the fact of the matter is that we were continually raising more obstacles, in my opinion, than opportunities. And those obstacles were not getting knocked down as fast as we would like them to. Now, no individual on the board, the port, the management, Rick Ferrin, or the next executive director, is going to be able to move the federal government as fast as we need them to.
However, I believe we need to assemble the right resources in order to attack this problem with the federal government. We can’t get deep water without (federal funding from) Washington. There’s not enough money in the city, the state and the port itself to finance what we need to finance.
So it appears that this is an accumulation of interrelated occurrences, and we came to a point (where we) had conversations every week about the challenges that would face us and what the plans were. And I grew maybe more impatient. I certainly felt that the board was in the same frame of reference on that.
Then the fact is that our customers are providing us a lot of opportunities. I once made a comment that sort of stuck with me, not in the port, but in my former life. I call it the ‘red box.’ The ‘red box’ is businesses we’re not in, with customers we don’t yet have. That’s a critical piece for the executive director. He needs to be in that ‘red box’ every now and then, in order to find out what new business opportunities there may be for the Port.
The other thing that concerns me is while we have a great reputation as being one of the great economic engines for Jacksonville, with that reputation comes a tremendous responsibility. I don’t believe we’ve lived up to that yet.
We don’t have as many ships coming into the MOL port as we wanted. The Hanjin deal has been delayed because of the issue with getting a letter of intent or a letter of understanding between the ILA and Hanjin. We’re not involved in the negotiations.
We’re trying to find reasonable alternatives and the right course of action for (the) cruise (terminal). This is an extremely sensitive issue with constituencies on both sides of the river. We are very sensitive to it. I don’t think we were as sensitive as we should have been the first time we went into the cruise business. But you know, those are lessons learned.
It seems like a long answer to your question, but I want to frame it properly, that this was not sudden, nor was it planned a year ago.
But you come to a tipping point. And I think we reached that point in the last several months that it started to be on our mind. It certainly wasn’t in our discussions, but then it started to be with Rick and me about how are we going to handle these challenges.
It came down to, ‘Rick, what do you want to do?’ Then we went back and forth, and I think had some very meaningful discussions about that. Rick was in the job for 13 years. If you look at the life cycle of a corporation, I look at JaxPort as a corporation, they go through periods of evolution.
Did the board ask for Rick’s resignation?
I personally talked to Rick about alternatives and I told him that we were going to have to move in a different direction. He immediately said, ‘what does that mean for me?’ And I said, ‘Rick, what do you want it to mean for you?’
I laid out all of the things that I’ve just said to you, and a few other things that were obviously private, but at the same time, I think he had a clear understanding of the direction we were going to steer the port, from a board standpoint. Remember, we’re not the line authority here. We provide direction and authority to run the business. And I also asked him, I said, ‘maybe you should seek some other counsel on this about what you want to do.’ Operating in (the) sunshine (laws), we go through the (City) Office of General Counsel, and so his advisers talked to our advisers, in this case our advisers were the OGC. Between them, they came to an agreement.
I accepted Rick’s resignation, and then we entered into a contractual agreement so he could provide continued services for us, which he will do.
I’m sure it was uncomfortable for a lot of people. But that was (a) conclusion that did not get reached that week, the prior day. This has been an ongoing discussion with Rick and me. Obviously Rick is a very bright guy, and he’s working toward his Doctorate in Education, and I think that maybe this will be the next phase of his life.
When you met with Rick the option was not on the table for Rick to be the person to take the port to the next level?
I had made the decision we were going to move to a different skill set. I just wanted to have this discussion with Rick, because his input was very valuable and I wanted his opinion on this. As we talked about directing the port, moving the port into business we were not yet in, what does that mean, how are we going to knock these dominoes down quicker. I ran a big publicly traded company, we had boards of directors, we had management teams, the priorities were such, there (were) timetables. This is not the way the port has been run for a number of reasons. So my pressure point is, OK, well we didn’t get things done fast enough, then why aren’t we doing things differently?
Someone said, we really have a great operating team here. I think the challenge for the next executive director is to take these assets, the people assets, and stretch them, and force them to think about ways of doing business that maybe no other port currently thinks about. And we will probably, I’ll say probably, because I’m not going to rule it out, we won’t be the biggest port on the East Coast.
But we certainly have the opportunity ... to be the best port. And that, I think, will not necessarily be because we have deep water, or because we have the best cranes, or even the best people. I think our workforce is exceptional in terms of productivity.
What skills will you seek in the next executive director?
It could be someone who has experience in a port, operating a port; it could be someone from the shipping industry; it could be a customer; it could be someone in the logistics industry, and I view JaxPort as in the logistics industry, because that’s really the definition, to move product from one point to the next, keeping inventories as low as possible, and getting people paid as soon as possible.
Do you see anyone currently on staff who might be a candidate for the job?
I’ve offered that, I’d left that open. If any individual would like to come forward and throw their hat in the ring, I will be more than happy to facilitate their candidacy being vetted. There will be a nominating committee made up of the board of directors. We’re in the process of getting that done now. We will go through the normal procurement procedure; we are in the process now of writing up a job description. And how do you write up a job description for positions that you don’t yet know about?
But I sort of like that. I think that aspirational leadership is exactly what I want as a key element to that. ‘Tell me what no port does that you think we can do.’ That’s a question I’ll pose to these people. We’re in the global business called logistics, which is a big umbrella. Now what business can we do?
Is that a job that you might want?
What was Lyndon B. Johnson’s favorite, or his last comment? ‘I will not seek, nor will I accept the nomination of my party.’ I’d love you to quote that, that’ll stop all the blogs and all of the opinions of people.
What’s your time frame?
The board, and I’ve also vetted this with the mayor and City Council, was that in September we would vote on the new slate of officers. People can stay in the job. The board resolution was that we, the officers, would stay in their current position, so we’d have a continuity, so I could now be at the board more visibly. I’ll be here every week. I’ll be visible. The port will be run by the same people that have been running it. Continuity of management. No speed bumps. Those people are running the port like they were last Monday, they’re doing it again this Monday. No change. Our employees ... felt a great deal of comfort with the three, operating officer, marketing officer and finance officer, sitting in front of me at that Town Hall Friday. And I’m in the process now of reaching out to all our customers, and letting them know that there is continuity; there is absolutely no reason for any concern. I will keep them informed every step along the way. We anticipate that going through the procurement process, we will get this RFQ (request for qualifications for an executive search firm) out before the end of the month. I want that process all to be complete by the Sept. 27 board meeting. That’s my target for the people here, so that the board can view the cost, the potential cost, the scope, and the job description that will be sent, and then we will go forward with the nominating committee, because the board in its entirety will be the selection committee.
We will deal with the top three or four people, outside people, that will bring us external candidates to mix with our internal candidates. Then we can turn that over to the nominating committee.
Did you say six months at some point?
I said six months because I thought that Jan. 1 was a good start date for a new executive director, because you know, in the natural order of things, people leave jobs, people are recruited, and I’ve always had good success recruiting people in the fourth quarter. It’s a new start. New Year.
I hope we’re done by January, but even if we are, the board is prepared. In the current officer slate, we’re going to stick around for a while to help with the new person. But again, we want to get in, and let him or her succeed on their own right. Remember, we’ve only had one executive director. We used to be combined with the airport and seaport. This person will hit the ground running.
One of the themes is moving quickly and speedily. We’ve got deep water, we’ve got Mile Point, Panamax is on its way. What does the Port need to do to prepare for Panamax?
Even before the Post-Panamax, we have to have Mile Point fixed, because otherwise, regardless of the fact that these other companies have built infrastructure and terminals here, they’ll go elsewhere with the bigger ships. We can’t afford for that to happen. Deep water is another issue. Three years ago when I joined the board, we had a seven-year window to get that done by 2014. I was just in Panama a couple of months ago with the mayor, and we went down there to talk to the people that run the Panama Canal Zone. They’re very supportive of Jacksonville.
We’re on target, we’re on budget, it’s going to happen.
It’s doubtful that unless things change that we’re going to have, when that first 8,000 TEU (twenty-foot-equivalent-unit) ship comes up the coast, and can make a left to go into Jacksonville, I don’t think we’re going to have the water for it in 2014, and I’m not trying to be pessimistic about this, I’m trying to be realistic.
It seems to me that based upon the way the current process is, that you have to have an approval, and then you have to have appropriations, and then you actually have to get put onto a bill to get the funding. That process could happen. Our legislative support for that, (U.S. Reps.) Corinne Brown, Ander Crenshaw, and our fine senators, certainly the mayor, and the governor, they’re all very supportive of Jacksonville. But I don’t see the money and I don’t see the timing to get the money. But with that said, that sounds like, well, we’re going to miss the Post-Panamax era. No. I think we’ve got strong relationships with these customers.
I want to make sure that we have the right resources to get this done as soon as possible. We need a different approach to it. I think we need to go to war on this issue. There’s no question about it. It is so critically important that no matter how far up the chain we elevate this, the best case is that we’ll be delayed getting deep water. Mile Point, I’m going to assume that’s done. Now, we’re going to get a lot of ships in here when that gets completed.
When the executive director gets on the ground, what benchmarks are you expecting to hit?
The new executive director’s responsibility will certainly be to get as close to the customers and employees as possible. We have many constituents here. We have the city, we have our customers and our employees. Then start having the out-of-the-box discussions with people that say, ‘What is your opinion? What do you think we could do?’ Because it’s one thing for an executive to come in here and make changes, but I’m pretty sure that the direction that I’ll give the new executive is to listen. And after you listen, then start making some evaluations about the assets you have, where we’re short. Come back to the board and tell us what else you need, but let’s start making the changes that are necessary in order to facilitate a faster pace, a faster growth. I want the customers that we have, and the ones that we don’t have. Remember the ‘red box’ customers. I want them to think about JaxPort first. They’re only going to do that if they have confidence that we can react to changes in the business, and the speed of change in the industry, and come up with innovative solutions. I’d love the customer to come and throw problems at us. ‘Can you guys solve this? What do you think?’ I don’t see enough of that here.
What’s the status of the cruise terminal?
No. 1 is, I want to keep the cruise business. Carnival’s a great customer. We also do a great job. If you look at the ships that sail out of here, the people of Jacksonville and the surrounding area that come in cruise, we’re over 100 percent capacity on these ships. We have nearly the highest rating from post-experience cruisers.
There’s no question that it is an important piece of business for us. It strategically fits.
We paid for a nice piece of property in Mayport that is suitable to bring in large ships. My personal opinion is that everywhere I’ve seen this occur, there’s been collateral benefit to the community. People will come and either have a pre-cruise or a post-cruise experience. If you look at our advantages, from Amelia Island to St. Augustine, and I’m a golfer, so all the golf courses are in between, and the river itself, we have a great city for that. We have a lot of advantages.
Now, do I want a cruise ship sitting in my backyard? I can certainly understand people looking up at that cruise ship and saying, well, that wasn’t here before. But what was here before was a shrimping industry that has gone on hard times, but has the feel of a small shipping village. And I think that’s wonderful except that it doesn’t facilitate the potential that Mayport has for creating jobs. And (the cruise business) is also creating jobs. I think people have to weigh what the benefits of that are for the city.
We have the property, it’s going to require some work, and some investment. One of the questions or concerns was we’re going to build this huge edifice here, multistory parking, with all this retail space, and the ship would be behind it, and it would change the whole look of Mayport. We don’t have enough money to build that big thing. We have a nice piece of property that could facilitate cruise. We don’t have all the answers as to how we’re going to pay for the infrastructure to support that, specifically parking, but we have some ideas. That’s Mayport.
We have some properties on the north side of the river, they’ve got some potential for us, but then we have the same thing. We have the Heckscher Road people. And I’m sensitive to what I hear from them.
There were 20 sites, and I’ll be the first one to admit, we made some mistakes. No question about it. So we’re trying not to make those mistakes again. The answers are far more complex than that.