2017 Survey of Senior Leadership (SSL)

>We just completed the survey in late November 2017. Not too many surprises from other years, or from our general expectations. Some of the results can act as a decent reminder for us all.

Specifically:

The top five business challenges began with Operating Cost Management. This remains consistent as #1 or #2, year after year. After speaking with many of you participating, it’s become clear to us that frequently this is mentioned as the result of challenges elsewhere. You may be concerned about operating costs, for example, because your management team is missing productivity or effectiveness targets…

…which is a great segue into the #2-ranked business challenge: Management and Leadership Performance.

Something near and dear to our hearts, obviously, and it seems to be a priority in your world as well. A couple of things stand out, particularly after a few follow-up conversations:

  1. Succession planning is still like the pea in Princess and the Pea; a continued challenge obscured by twenty layers of present-day priorities. We have to get better. Naming a potential replacement at the last moment is not “announcing a succession plan,” it’s replacement planning, and frankly, shows a lack of planning in general.
  2. Leadership pipeline development, the next-level from succession planning, is on many minds. Consider constant aging and retirement of boomers coupled with developmental shortfalls with our younger generations, and we’re headed toward a perfect storm. Someone must lead the rabble.

Individually (personally), your top challenge was managing change while maintaining focus. Gone are the days where each change gets summarily vetted through the organization prior to implementing, ensuring wide swaths of buy-in. No, we’re discovering what it’s like to change the oil in a car while driving down the road. At 80mph. In the rain. With our mother-in-law sitting in the back seat telling us to slow down.

It won’t get easier, though I do hope we can get better at it. Leading change is a learned skill, and though generalizing a bit, appears to be a key characteristic of some of the younger generations. Maybe join forces?

Staffing challenges will not lessen any in 2018, it seems. 36% see a slight increase in staffing for 2018, almost 10% see a significant increase with 44% staying the same. That leaves only 10% looking at reducing staff size in 2018. The war for talent rages on.

We’ll provide more detail from the survey throughout the year. Please download and utilize as you see fit and let us know if we can answer any questions. We’re here to help.

Leaders & Laggards for 2017

When we reviewed the 2017 Leaders and Laggards “Naughty & Nice” list last month, we thought we’d see how our winners and losers are poised to make a splash in 2018.

These three represent the best… and the worst:

Leadership Leader

Our leadership Leader for 2017 is Charles Butt, CEO of HEB groceries, headquartered in San Antonio Texas. He easily took the Leadership Leader mantle in October, after donating both personal funds and corporate support to Hurricane Harvey recovery efforts. But that’s just the tip of the iceberg.

HEB is #12 on Forbes Largest Private Companies list, and #1 in Texas, with $23B in revenue and over 100K employees at 330 locations in the U.S. and Mexico. Founded in 1905 by Charles’ grandmother Florence, the company was named after his father Howard E. Butt, one of the Butt brothers. I freely admit to having an occasional chuckle at the sound of that last sentence. As my wife is fond of saying, you’re only young once but you can be immature forever. Moving on…

The sheer size, success and longevity could be enough to make a leadership leader, but it’s the process taken that has our attention. This massive growth is entirely organic—they don’t go around buying up other grocers in that insatiable quest to be bigger. They simply plant seeds and water them. Locally.

And here are some of those leadership “seeds:”

  • HEB gives 5% of the organization’s pretax profits to charity.
  • Charles is a Glass Door Top 20, with a 97% CEO approval rating.
    • 85% would recommend HEB as a place to work—validated by their Net Promoter Score (NPS) of 55+, impressive for anyone who follows those things.
    • The company culture and career advancement are most frequently named as reasons for that loyalty.
    • Jeff Thomas is a great example. Hired as a bagger 41 years ago, he’s held 22+ positions and moved nine times. He’s currently SVP/GM of the Central Texas region, leading 20K+ employees. From teenage bagger to leading 20,000 people. The pic on the right is Jeff, congratulating three sisters; two retiring with 50+ years of HEB service, and one sticking around since she just has 43 years. Seems they do something right to avoid typical retail retention challenges.
  • Charles recently provided a $100M investment to create a new institute dedicated to training school principals and superintendents, focusing on leadership styles to boost student performance and talent development.

Charles’ right hand, COO Craig Boyan: “[HEB’s] success stems from its investment in its employees…” “It’s our goal to pay as much as we can, not as little as we can. It’s hard for some to understand… that those who invest more in their largest cost item — people — can be those that win.”

Whole Foods founder John Mackey clearly admires Charles, saying that “HEB is one of the best-run companies I’ve ever seen.” Not grocer; not retailer. Best run company.

Besides, any CEO that has a company that has a mascot—a real mascot—has to be freakin’ amazing. It wasn’t a difficult decision, making Charles Butt and his HEB Triangle’s Leadership Leader of the Year.

 

Leadership Milquetoast

Oscar Munoz, United Airlines’ CEO, had a tough 2017. Much of it he brought on himself.

We had almost given up on United as a perennial Laggard, when Oscar Munoz started pulling them out of the gutter. His actions were so un-United-like that in February 2017 we declared him “Almost a Leader.”

After his horrendous April response to United’s man-handling of a passenger, he fell to Laggard status.

By September, with United still not being able to stay out of its own way, Munoz climbed back to the Milquetoast category with a common sense approach to adhering to self-imposed rules.

As 2017 came to an end, the only thing we were sure of is that he’s absolutely tone deaf when it comes to his customers and United’s investors.

For instance, during the third quarter earnings report, Munoz scared the crap out of analysts when he acknowledged the hole the airline had dug for itself. He said his management team was working on a plan for success. Really? Just now formulating a plan? That might be just after the nick of time. We weren’t alone in that assessment; United’s stock plunged more than ten percent that day.

When the flight attendants’ union joined the #metoo campaign, Munoz declared his support and said United needed to have a policy about sexual misbehavior. You think? That’s certainly not leading-edge thinking. He publicly joined the better-late-than-never club on preventing idiotic behavior.

And then there was December’s bump of a first-class passenger, innocently of course, so that a Texas congresswoman could sit up front. He said – she said aside, the airline’s response (blaming the passenger) certainly didn’t reflect the airline’s publicly declared “we care about our customers” mantra.

Come on, Oscar. We’re rooting for you, especially if you can get your airline to give a snot about its passengers. We see how hard you’re working to convince your employees that you’re a people person, but the rest of us are people, too. And we’re the people that pay your peoples’ wages.

Hollow promises are the hallmark of a milquetoast leader, and we’ve decided that Oscar Munoz has been the milquetoastiest of Triangle’s Leadership Milquetoasts in 2017

Leadership Laggard

As much as we thought Steve Ells, former CEO of Chipotle and July’s Leadership Laggard winner, displayed poor leadership in 2017 during the continued outbreaks of various maladies at his restaurants, he didn’t make the Worst of the Worst cut. Maybe because he knew when to step down… better late than never.

Instead, we picked a CEO we haven’t mentioned since September of 2016, “Fast Eddie” Lampert of Sears Holding Corp (SHC) infamy. The announcement that more than 100 Sears and Kmart stores are going to close in 2018 was the straw that broke the camel’s back.

We predicted a bankruptcy ‘I told you so’ moment if he didn’t change his ways, and his performance during 2017 didn’t disappoint – us, anyway. Fast Eddie loaned the company another $600 million to stay afloat in 2017, while Sears and Kmart closed another 358 stores (with 63 more closing this month).

Damn. What am I missing? Can someone tell me what Lampert’s game plan is?

Lampert, the hedge fund manager who engineered the merger of Sears and Kmart in 2005, has managed to lose the company more than $10 billion in the last six years. Lost SHC, that is, since his hedge fund controls Seritage Growth Properties, the REIT that Lampert spun off to own and manage the properties Sears and Kmart now lease. And with every closing, Seritage gets to lease the property to someone willing to pay more than Sears and Kmart are paying under the current structure.

Oh, and then there’s the Sears Hometown and Outlet Stores, a slimmed-down version of Sears primarily focused on selling home appliances, lawn and garden equipment, tools, and hardware. They seem to be doing better than the SHC big box stores, so Lampert bought another 95+K shares last month, after buying almost 220K shares in November 2017. Between him and his holding company, they control the majority of shares of the only profitable endeavor SHC has going.

Not to paint a grisly picture, but Fast Eddie kind of reminds me of an assassin bug (you can look it up). The bug impales its prey and sucks it dry, then attaches the entire corpse to its back. Never again let it be said “you can’t get blood out of a turnip” … the SHC board and investors seem perfectly willing to tolerate Lampert draining the lifeblood out of a company that survived two world wars and the Great Depression.

For being worse than the worst of all our 2017 Laggards, we have to declare Edward “Fast Eddie” Lampert Our Leadership Laggard of the Year.

Breakthrough Innovation Through Diversity and Inclusion Leadership

Written by Simma Liberman, The Inclusionist
Creating inclusive workplaces where people love to do their best work and customers love to do business.

According to findings of the Center for Talent Innovation “The engine for serial innovation is a diverse workforce that’s managed by leaders who cherish difference, embrace disruption, and foster a speak-up culture. Inclusive leader behaviors effectively “unlock” the innovative potential of an inherently diverse workforce, enabling companies to increase their share of existing markets and lever open brand-new ones. (more…)

Leaders & Laggards | October 2017

Leadership Leader

Our leadership Leader for this month is Charles Butt, CEO of H-E-B groceries, headquartered in San Antonio Texas. Intensely private, alas, we have no photograph we could use.

H-E-B is one of the largest privately held companies in the country, and certainly the largest grocery store in Texas and northern Mexico. With almost 100,000 employees and revenues exceeding $20 billion, their size is nothing to be trifled with. H-E-B was on Amazon’s radar before they made the decision to pursue whole foods. They’re ranked #3 in the nation for grocery stores, and #12 among all retailers.

All of that, however, is not what made them this month’s leader. No, it’s all the other stuff…

First, something close to home. Charles Butt but made a personal donation of $5 million to the JJ Watts Foundation for Houston Flood Relief, and the H-E-B Corporation provided monetary, material and volunteer support to victims of hurricane Harvey since the storm began. Charles Butt and his family donated an additional $1 million, in memory of their late patriarch, Howard E Butt, Jr., to help people recovering from the storm’s damage. H-E-B employees felt it was a badge of honor to be at work during hurricane Harvey.

The H-E-B mobile app frequently trends as one of the most popular on both Apple’s Store as well as Google Play. Think about that—a grocer, focusing almost entirely on just Texas and Mexico, is trending nationwide with their mobile app. Take that, Amazon!

They know how to hire at H-E-B as well. And before you chuckle too hard, realize most organizations do not. Not really, anyway. Their hiring practices were singled out by researchers from Harvard Business School for “looking beyond the degree” in their hiring practices. Take a look at their career page, and you’ll notice some differences from many others, particularly retail. Discussions around development, career paths, and expectations… all integral to their obvious success.

And don’t forget the hoochies! Apparently H-E-B also carries (or somehow causes) hoochies.

So, hoochies notwithstanding, Charles Butt and his H-E-B stores are an easy winner for October’s Leadership Leader.

Leadership Milquetoast 

We like some of what we see CEO Brian Cornell doing for Target to keep it from going the way of other defunct or dying box stores. How’s that for equivocation?

Cornell is leading Target through a $7B investment in remodeling old stores, opening new small-format stores in high-traffic urban areas, (thankfully) fixing a supply chain notorious for leaving shelves bare, and upgrading its e-commerce platform. His style is data-driven and hands-on, his outlook for Target is upbeat, and investors seem to be responding.

But not everything thing Cornell has done as CEO is puppies and rainbows. Target’s investors enjoyed his first year, rode through a bumpy second year, and suffered during his third year mainly because it’s been a “follow the leader” strategy that will never get Target to the front of the pack.

Target has not kept up with the Joneses – or Amazon and Walmart in this case – and is pumping money into neglected areas to catch back up. That strategy will work out well if everyone will just stop moving forward.

Take e-commerce, for example. Target is trying to introduce on a wider scale next-day delivery for a price, and same-day deliver for a premium. That means for those with plenty of money, you don’t have to wait or worry when you run out of diapers and toothpaste. Sorry, we’re not impressed.

Investment in existing stores and the supply system? It’s about time. And the small-format stores are likely to be very popular in the right locations, but Target will pay a premium for the footprint and stocking each store differently to meet local demands. We’re not that fond of trying to be everything to everybody.

Still, we like Cornell’s focus on listening to what the customers say – personal visits to customers’ homes is a nice touch, we like his enthusiasm, and we like keeping the shelves stocked. Cornell knows Target has to evolve to be competitive and is leading in the right direction.

But as we’ve all been taught, evolution is a very slow process. We’re looking for innovation here, not imitation. Until we see something different, Brian Cornell gets lumped in with the other mediocre CEOs as this month’s Leadership Milquetoast.

Leadership Laggard

We’ve written about this before, but indecision kills… and Roger Goodell is killing us.

Warning: if you disagree because of your politics, you’ve missed the point. 

In his carefully worded memo to NFL franchise Chief Executives and Club Presidents this month, NFL Commissioner Roger Goodell nimbly danced around the current NFL players’ protest issue(s), but he offered absolutely nothing as a way forward. He did offer his opinions, but you know what they say about opinions being like assholes…

My opinion is that he should make a decision befitting the leader of an $80B organization. Goodell has been making over $34M a year to lead the 32-franchise league, worth an average of $2.5B each, but he’s failed to do anything with his indecisiveness over the last year except make things worse. And it seems like each week, another owner steps in it.

His “I think they should stand during the National Anthem, but it’s okay if they don’t” stand is weak. We don’t care which – they have to stand, or they don’t – but until Goodell leads the franchise executives (who are also making bucket-loads of money) in charting a new course, the NFL will continue floundering like a rowboat in heavy seas.

The players have something to say – hell, we all do – and Goodell doesn’t want them to do it during the National Anthem. What alternative has he given them, besides the “to protest, or not to protest” option? That’s all the commissioner and franchise owners could come up with?

Come on, Roger… LEAD THEM! Get your wishy-washy, politically correct opinion out of the middle of the road and get this league headed in the right direction again. Until then, welcome to the club; you’re this month’s Leadership Laggard.