Tyson Foods CEO Donnie Smith, soon to be a first-time grandpa, shared his personal insights on leadership, company turnaround and the importance of succession planning with the local business community Thursday (Sept. 15) at the Cross Church Summit Luncheon in Rogers.
Smith fielded questions from Cross Church Pastor Ronnie Floyd around business topics and leadership with a few insights into Smith’s personal life. On that note, Smith told the group his youngest daughter Becca was due to make him a grandpa at any time, which is new territory for the Fortune 500 CEO.
“She is due today in fact, but we’ll have to wait and see how that goes,” he said. “I have been eager to meet Joseph Titus for some time now.”
Despite his 8-figure income, Smith is more at home in his oxford cloth shirt with Tyson’s logo above the breast pocket and khaki pants than a business suit. And the turnaround he helped engineer at Tyson Foods in the past nine years is impressive. The numbers speak for themselves.
It’s hard to fathom that seven years ago when Smith took the helm at Tyson Foods the company’s stock price was $12.50 a share. Today the stock has risen to $73.60 as of Thursday’s closing price for a market cap gain of more than $23 billion since 2009. Smith said the stock value has multiplied six times in seven years.
Looking back to late 2009, he said there wasn’t very much that Tyson Foods was good at.
“There was a lot we needed to fix. Our costs were out of line, our service was not very good and our customers were frustrated with us. We needed to take a deep look at who we really were and then try to get back to the basic fundamentals,” Smith said. “It was after we fixed the fundamentals that we were able to focus on our future with the capstone of the recent years being the HIllshire Brands acquisition two years ago.”
Delving into the turnaround game plan tactics Smith said there were two words his team wore out: “focus” and “speed.”
“Our culture at the time was in bad need of repair. People did not accept responsibility and accountability because they were looking more for the excuse of ‘why this couldn’t be my fault’ than owning the problem and trying to find a solution. That was really slowing us down,” Smith shared.
He said in trying to speed up decision making, the leadership team attempted to push the decision making as far down in the organization as they could. Sometimes down to the line supervisor in a plant.
Smith said the second thing the team tackled was to focus on a few things and quit trying to do everything.
“We had to quickly learn where our big rocks were and not focus on the pebbles in the sand. The cost structure in our chicken business really needed to be fixed, It was labor deficiencies, line deficiencies, plant yield, plant spend, logistics and transportation efficiencies. It was basic blocking and tackling stuff,” Smith said. “We gave permission to people to say ‘no’ to a litany of stuff so they could say ‘yes’ to the few things that mattered.”
He said 2010 turned out to be the best year in the company’s history at that time, which has now been eclipsed many times. Smith said he also thought it was important to flip the leadership style from dictatorial when he took over to a more servant style which fits his management ideology.
Smith said Tyson Food was a fan of Hillshire and had been waiting in the wings for the timing to pounce on the acquisition. He said Hillshire was attractive because of its higher margin, branded businesses that brings with it high levels of customer loyalty.
He said after Hillshire Brands made a play to try and purchase Pinnacle Foods, which would have required some equity dilution, Tyson approached the Hillshire Brands board with a better cash deal for shareholders. He said HIllshire opened the door.
Smith said Tyson Foods wanted Hillshire Brands to help stabilize its earnings stream because at the time Tyson Foods earnings were being discounted by investors because of what was then primarily a commodity business. He said the higher margin Hillshire business reduced the volatility with Tyson’s earnings and remove the discount Wall Street was factoring into their valuations. He said Wall Street is now willing to pay a premium for the earnings which has made a big difference.
Smith said one thing Tyson has been maniacal about is maintaining its investment grade credit rating. He said a AAA rating has access to roughly $17 trillion in capital, whereas a non- investment grade company had access to around $1 or $2 trillion.
Smith, 56, is in no hurry to retire from his CEO position, but he said the leadership team at Tyson Foods understands the importance of good succession planning. He said every leader at Tyson is asked to mentor and train three other people who can take their job. Then that leader is making sure three levels down leaders are being trained to step up.
“We call it 3 deep, 3 deep. We have a responsibility to ensure we keep the right leaders around. Every leader at Tyson Foods is developing someone to take their place. To do anything less is a disservice to the organization. I will not promote a leader unless they have someone trained to take their place because it does me no good to build up one part of the organization if it falls down somewhere else,” Smith said.
A few months ago Tyson Foods named Tom Hayes, a Hillshire executive, to the new position of president, which was split off from the dual role Smith was also filling.
“Tom is a great leader and I feel super about his abilities and others to take on more responsibility in the future,” Smith said.