The Heart of Texas
By Meg Major, James Dudlicek
Deep in the heart of Texas lives a retailer filled with a passion for building the greatest retailing company possible while striving to improve the lives of its partners and customers.
The Alamo is the most famous mission in Texas, but perhaps only slightly less well known is the legendary mission of fellow San Antonio stalwart H-E-B, whose quest to create the greatest retailing company possible is built on a dedication to improving the lives of its valued partners and customers in the Lone Star State.
While company officials are staunchly proud of the vibrant legacy H-E-B has attained throughout its rich 105-year history, they are equally enthusiastic about perpetuating the commitment and success of their dynamic organization for another 105-plus years, none of which would have been — nor will be — possible without the individual contributions of an extended family of 76,000 "partners," as the company refers to its employees.
Indeed, H-E-B thrives on the countless talents and unique skills of its many diverse and dedicated partners, who embody its commitment to excellence and ultimately provide the regional retailer with a powerful competitive advantage in its extremely competitive Texas home turf, where it has rightly earned a dominant market position largely as a result of an admirable corporate culture that places a high value on people throughout all levels of the organization.
As history repeatedly demonstrates, the most successful companies are fundamentally defined by their human element. In H-E-B's case, however, the remarkable connections it has established with its partners, and the hundreds of local communities it serves throughout Texas and Mexico, truly enable it to stand apart from its retail peers, thanks to a fervently passionate commitment to continuously enhance its "Bold Promise" mission to celebrate "the role each and every partner plays in building the greatest retailing company, with a guiding purpose of improving the lives of our partners and customers," in the words of H-E-B's chief merchant, Martin Otto.
Predicated on four strategic pillars — service, quality and value for its customers; fostering an employer-of-choice culture; stable long-term sales and profits; and building authentic bonds with local communities — the company's prevailing mindset and deep-seated "love of the game" instincts translate to a "unique place that that enables our great partners to bring the spirit of community to life every day," says Otto, offering an essential H-E-B household phrase that personifies its central philosophy: "Because people matter." (For more on this, see the sidebar on page 36.)
Otto, who added his present title to that of CFO in early 2010, has been with the company nearly 20 years, a record equaled — and then some — by many of H-E-B's partners. Otto's depth of experience, which spans leadership roles across the company's various operating areas, followed by assignments as GM of the central Texas region and grocery merchandising/procurement SVP, provides him with a breadth of ingrained insights integral to fostering H-E-B's servant-leadership culture. "We're all one company and one team," he notes.
Having joined H-E-B in 1997 and assumed her current post in July 2003, Wade takes deep pride in sharing her talents with some 45,000 partners in 205 stores — which collectively net roughly $12 billion in sales — to create an atmosphere where partners can't help but feel enthusiastic about spending time with their "extended family."
"When I walk into our stores and see partners with 30 or 40 years of service on their name badges, I can't help but think about how much of their lives have been devoted to our company. It's just a very special place," notes Wade, who revels in the "people business" aspects of her role, which both drive and energize her. "We have over 1,000 partners that have 30 years or more experience and who are still working. Their service is never lost on any of us."
The same can be said of Wade's contributions, which emanate from what Boyan describes as her "amazing connections with store partners. There's nothing better than visiting stores with Suzanne," he beams. "She's our rock star. She's got this huge business to run, but her heart is with her partners in the stores. She knows at least half of the 50,000 people working under her, every store leader and most department managers."
Wade takes Boyan's commendations in stride: "We are never at a loss for something to get excited about."
Her spontaneous summation of a day in the life as one of the company's chief architects sparks an unspoken high-five from Boyan, H-E-B's inspired maestro, who assumed his current role as president earlier this year, after carving out a role as chief strategic officer, and holding the existing COO post, since 2005.
A strategic adviser to the company for two years in his former role as lead partner and head of the New York office of Cambridge, Mass.-based Monitor Group, a global strategic management consultancy where he worked from 1990 to 2005, Boyan — who holds degrees from both Harvard and Columbia Business School — admits to having little interest initially in pulling up his entrenched Northeast stakes for a move to San Antonio.
In weighing the prospects of a relocation and major career change, Boyan says, "H-E-B was very compelling, not only because of its very interesting business model, but mostly because of the people." Ultimately unable to resist the opportunity to be a part of an organization "that really touched my heart," Boyan conveys his utmost admiration for "an unbelievably unique place" whose corporate ethos reflects its transcendent spirit. "I've never met a company that cares so much for its community, and a community that cares so much for a company.
"It is very different here than it is at other places; there is a real uniqueness to how it's run," he continues, emphasizing "the compelling spirit of H-E-B — how we treat partners, how we put people first and our role in the community."
Boyan is quick to point out the talents of another key member of the management team, regional VP Greg Souquette, who runs H-E-B's San Antonio West region. A 40-year company veteran whose internal spark, palpable vigor and intuitive insights comprise yet another integral layer of H-E-B's managerial dream team, Souquette marvels at the good fortune that finds him at the same company a generation later. "What initially began as a part-time job to help with expenses slowly but surely turned out to be a pretty exciting career," notes Souquette, adding that "even way back then, H-E-B was already a great company — and it's continued to get better ever since."
After rising through the merchandising ranks from his original meat department roots, Souquette acquired an important lesson early on from one of his most influential mentors: "Treat people with dignity and respect. I never forgot it, and it's at the heart of what makes this company great; people don't mind working hard if they understand the goal," he notes. Reflecting on his formative years, Souquette continues: "I felt supported; I was in control of my own destiny. And I think it's very important for people to feel that their participation in taking a program and enhancing it with their own personal spin is essential. This company has always excelled at giving people opportunities to take ownership and invest in themselves. The importance of people in our business, the relationships we have formed with one another, is what makes the difference at every level of the organization. It's just an amazing thing."
A native of Mexico who possesses dual citizenship, Souquette oversees 58 stores, which reportedly have the highest per-square-foot sales volume in the chain. Noting the business smarts seemingly carried within the company's DNA, he says, "We all own each others' successes. This is a company that works together very, very well." But make no mistake, he adds: "We play consequentially — we don't go halfway. We challenge each other, but at the end of the day, we are all working toward the same goal. I've seen it time and time again — it's just the way H-E-B works."
During his 10-year tenure overseeing the company's U.S./Mexico border-corridor stores, Souquette vividly recalls when Walmart made its first foray into "‘H-E-B land,' which really raised our blood pressure." But rather than decry Walmart's rapid encroachment — and eventual saturation of a state for which the world's largest retailer now has a dedicated division inside its corporate structure — Souquette readily bestows props to the retail giant for "enabling our whole organization to step up our game" while simultaneously enabling "us to learn a lot from an admirable, tough competitor. It was another great experience because it made us better" in terms of productivity, price and posture.
What's more, he adds, Walmart's swift advance into Texas "also made us much more resourceful about new ways to create value for our customers, so we're obviously a better company as a result."
The Best of the Best
"H-E-B is handily among the best-of-the-best retailers in North America and worldwide, while at the same time being among Walmart's worst nightmares," says Flickinger, contrasting H-E-B's overall 39 percent market share tally in 1989 to its estimated present-day 55-plus percent share — certainly no small feat, considering the gains were achieved during the same 20-year time frame that Walmart site-saturated Texas with some 400 stores. "No other retailer in the country has gained market share in the face of Walmart in this fashion," asserts Flickinger, citing the massive casualty count that the Supercenter steamroller has taken on other food retailers across the country during the same time period.
"Instead of succumbing to the pressure," he says, "H-E-B puts it back on Walmart in one of the country's most over-stored states," which serves as home to a multitude of various retailers. "Whether competing against other major supermarket chains, big boxes, small-format discounters, drug chains, warehouse clubs or superstores," Flickinger says H-E-B has perfected a winning formula that beats them all.
"They're not going to be bullied by the big Bentonville behemoth," Flickinger declares, "nor are they going to surrender so much as a centimeter to Aldi," the fast-growing Batavia, Ill.-based U.S. division of German discounter Albrecht, which recently launched a $150 million push into the Lone Star State with an initial 27 northern corridor stores and a new distribution center.
Likening H-E-B's steely resolve to fight and triumph "against overwhelming odds" to Gen. Patton's Third Army — renowned for its astute anticipation skills, meticulous planning and precise execution of battle plans crafted for a specific terrain — Flickinger marvels at H-E-B's "relentless focus on driving total quality and continuous improvement across the organization," which he says is a natural extension of the all-encompassing vision of the company's chairman and CEO, Charles Butt.
Flickinger considers the company's widely respected patriarch to be "one of the best professors of ‘the detail of retail' in the business. He innately understands the rhythm of retail — how to appeal to every consumer constituency, regardless of income, race or creed. At the same time," Flickinger continues, "Charles has put together a tremendously talented team of corporate and store-level partners" across all strands of the corporate lattice, who the grocery expert says collectively comprise the quintessential "outstanding family-owned/professionally managed company" that's well equipped to compete toe-to-toe with some the biggest corporations in the world.
Noting the company's prevailing mindset that encourages lifelong learning, Flickinger praises H-E-B's culture "as an exhilarating place to work. There is such an embedded sense of esprit de corps," which intrinsically feeds its partner- and community-minded commitment "to take such good care of both its people and its shoppers."
Flickinger also admires the company's exemplary multitiered private brand program, which serves as a critical element in helping the retailer build and secure shopper loyalty and deliver on its quality and value promise to customers.
More to Do
Boyan goes on to emphasize the proper support tools that the company prioritizes for its store leaders. "We are in our stores all the time — that's the beauty of being a regional player. We have a lot of access to them, and they have a lot of access to us. That's the mantra that Charles leads by: If we can have the best store leaders running their businesses, we're here to support and help them and they will do the right thing at all times if we do our part, by paying them well and giving them all the support possible. It's a great job," he says. "They run $100 million businesses and they play a great role in the community. Some may think that being a grocery store leader is not an aspirational job; here, it is top of the pyramid."
That said, adds Boyan, the company's "restless dissatisfaction" continually prompts its leadership team to answer a single question: "What more can we do? Charles pushes for restless dissatisfaction, but always in regard to how we can be a better employer of choice for our partners. We're all in this together."
Souquette concurs, noting that the company's approach to attracting top talent is "very unique. We don't want to tell people how to do their jobs, but we want to give them enough support and direction to prepare them to succeed."
Looking ahead, other keys to H-E-B's success can be found in its recent investment in lowering prices, and its commitment to continued growth. Winell Herron, group VP of public affairs, diversity and environmental affairs, says, "We have a very aggressive new store campaign underway, including a number of stores that are also being refreshed. We also have very ambitious plans for next year as well. We are investing on all fronts in Texas."
With projects like that on tap, Boyan proclaims H-E-B to be "fierce competitors in the sandbox we've drawn. Our goal is to not add other sandboxes. We are more concerned with how to be as good as we can be in a fairly narrowly defined geographic area, and our competitors need to know that we intend to fight aggressively for share."
While H-E-B doesn't have the obligation to maximize shareholder value like many of its publicly traded competitors are required to do, Boyan says the company is "thoroughly committed to reinvesting in our partners and our communities. Above all, our goal is to be a great and vibrant company that prioritizes its sense of community and focus on its people. We don't have a lot of walls or boundaries that get in the way of what we're trying to do. We have managed to retain a small-company feel, and we pride ourselves on doing things quickly and responsibly."
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