Tyson Foods CEO Donnie Smith: ‘Just go get good at what we do’

story by Roby Brock, a TCW content partner and owner of Talk Business
roby@talkbusiness.net

Editor’s note: The following is an abridged story from the recently published Talk Business magazine. The complete magazine can be viewed at this link.

Bell Buckle, Tenn., doesn’t sound like the launching pad for the career path of a CEO for the world’s largest protein company and one of Arkansas’ largest employers.

However, it provided the foundation for a storied career for Tyson Foods CEO Donnie Smith, 54, who started with the Springdale-based meat giant in 1980 when he was fresh out of college.

“I was a broiler service man calling on growers and trying to help them do a good job growing chickens,” Smith recalls.

Bell Buckle is smack-dab in the middle of Tennessee. It boasts a population today of 500 residents and is known for its annual RC Cola and Moon Pie festival. The land surrounding the town – as its name might suggest – is fertile farm and pasture land with a lot of activity in the cattle and poultry business.

The lessons learned by Smith in tiny Bell Buckle proved instrumental for guiding his career to the top post of Tyson Foods, a dominant worldwide brand and business founded three generations ago by the legendary John Tyson.

GETTING TO TYSON FOODS
A pre-vet major at the University of Tennessee, Smith figured out by his sophomore year that he ought to consider a different pursuit. Guided by his college advisor, a poultry science extension service representative, Smith pivoted to a degree in animal science.
His advisor noted that Tyson Foods had a complex in Shelbyville, Tenn., about an hour-and-a-half from where Smith grew up.

“I started working them really hard my last year of school,” Smith said.

He graduated from UT on Dec. 12, 1980; married his wife, Terry, on Dec. 20; and started working for Tyson Foods on Dec, 28. It’s been that kind of pace for Smith’s entire career.

After a few years as a broiler service rep, Smith was promoted to feed mill manager in Shelbyville before then-CEO Leland Tollett called Smith to Tyson’s headquarters in Springdale in 1987 to work with the company’s grain purchasing group. Smith mastered the challenge and by the mid-1990’s he was in charge of additional purchasing groups – not just grain feed, but bags, boxes, food ingredients, maintenance items, and more.

In 2008, Smith was asked to take another role in Tyson’s retail group working with the poultry and prepared foods divisions – two of Tyson’s four major business silos.

By 2009 – after his early mentor Leland Tollett returned for an interim CEO stint – Smith’s broad and balanced skills made him a natural selection for the role he has today. Smith, however, says he really didn’t see it coming.

TURNING IT AROUND

It won’t take 10 seconds into a conversation with Smith to recognize his enthusiasm and animation, not to mention his endearing Tennessee twang. Throughout our talk, Smith is self-deprecating and humble, quick to credit his management team and employees, but full of zest for the subjects at hand.

High-energy is another adjective that leaps to mind. He is intense in his personal engagement with others. As we walk briskly through the corporate headquarters on a tour, Smith interacts often with employees in the hallways, kitchen areas, and research and development division.

The Springdale headquarters has a large volume of masterpiece art adorning its hallways. A whimsical statue of a chicken-cow – an artist’s rendition of a morphed animal with a chicken’s comb, beak and tail attached to a cow’s body – would make the perfect prop for a hilarious cover photo, especially if Smith would agree to sit on top of it and wave like Bronco Billy.

“I’ll do it,” Smith says after I suggest the shot. We have a good laugh as his PR handlers wisely encourage us to “move along” to the next destination.

When Smith took over as CEO in late-2009, Tyson Foods was struggling – like most businesses – from the recession that reshaped the American and world business landscape. Tyson finished that year with a $547 million net loss. Its debt was massive and it had only invested $368 million in capital expenditures, a significant drop-off from the previous year.

CULTURE FOCUS
Smith says a focus on two primary areas helped the company move forward since the bumpy years when he inherited the CEO mantle. Number one was culture.

“I think creating a culture where people are willing to take some risks – not crazy risks, but reasonable, controlled risks – not afraid to fail, knowing that we’ve got to try different things, we’ve got to try to innovate … we knew we had to create a culture where people know we care about them, and they were willing to take a chance and try something new,” Smith said.

As an example, he points to a time in 2009 when light truck weights were eating into the profitability of the company’s poultry business. He says Tyson was averaging about 24,000 lbs. a truck. Smith and his management team made the decision to enlist ideas from the customer service representatives who were on the ground dealing with the light truck weight issue. They were asked how to improve transportation efficiency, says Smith, and in return ideas ranging from shifting order patterns to re-working production plant operations emerged.

“Now we average close to 34,000 lbs. a load in that business,” Smith notes. “The bosses didn’t do that. It was the bosses turning the people loose.”

He underscores that listening to clients and customers and responding with solutions has been a part of the culture, too.

“I think God gave us two ears and one mouth for a reason, so we try to shut up and listen,” he jokes. “It’s hard to tell through this interview because I’m talking like a machine gun.”

CONTROLLING COSTS
The other half of the equation leading to Tyson’s turnaround financial performance centers on a commitment made in 2010 when Smith was in his first full year as CEO. He said there was broad consensus that a realignment of the company’s cost and capital structures had to be brought in line.

“I remember not long after they put me in this job, I brought the senior team together and said okay we’re going to have our first strategy talk. And here’s our strategy: we’re not going to talk about strategy for at least a year. We don’t need a strategy. We need to fix this business. Forget about grandiose ideas about who we could be in five years because if we don’t fix this thing, there ain’t going to be five years. Just go get good at what we do,” Smith told the troops.

He emphasized that the turnaround investments and changes he’s helped guide have little to do with controlling grain and feed costs related to the beef, poultry and pork industries. As important as they are, Smith says Tyson Foods has spent the last four years fixing its internal operations in order to become more efficient and profitable.

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“I’m talking about things that we had complete control over that we just weren’t focusing on at the time,” said Smith, who highlighted changes in line efficiencies, labor resources, plant spending, and yields as examples.

In four years, Tyson Foods has shaved more than a billion dollars worth of debt from its balance sheet and lowered its debt-to-capitalization ratio from 44% in 2009 to 27.9% in 2013.

Sales have climbed nearly 29% higher during that time and net income has reversed from that $547 million loss in 2009 to a $778 million profit in 2013. Its stock price has climbed from a low of $4.40 per share at one point in 2009 to a high last year of $31.83. It has approached $40 per share so far in 2014.

“It’s been about getting back to the fundamental basics of blocking and tackling of running a good business,” said Smith, who is also quick to point out that he is undeserving of any individual accolades for the improvements.

“I don’t think any one person can ever get credit for what a team or group of people accomplishes,” he said.

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