Strategic Decision Making and the Values of Simmons Foods with Todd Simmons

Todd Simmons: 00:00:00

We are entrepreneurial. So if we have a line of business, we're likely going to try to do something with it and and so if you limit your choice set, we you know, we now can really spend more time on what does the strategy look like for this segment.

Matt Waller: 00:00:20

Excellence, professionalism, innovation and collegiality. These are the values the Sam M. Walton College of Business explores in education, business and the lives of people we meet every day, I'm Matt Waller, Dean of the Walton College and welcome to the be epic podcast. For the next few episodes, I will share conversations with top CEOs about the future of the workplace. The pandemic has transformed the way that we work, and we discuss their predictions for the future. I have with me today, Todd Simmons, who is CEO of Simmons Foods, Inc, headquartered out of Siloam Springs, Arkansas. Todd, thank you so much for taking time to visit with me today. I really appreciate it.

Todd Simmons: 00:01:07

I'm really excited to join the be epic podcast. So thank you, Dean Waller.

Matt Waller: 00:01:14

Todd, a couple of things, I want to talk to you about today, leadership and strategy. Two things that really come to mind when I think of you as a person and as a business leader. And I want to start with leadership. And one thing that I've noticed about your leadership is that you really emphasize values. And there are five values, I think, and correct me if I'm wrong about this, that your company emphasizes, one is putting people first, one is acting with integrity, one is taking responsibility. The fourth one is be curious, which by the way, is one of the four values of the University of Arkansas. And the fifth one is take action. And one other piece of background I want to give the audience when I first met Todd, and keep in mind, for those of you who don't know me, but prior, my early work, and my early research really focused on total quality management, continuous improvement, business, process, reengineering, etc, etc. And so the first time I met Todd, he was the first CEO I'd ever met that, within the first five minutes was talking about quality. And it really caught my attention. And so although that's not an explicit value of your firm, you could say it's part of your strategy as a firm, and I want to talk about that, as well. So before we talk about the values, maybe given the way I've positioned this, we could talk about quality. I'd love to hear, how is it that you came about developing such a strong quality management system at Simmons Foods?

Todd Simmons: 00:03:23

You know I appreciate you recognizing that, I think when we met, we were in a major transition as a company, we were in our poultry side of our business, and we were entering into much more higher value added products, very tight specifications from our customer base, we're very much focused on the food service industry and in restaurants. And they want their products to look the same for every customer. So that if you and I both order something at a restaurant and it's delivered, and it's the same product or same menu item, I don't look over and you have a big piece of chicken and I have a smaller one or that it just eats and tastes the same every time. That transition for us from a more commodity producer to a value added producer was painful. And so we had a lot of opportunities to really come from behind, if you will, against our competition who had already gotten there with their quality specifications. And what it felt like to me is we were solving the same problems over and over that we would come in and bandaid a process or we would we would think that we had solved it by throwing more people at it or more equipment or whatever may be the case, more resources, but we weren't ever solving the root cause. And the, and and it was really from a necessity perspective that are seeing our customers and interacting with them, they were frustrated. And I became frustrated, our teams were frustrated, and we needed to find a way to get to root cause and solve the problem at its at its core, or at its base. So that got us into statistical process controls and lean management and, and really diving deep on that journey.

Matt Waller: 00:05:54

I knew you dive dove deep into this, I could tell from your first conversation. But then not a few years later, I mentioned to you that, hey, the Walton College is growing really fast. We're having serious problems, I think, with our business process quality, and anytime you grow fast, that's a great way to find out how good your quality processes are. And I said you know we're growing really fast. And you had already shown me your training for quality management, which is remarkable. And you were very generous. And you offered to allow our staff to go through some of your quality management training with your employees. And we did that. And we've implemented it. And we've improved our processes in many different areas. As we've grown, so I mentioned to you before the show, we we added over 1000 students this this year, going from about 7100 to 8200. And a lot of them are both undergraduates and graduates and but you know, when you grow that fast, you really find out where your problems are- I- You know, a lot of people complain about growth that oh, this is this is not good. It's causing all these problems. But no, it's, you know, John Roberts often says, growth is like oxygen. And I think it's true, but in addition to that, it's, it's a huge blessing, because it allows you to see where your processes are weak, and so you can improve them.

Todd Simmons: 00:07:44

Totally agree. And, and by the way, your staff and the professors at the business school, were great students. So that was fun to see, it was exciting to have them at our facility here. And they, they were very focused and competitive, we kind of tried to make sure that we create some opportunities to apply. And they, they went after it. And so I appreciate you all leaning in with with folks like Simmons and it was it was very fun. And I would agree that growth does push you in so many different ways. And we are although we're over 70 years old as a company and our- you know, we're growing fast. And and it's it seems like we we're just geared to be entrepreneurial, as a family or as a company and and we lean into opportunities with our customers. We typically try not to do the Field of Dreams, you know, build an operation and hope that customers will come will we tend to have a customer that signed up before we jump jump off that that ledge but but it does drive you to recognize where growth is causing some some pain. And frankly, I think we see it a lot as we have sort of that eyes bigger than our stomach mentality that of course we can do that we've got you know, well, we need to over resource it. And a lot of times we look back and realize, wow, we really didn't have our processes buttoned up as much as we thought or we didn't, we did not over resource it, we thought we did but we should have had another engineer or another project manager or you know because it just it growth is hard and it can be expensive too so.

Matt Waller: 00:10:03

So true. So true. So, Todd, coming back to the values, putting people first, acting with integrity, taking responsibility, being curious, taking action. These are terrific values, you know, we actually, me and two colleagues of mine did a study of firms values. And we found that the most commonly listed value is integrity, not surprisingly, but would you mind speaking to your values a little bit?

Todd Simmons: 00:10:38

Love to, I think our number one value is truly putting people first and that is driven by it manifests itself in a lot of different ways. So one is truly treating people with dignity and respect, every job is important, two, it's very much around how do we design our workplaces, around our team members? When, when when traditionally, we built facilities or remodeled them, it was about the equipment. And how did the equipment fit and in the box, if you will, of a an operation? And and now we try to understand well, how do our team members interact with it? And where are the- Where are the pain points for them? Is it hot? Is it wet? Is it does the equipment create- noisy? And can we isolate those team members from those elements in a way, but still drive performance? I think the other piece is how do our team members interact with the facility when they drive up in the parking lot and or the rest of the world sees that facility and when they tell their friends where they work, that they can be proud of how the facility looks and and and as they drive up and go inside the break room. And the facilities that are there for them are nice look, I say hey, it looks like a Starbucks or you would, you know, be proud to have your mom have lunch there or- or whatever that that may look like. And then it is also driving a performance management system that respects people to give them feedback. I think that putting people first a lot of folks, initially when we sort of rolled these values out like well, you know, that's just, you know, someone can, you know, it's all about people, and not necessarily about performance. And I said actually, it's the exact opposite of that. Because if there is a performance issue, and we aren't addressing it with an individual, that's not putting them first, and that's not putting their teammates first. And so someone should never be surprised that they aren't getting the job done, we should be giving them very good feedback and constructive feedback, so that they can learn and grow. And, and so that their teammates don't have to pick up slack. So that that kind of rounds out that value. From there, they cascade a lot acting with integrity is truly do we do what we say we're going to do and that like that those values are real. And but also you think about integrity is that that we we have a business that is very, that's vertically integrated. And as you think about the strength of different parts, strengthening the whole and you know, I think that's where we have a we have three business units and shared services that help. So we start with the chicken and, and we then have an animal and we serve as restaurants in that chicken business. But there are a lot of the parts of the chicken that people don't eat and we turn that into different feed products and primarily pet food ingredients. And then in that business Simmons animal nutrition produces about 40% of their volume goes to our own pet operation. So Simmons pet food is the third business unit. And we make finished pet food for retailers and we make finished pet food for contract manufacturer for other brands. And each of those steps of the process, we work together as we call it, one Simmons. And we have overarching quality research and development purchasing supply chain that manages that entire business. And, and so I talk a lot about, hey, integrity is what we normally think of, but it's also us. It's one Simmons, we are integral to each other, and we have to drive that. And then when we see problems take responsibility is critical. Because it's the last thing we need to do is point fingers, or, you know, say, well, gee, that's not my job. When you see something and see a problem, be curious is all about the early conversation we just had about continuous improvement, it's, if you're not curious, you're not going to look for a different better way. And then finally, taking action, it just, if you don't take action, then the rest of this is just, we kind of talked about it, it's just entertainment. And so so we got to do something. That's what we're here to do. And my granddad used to say, we, we make stuff that when you drop it on your foot, it hurts, you know, don't do that. But, but we're not we're not pushing paper around here. We're making things and and that you gotta go do something with it. And so that's, that's the fun part about my job is getting out there with the people who are making the the products.

Matt Waller: 00:16:40

Well, that's great. Thank you. I want to now this is actually a good segue to transition to strategy. And the example I want to use because I, I don't know the story. I've been following Simmons, since I moved here in 1994. And so I've seen all kinds of strategic decisions and moves, but rarely have I heard the story behind them. And so I'm, this is one I wanted to ask you about anyway. But the pet business is so interesting to me for many reasons, we one of our alum of ours, JK Symanck, who's also on my advisory board. When he graduated, from here, he went to Walmart, and he rose through the ranks quickly. And eventually took a job at Meijer in Grand Rapids and became CEO eventually. And then he became CEO at Academy Sports in Houston. And now he is CEO of PetSmart. But I remember when he started at PetSmart, you know, and I read the news announcements about it. I thought, wow, this was private equity firm, you know, that had bought PetSmart and put him in charge. And they were just talking about growth and growth and growth and thinking, you know, pets, okay, that how how's he gonna grow this much? He's gonna have to figure out how to take a bunch of market share. So I follow a lot of alumni and people I know, and I think about strategy, but then all of a sudden, you know, COVID happened. And boy did he get growth. Right?

Todd Simmons: 00:18:32

Yes.

Matt Waller: 00:18:33

Unbelievable. And so when I saw you, when I saw Simmons Foods, making strategic moves in the pet food area, I thought, well, that's smart. But but what I'd like to ask you about, in particular, is you all made a strategic decision to move away from dry pet food and pet treat categories and focus solely on wet pet food. And, again, you and I've never talked about this, but I would be interested if you wouldn't mind in talking about that?

Todd Simmons: 00:19:11

I'd love to, I think one by the way, JK has has done a fantastic job at PetSmart. And he's, he's been a great person to interact with for our Simmons pet team and and and so I think one thing that we have driven at Simmons is a focus on return on investment and a focus around not just capital, but our time and attention and so we we got into treats and dry when we He thought that our strategy should be to provide a full offering to our customer base. And, and what we recognized, though, over time, probably longer than we should have taken to recognize it was that our market share, and our knowledge in treats and dry were were indexed lower versus the rest of the industry. And way lower actually. And so we didn't have the technical capabilities that many of the our competitors in dry pet food had. It's also a fairly, it's gotten more capital intensive over time, but it has fewer barriers to entry. In in producing, there's a lot of legacy volume. So there's less barriers to entry in that market. So there tended to be a lot of capacity in the industry. And, and we were just a small player, we were a very small player, in dry and treat. So low single digit market share. And so we just felt we didn't have a right to win there. Whereas in the wet pet food space, we have a significant market share. And we were able to sell the dry pet food facility to one of our best wet pet food customers, and they're happy, and we're happy, we're able to put all of our technical resources, our capital, our time and attention on the marketplace, in wet pet food, just at Wet pet food and growing that piece of the business. And the nice thing is it has been growing significantly.

Matt Waller: 00:22:03

So this is this little discussion we've had so far on your strategy with pet food is excellent. We need to really highlight this because you're talking about your you know, there's the resource based view of the firm that there's a resource strategy kind of perspective. There's the idea of barriers to entry that you brought up, and and then supply chain competition, and collaboration, and coopetition. And so you're bringing in some really interesting, strategic concepts into this decision. So I didn't know that I wouldn't have guessed, I just had no idea. But I suspected there were some strong strategic reasons for what you're doing. I love the example of how, you know you're, and this happens a lot, your customer and your suppliers sometimes are the same thing. And in this case, you sold a competitive business to to one of your customers. Brilliant, brilliant. And then and then on top of that, you know, looking at what resources right because we resources are scarce, how do you allocate them? And as you said, it's not just capital scarce, it has to do with your capabilities, your competencies, your core competencies and time, senior people can only give so much attention to something and then you have to look at the ROI and the growth of the of the category. So this was that that is really really interesting. And so what are you seeing so far?

Todd Simmons: 00:23:58

Well, certainly we're seeing growth. You know, it's very, there's a lot of confusing datasets out there today. Certainly during the pandemic, we saw significant growth because more people got pets. When you're home with your pet you want them to have a good eating experience and I think a lot of people recognize that dry pet food maybe didn't excite their pets as much as they thought, a lot of people tend to and I'm I'm have been one of them over time as well. As I walk out the door. I feed our dog Bruno, I'll just put some food in the bowl and I'm headed out the door. Well, during the pandemic you didn't head out the door, you sat there and you know drank your coffee returned emails, looked over the bowl still full. And people decided well what do I do and and they bought more wet pet food because it's more more palatable, and pets tend to really like it. And so our volume skyrocketed. Of course, we we didn't have significant capacity. So that created all kinds of issues in the supply chain. And, and so now that's moderating some and but it's great because we get to catch our breath and focus on our operations and the new capacity that we're bringing on to strategically address certain parts of the wet pet category. And, and so all of that ability to shift our attention from having really three lines of business in that pet food in our pet food business, taking out dry and treats and focusing on wet has been great. And and like I said earlier, we are entrepreneurial. So if we have a business, a line of business, we're likely going to try to do something with it and grow it or change it. And so if you limit your choice set, we, you know, we now can really spend more time on what does the strategy look like for this segment. And we're, we're family owned, we're not a small company by any means. But we're not, we're not public, we don't have unlimited resources, no company really does. But sometimes some of the big guys, I think, feel like they may and, and so it's been helpful for us to really focus in and get in, get in tight with, with what that market needs.

Matt Waller: 00:26:43

So, so Todd, we have we've talked about how you have brought quality in as a foundation to your your business. And it's so important, especially in food categories, to have high quality coming from the CEO of the firm. We've talked about the values you hold, which actually as I was, as you were speaking to them, I thought each of them really are complimentary to your quality strategy, which is also interesting, but then you've got you've got economies of scope, in that your, your business units, leverage a lot of the same capabilities and, and inputs. And, and then we talked about strategy and how you use concepts of coopetition, economies of scale, barriers to entry, and the capabilities of core competency concepts. And these are all very interesting. And one of the things I'd like to cover briefly is leadership that you hire into positions. Because every anyone who's lead knows, the people you have around you, are absolutely crucial for success, and it's easy to know that, but it's very difficult to execute it. Because when you hire someone or you promote, if you promote someone, of course, you don't know they may have done well at their current job, but they may not do as well, in a very senior position because they don't understand how to delegate, they don't understand how to set direction, gain alignment, motivate people, these kinds of things. But similarly, when you're hiring someone from the outside, it can be even more difficult, because they may have led at a very similar position of a similar company. But one thing that we've learned through research over the years is you can take someone in a same industry at the same level and move them to a different company and it doesn't work. It's the strangest thing, and there's all kinds of reasons for it. But I know you've put together a really strong team. So if you wouldn't mind speaking about how you've done that, that would be wonderful.

Todd Simmons: 00:29:27

Sure, I think so- we tend to as we recruit, we want people who are very boots on the ground, if you will, they want to get out there and see it and that's that goes back to kind of lean rules and principles of getting to the closest level of the process. We can many times I think trick ourselves into sitting in a meeting and talking about what's happening out there and really not knowing but acting like we know what's what's going on. And so the tough thing is we're growing. We're, we're a high growth company, we need people who have been to a place that is bigger, I kind of been to the top of the mountain have seen how it can be done at at when we were a billion. What does it look like 2 billion in revenue? Okay, what does it now look like at three and then if at five, you know this year, we should be around 3 billion in revenue, and we're growing at a 15 to 20% rate. And so we've got to bring people in who understand what that looks like. But also that that haven't gotten used to a larger company's narrower scope, because usually, that's what happens, you go from wearing five hats to wearing two or one. And you know a lot about that narrow scope in your business in some of the larger corporations. And when folks come here, we want to maintain that you need to wear all the hats, and you need to understand that our job is really out in the facilities, out with the customer understanding their problems. And so being very explicit on the front end about that and trying to understand that individual's background, if they've been a general manager of a division, or if they've worn a lot of hats over their career, then that tends to work best for us at Simmons. And then that's kind of at the the upper part of the management structure. And then what we're trying to do, as we recruit out of college is, is one have a robust internship program. And our mantra is come to Simmons and do real work. And and so that's exciting for us, we had a really good diverse group of over 60 students that came in last summer, and then we have a career leadership program where get out of college come to work at Simmons, and you're going to go through a robust training program, where you see every aspect of the business for over six months. And we're investing in these folks. And we've got leadership classes happening all throughout that six months. And then at the end, they've already kind of said, hey, I would like to be in quality, or I'd like to be in marketing, or I'd like to be in operations. And that's the fun part is that when once they see all the different opportunities at Simmons a lot of times, they're like, well, wait a second, I thought I wanted to do this, but now I want to work in operations and pet food or operations in the chicken plant. So we're trying to build those people and introduce them, and help them recognize there's so many opportunities to work here. And let's, you know, build a career at one company. I still believe in that. I still think it's possible. And especially when you have a diverse as diverse options as you have at Simmons. So

Matt Waller: 00:33:33

Well, that's great. You know, this brought to mind one last question. And it is another strategic kind of question. As I mentioned, when I moved to Northwest Arkansas in 1994, I quickly started following the companies in the area, including Simmons. And I remember I don't remember the exact dates, I think it was a few years later, when you became CEO. Maybe the late 90s, I can't remember. But one thing you did. And it's another thing I've wanted to ask you about that I've never asked you, you made us another strategic decision that was very interesting. You moved away from building your own consumer type brands, and focused more on B2B. And that was a big strategic decision. And of course, it seems like it's really paid off. But I'd like to hear about how did you think to do that? And just any background on that? Because I don't find anything written about it.

Todd Simmons: 00:34:45

Now, I do think that we so in our the chicken side of our business, very much been B2B, we were up against large players like Tyson Foods or Purdue or a Foster Farms are all these big brands, if you will, who have do a great job. And so it made sense for us to play in a market that was more niche, larger restaurant chains that were high quality, high service level, had single point of contact for the buyer it, we were smaller from a Salesforce perspective, that's where I grew up. And so to think we were gonna go hire a route sales group and go, you know, sell down the street to through Cisco and others just wasn't something we could accomplish. And so we we also didn't feel like we could put a marketing budget against those big organizations. And so we very much focused on business to business, I think it may be that that's how I grew up in the business. And therefore, as we were decided in the in 2008, or nine to really try to grow in the pet food segment more, we've been in pet food since the, the early 60s. So we had done it a long time, we just weren't, we were a chicken company that did some pet food. And so we made a very strategic decision to drive more into the pet space. And, and the resources we had built in the poultry business, were very applicable to the doing more contract manufacturing in the pet space. So partnering with larger brands that needed incremental capacity, they might make some of their own wet pet food, but we could come alongside them. And so we had the technical capability, we had the business to business kind of sales perspective. And the same thing with our animal nutrition group. We're selling to Nestle, Mars, General Mills, Colgate Palmolive, the hills pet food folks, all these different companies that have their own pet food division, we're selling ingredients to them for their pet food manufacturing operations, but we're also making finished product for them in our Simmons pet business unit. So it's, we I think it was what I grew up doing, and what we had built capabilities in the business and in our largest business segment. And then as we looked to grow those, it made sense, we just, we didn't have the budget to build a brand in pet food. We, like I said, we've our core, we're very innovative, but we're innovative in manufacturing, and we're innovative in producing food and and we know the markets we sell to. But we have we don't have that core competency of branding in our DNA. It doesn't mean that we won't do it someday, but but certainly that's just kind of been our history. And I think that's how it evolved. So it wasn't an explicit. It wasn't an explicit strategy to say, hey, back to that resource allocation. What are we really good at? Look yourself in the mirror. What do you have the money, the capital resources to really execute on? And then let let those awesome consumer brand companies execute what they do best, so

Todd Simmons: 00:35:02

Back in the I think it was the mid 90s? I can't remember exactly. There was a Harvard Business Review article that came out and a book I believe, but the the article was called the core competence of the corporation. And I've seen a lot of examples of how you apply that concept, and your strategic decision making and it's clearly paid off, so congratulations, Todd, on the amazing success that you've brought to Simmons Food and thank you for taking time to visit with me. I really appreciate it.

Matt Waller: 00:38:44

Aw, Thank you. We've got a great team and it's fun to work alongside them so and it's great to be able to talk this morning with you.