As we continue on in the CEO series, Matt sits down with the CEO of Simmons Foods Inc., Todd Simmons. They begin the episode by discussing the importance of quality control measures and setting high standards along with sustainable growth in a business. They then delve into the values at Simmons Foods including putting people first, acting with integrity, taking responsibility, being curious, and taking action. They then discuss the strategy at Simmons Foods, especially within their pet sector along with their redirection to B2B customers rather than building consumer brands.
Episode Transcript
Todd Simmons 0:00
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 0:20
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 1:07
I'm really excited to join the be epic podcast. So thank you, Dean Waller.
Matt Waller 1:14
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 3:23
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 5:54
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 7:44
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 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 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 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 18:32
Yes.
Matt Waller 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 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 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 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 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 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 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 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
Matt Waller 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.
Todd Simmons 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.
Matt Waller 39:14
On behalf of the Sam M. Walton College of Business, I want to thank everyone for spending
time with us for another engaging conversation. You can subscribe by going to your
favorite podcast service and searching Be Epic. B E E P IC
