Hi everybody, this is Jay Hartzell Dean of the McCombs School of Business,
and I'm really happy today to have Martin Otto, the Chief Operating Officer
of H-E-B with us today. Good to see you, Martin.
- Good to see you. Thanks for having me, Jay.
- Oh, it's our pleasure. And as we were talking before,
this is our second in a series of lessons from the field
where we're bringing in business leaders that are associated in some way
with our school, to share some insights and things
obviously in this crazy time that we've never seen before.
So, maybe to pick up there.
Can you tell us a little bit about H-E-B's journey given the COVID crisis,
and what had you seen before as a company that positioned you for this,
and what was just something that you --
this was unlike something you'd ever seen before.
- Yeah, this is -- I think for all of us this has been unlike anything
we've ever seen, or really expected to happen in our lifetimes.
And most similar things that we've experienced are hurricanes here in Texas.
And what happens with those is they create a tremendous
amount of disruption in a short amount of time
for a limited number of cities and stores.
This is different in that it has created a massive disruption
for a very, very long period of time across all of our stores.
And what's helped us is that we've had a standing emergency preparedness
director and small team for quite a number of years now.
And that's because of the hurricanes in Texas
and also for other natural disasters.
And by having that team in place, it gave us maybe a bit of a head start
to plan for what was coming, because between having that team
and all of us seeing what was happening in China in late December
allowed us to begin planning for what might happen in early January,
which culminated in a tabletop exercise that that team ran
in very early February.
And so between that work and also the information that we were getting
from some of our vendors overseas and from our chief medical officer
about what this illness was about and what it was like or could mean,
and his projections turned out to be accurate.
All of that prepared us as well as you could for something like this.
But even with that, it's been, like we were talking about a few minutes ago,
sort of a land of twists and turns and constant surprises every single day
for weeks and weeks on end.
- So what do you think, in a non- COVID world or crisis world,
you'll take away from this as a lesson learned?
So whether that's as a leader or as a company,
can you tell what the takeaways are yet?
- Yes, it's been very interesting
So, for -- I'll start with for the company
and some of the things we'll do differently coming out of this,
and I'll speak to some of the leadership lessons after that.
I'll start with the supply chain, and I think about the supply chain
as three parts.
There's the consumer product goods manufacturers
and the farmers and the ranchers and the meatpacking houses
at the beginning, and at the end there's our stores.
In the middle is our warehouses and our transportation operations.
And part one of the supply chain was in good shape early on.
There was plenty of product in our country to be able to take care of the big demand,
and our stores were able to scale up quickly as well.
The bottleneck for us was the supply chain and the distribution centers.
And we, like I think most companies, have always run that lean,
and so it didn't allow for a big surging capacity.
That was job one, was to be able to work through that.
And going forward, one of the lessons is we're going to look to run that
with a little bit more excess capacity so that we can be prepared for this
kind of thing or something like it.
I'd say the other thing that we needed to get done as a business
was really care for our partners.
Our employees, we refer to one another as partners.
Because ultimately, as has been well documented in the press,
those are the folks who are on the front lines so to speak
of this illness, particularly in the early days
when nobody really knew what the illness meant
and what the consequences were, and so our partners in the stores
and the warehouses were the ones who were really working day in
and day out, and this was before we were able to acquire masks,
which was a whole challenge of its own.
And so we thought through, what do we need to do there
to cause a level of comfort for our partners and a level of safety
that they could feel good about.
And so that resulted in a lot of steps that we took.
I don't know that this is a lesson necessarily, but certainly reinforced
what we have always paid a lot of attention to, which is
how our entire team, how our partners feel about H-E-B
and about working together, and I'm very thankful for the culture
that we have, because --
So I'd say supply chain is a big lesson going forward in terms of
how we create some more capacity there.
In terms of leadership lessons, I think it reinforced maybe some things
that we knew already, but there's -- I'd say a change that's come out of it
is around this whole Zoom meeting approach,
and what the role is at the office going forward.
But I'd say the lessons in leadership, number one is that
you gotta have a great team.
And it's about the chemistry and working together, it's about tenure
and knowing how the business runs, it's about a focus on the details.
In this environment, there were so many changes and so many decisions
that happened on the fly that we all had to rely a lot more on intuition,
which is born out of years of being in the business and doing this sort of work
than it was born out of data that we had a whole lot of time to run and analyze.
Obviously the analytics matter a lot, and we did that, and all of us do that.
But the intuition, without the intuition that's formed by these years
of becoming experts, really, at what the entire team does,
we would have been in a lot of trouble.
And I don't know that people in business always pay as much attention
to the last detail as they might. And so that served us quite well.
Other lessons here I'd say are around communication
and how important that is in a crisis when things change so quickly,
and what's right one day is wrong the next day or is different than the next day.
We have had standing calls first daily and now weekly with 900,
almost a thousand people each day, and then each week now
as the crisis has progressed, to be sure that we're all on the same page
and we're all aware of what's changing, we're all aware of what the problems are
so that we can know what those are and then work together to fix them
and to be on the same page. That's been critically important.
Communication's been important across all the different constituencies as well.
Our large partner base, we started early on with some videos
from our chief medical officer and other positions to explain the illness,
and what are the consequences, and how do you prevent it,
or how do you avoid it.
And so the communication has been essential.
And I'd say the other reinforced lesson,
which I think we've always done a pretty good job at H-E-B
is to understand that we serve every constituency.
So it's not just our customers. It's our customers, it's our partners,
it's our shareholders, it's our suppliers, it's our communities. It's all of those.
And it's our elected officials.
And we, I think, did pretty good work early on and throughout the crisis
to understand what each of those constituencies needs
to feel comfortable and to have delivered what they're looking for.
So, hopefully that answers your question, in a long way.
But those are a few lessons and key points.
- No, those are great, Martin.
And I was thinking how proud we all are as Texans.
You all are an iconic Texas company, and have gotten a lot of, I think
well-deserved kudos for the way you've responded in this,
and we're glad to have you in our state and with us.
One of the things that you've been great for us is hiring our people.
And we always like for you to hire more, but we appreciate whom you do hire.
And I know you have a couple of daughters that have been through the school,
one that is graduating, Caroline, right? - Yes. Yeah.
- So congratulations to Caroline. - Thank you.
- And then my daughter Katelyn went here as well.
For our students, or for our faculty and staff, as you look ahead,
how does -- post-COVID, a few years from now,
any sense in which this might change the way you think about talent,
and people, and how you hire, what you look for?
- Well, we're going to -- I think we're going to grow quicker,
at least for a while, than we otherwise would have,
because so much demand has come our way.
And so I think our hiring needs will increase over the next
number of years, which is good news for us and for the kind of opportunities
we can provide.
And you should know, and I think you do know this, how proud
we likewise are to be, number one, in Texas, but secondly
to be associated with the University of Texas,
which is just one of the top universities in the world.
And as I've been involved in recruiting over the last probably five, six years
at UT, I can't say enough about the quality of your students
and the instruction that they receive and the breadth of knowledge
that they come out of the university with and how much value they add.
It's really impressive, and it's a real tribute to you and your team
for the work that you do.
In terms of opportunities, I think a lot of it remains the same.
I've read a number of people say that what this crisis has done
is not so much change things, but accelerate things.
And I think that's accurate. It's clearly accelerated digital,
and it's re-emphasized or reinforced the importance of, as I said a minute ago,
knowledge of the details, being able to analytically dig into issues quickly
and have good judgment in coming up with recommendations and solutions,
and also communicating effectively. And quickly, decisively.
And a crisis like this reinforces that.
There's not a lot of time to read long memos or to listen to long speeches.
It needs to get to the point and it needs to be understandable.
So, if I had to highlight the skills that matter, they're largely the same,
but I think that there's been a point of emphasis placed on them,
and so I'd say the math is critical, the communication skills are critical.
It's not one or the other, it's both.
And then the digital skills are really important.
I'd say both an understanding of the digital landscape
and how the pieces fit together, how does the tech stack
relate to the digital marketing program, and how does that relate
to how that gets distributed and communicated to customers?
And then also I think the coding itself is a valuable skill.
And I got a little bit of it back in the early, mid '80s.
I'm glad I did. But the students, they ought to have more than I did.
Because I think even if they don't become a coder for a living,
to know the questions to ask and to be able to dig in a little bit
is going to be important.
So I'd say those are the skills that are important.
Beyond that, the folks that want to join H-E-B, the rest of it,
they're going to learn it on the job.
One other thing I'd say is super important actually as I think about this
is that this crisis, probably like any, emphasizes the importance
of how well folks need to work together, and teamwork is essential.
Being able to understand and sort of intuitively get how you fit
as a member of the team and what the team needs from you is really important.
And so that's something that through a crisis like this
becomes even more obvious.
- Yeah. Thanks so much, Martin.
I promised you before we wouldn't take too much of your time,
but I thought you hit some great things
and things that we've talked about on campus from the need for communication,
the need for transparency, the need to act as a team.
Because the way we're going to get through this, as you said, is together.
So, everybody bringing their own unique, diverse perspectives and talents
to the table to get through this collectively.
- You mentioned transparency, I didn't get into that as much as I might have.
That's absolutely essential, is what I have found.
And I would say as a company, we've always been relatively transparent
with our team.
And yeah, this has shown the importance of that, I would say,
being around the illness and what does it mean, to our --
When folks unfortunately do get sick with the virus in the workplace,
how you share that and how you handle that is really important.
And we've been very open about that with partners on the team
and stores where somebody has gotten sick.
And I think by doing that, it's -- elevates or reinforces
the level of trust that is essential, I think, to running any organization,
be it a business, a family, a sports team, or whatever.
And so -- but your point about transparency I think
is a really critical one.
- Thanks a lot Martin, and thanks for joining us today,
and I think we're in the mutual appreciation society.
We're very proud of our association with H-E-B and all you've done,
and we look forward to many more years of working together
and sending you great students and having you involved in our classrooms
and in our research. So thank you.
- Thank you, Jay. Really enjoyed the conversation,
and appreciate the chance to do this. - And congratulations to Caroline,
and we hope to see her back on campus.
And can we get a hook 'em Horns for the last photo shot? Can you --
- Hook 'em Horns. - There we go. Thank you.
- Thank you, Jay.