CSP Magazine

Outlook Leadership 2010

A Perfect Landing: Sully’s Heroic Story

On the brink of fate’s final moments— the engines of Airbus A320 permanently disabled by a gaggle of Canada geese—a crew shepherding more than 180 passengers from New York’s LaGuardia Airport to Charlotte, N.C., knew death could be but minutes away.

Yet, deliberate and remarkably cool, U.S. Airways Capt. Chesley “Sully” Sullenberger, a stately former fighter pilot for the U.S. Air Force, analyzed his frustratingly few options, working closely in the cockpit with first officer Jeffrey Skiles and air-traffic control.

“We were well prepared and we also had a plan,” he said. “I knew I could land. … I knew which options were possible and, equally important, which options were not.”

On that frigid day in the middle of January 2009, Sully landed U.S. Airways Flight 1549 not on a tarmac or vacant field. Touchdown was sliding safely across the Hudson River in what shortly after would be called the “Miracle on the Hudson.”

Today, Sullenberger, a husband and a father of two adopted daughters, is voluntarily retired. He speaks about his experiences and lessons learned not from a vantage of hubris, but of teamwork, leadership and the practical application of life’s fundamentals to unknowable surprises.

His message is less about heroism or recounting moment by moment the stills of that afternoon of Jan. 15, 2009. The nearly four minutes of airborne uncertainty, for Sully, is a metaphor, a recipe for effective leadership and the value of living life in a methodical way that treasures fundamentals and dedication to the most menial of tasks. Because one never knows when stocking the shelves or mopping the floor will win a new customer, or greeting someone at the checkout counter may have transformed a shopper’s mood from grave to grateful.

“At the end of life,” Sully said, “we’ll ask [ourselves], ‘Did I make a difference?’ My wish is that for each of you, the answer will be yes.” —Mitch Morrison 


Big-League Priorities

In a panel led by CSP vice president and group editor Mitch Morrison, executives from The Pantry, The Parker Cos. and 7-Eleven discussed core survival tactics, including revitalization of brand, the pursuit of gross profit dollars and growth strategies.

Terry Marks, CEO of Cary, N.C.- based The Pantry Inc., told of his company’s intent to remake the chain’s image, uniting its network of 1,642 stores under the Kangaroo Express brand and anchoring its inside offer with its new Bean Street coffee program.

One of the issues facing The Pantry is the task of getting customers to “reconsider” its new offer as it rolls out through the chain. Despite competition from other c-stores and retail channels, Marks said, his chain has the ability to offer a quality product with service and speed. The Pantry undertook extensive research to pick the right product and presentation to make coffee the “hero” of its new campaign.

“We must create the environment where [new assets can become] accretive,” he said, “and we will introduce a model that will improve performance.”

Profitability is a key focus for Parker Cos., Savannah, Ga. Greg Parker, president of the 23-store chain, said focusing on gross-profit dollars is critical for assessing the success of his operations, especially with foodservice. “I don’t think people are as honest with their numbers when it comes to foodservice,” Parker said. “They say they’re doing well, but when you factor in costs like utilities and occupancy expenses, that might not be the case.”

Profitability is all about identifying what customers want, he said, pointing out that his locations tailor offerings to urban, suburban and rural environments. He also targets busy mothers, one of the tougher demographics to please. He does so in part because many other demographics also want what time-starved moms find appealing: cleanliness, freshness and safety. (For more on Parker, see p. 38.)

Darren Rebelez, COO and executive vice president of Dallas-based 7-Eleven Inc., talked about his company’s continuing intent of becoming fully franchised. Growth is definitely part of its game plan, with a goal of adding 2,000 stores globally by the end of 2010. The company’s current base of 38,400 locations is in only 16 countries. It currently has no operations in Brazil, India, Russia and many areas of China.

In the past, 7-Eleven’s growth model involved the parent company building locations and then finding a franchisee to run them. That’s expanding. Rebelez described a new paradigm called “business conversions,” wherein an existing operator would remodel and rebrand its c-stores to 7-Eleven. He said there are currently 200 of those.

All three panelists spoke of using technology to identify both fast- and slow-moving products to better address customer demand. Rebelez said its proprietary technology allows franchisees to “drill down” to identify what’s selling, which helps optimize the local product assortment, as well as leverages 7-Eleven’s distribution system to keep high-demand items in stock.

Another point panelists spoke of was the issues separating large and small chains. Parker said that sometimes being smaller means being more nimble: “Every decision you make is terrifying. But we are very focused on creating an exceptional experience. We talk to our consumers, our customer-service representatives, our managers, and we ask, ‘What can we do better?’ ” —Angel Abcede 


Verleger: Cash Is King in Current Recession

Forget the Great Depression of the 1930s. The Depression of 1873 has much more in common with the origins of the current recession and how it may unfold, said Philip Verleger Jr., president of PKVerleger LLC and a petroleum and energy market analyst.

Like the current recession, the Depression of 1873 was rooted in financial failure. While the construction industry suffered perhaps the greatest rise and fall in today’s economic malaise, the railroads took a similar ride in the 1870s.

The 1873 depression, meanwhile, stretched for six years. While “all economic cycles are not created equal,” Verleger said, the current recession, also rooted in financial collapse, will also be long, severe and have great aftershocks.

Therefore, while the c-store industry may be recession-resistant, its fortunes are directly tied to that of the construction industry, which makes up a large piece of the customer base. “Construction workers are your most loyal customers,” Verleger said. “You do have to worry about the out-of-work construction worker, who will be gone for years.”

The economist downplayed a “double-dip recession,” instead predicting several years of slow growth. High cr ude pr ices tied w ith lo w demand will continue to bleed the refinery business and trigger more bankruptcies and closures.

Verleger’s advice for survival? “My best answer is: Cash is king,” he said. “Minimize your exposure to debt. If locations aren’t doing well, they won’t be doing better next year—cut them.” In essence, focus on the most profitable locations and be ruthless about trimming the dead wood. “It’s not pretty,” he said, “but it seems to work in situations like this.” —Samantha Oller 


Tips to Grow On

  • The recession’s roots in financial collapse portend a long, hard slog.
  • The c-store industry’s fortunes are closely tied to that of the construction sector.
  • Preserve cash and whittle down to your most profitable locations to survive.  

H.R. Hints

With customer service fast becoming the industry’s No. 1 differentiator against crosschannel competitors, the mechanisms for achieving consistency at the stores are quickly becoming prized tools. Three finalists in the CSP-Service Intelligence Mystery Shop discussed their formulas for success: Steve Loehr of La Crosse, Wis.-based Kwik Trip Inc.; Jill Linville of Jacksons Food Stores, Meridian, Idaho; and Steve Kimmes of Kum & Go, West Des Moines, Iowa. 


The Numbers:

1% What Jacksons is up on its oil-company mystery shops, going from 97% to 98% 

24% Kwik Trip’s employee turnover

600 The number of applicants Kwik Trip had for a store it recently opened in southern Wisconsin


Technology used by Kum & Go:

  • Blackberry app that lets employees rate the chain’s stores
  • Sophisticated training modules on DVD
  • Upsell prompts—but too many will slow the transaction   

A New Reality Check

In late 2008, as the federal government was attempting to shore up American International Group Inc. (AIG) from collapse, it asked the former chairman of Allstate to take control and help stabilize the troubled insurance goliath. At the time, Edward Liddy was considered a phenomenal business leader; in an exercise in patriotism, he agreed to be CEO of AIG for a salary of only $1.

“Was he a great leader, or a terrible leader?” asked Saj-nicole Joni, Ph.D., CEO of Cambridge International Group, a consultancy for executivelevel business leaders based in Cambridge, Mass.

History speaks for itself: Liddy resigned after only six months in the job, caught up in a massive publicrelations backlash against $218 million in retention bonuses slated for execs in AIG’s financial-services division, after the company accepted $170 billion in taxpayer-backed bailout funds from the government. Liddy felt duty-bound to pay the bonuses, citing AIG’s contractual agreements with the execs.

Outlook attendees and Joni discussed his other, possibly better options, which could have included deferring payment on the bonuses and better communicating their purpose. Regardless of the alternatives, Liddy’s tumultuous experience serves as a warning to all business leaders.

“What I think is most important about Liddy is you,” Joni said. “It will happen to each of you: When you leave, you will all be faced with a problem of making decisions with imperfect information.” From the consultant’s perspective, innovative leadership that meets the challenges of “a world turned upsidedown” contains these three elements:

Be grounded in reality. In what Joni considers the “head” part of the innovative leadership challenge, execs must stay in tune with public perception, much of which is being shaped by new forms of mobile communication, and stay rooted in an environment where government regulations and financial conditions are constantly shifting.

Be disciplined. You cannot innovate without discipline—the “heart” of leadership, Joni argued—especially as it relates to people. That means assembling teams that will fight and push back for what they need to create innovative outcomes, and hiring individuals who may challenge your own world view. “You’ve got to put the very best people into your leadership positions so you don’t see the world only how you see it,” Joni said. _ Be courageous. Various researchers have pegged the failure the rate of innovation initiatives at anywhere from 46% to 98%, according to Joni. But this willingness to take a risk—the “guts” of the leadership equation—can pay great rewards if the head and heart elements are in place.

Or, as Joni summed up the message: “Do you have the courage, wisdom and purpose to lead in a way that really matters?” —Samantha Oller 


Tips to Grow On

Innovative leaders:

  • Are firmly grounded in a constantly changing, uncertain environment.
  • Hire individuals who balance their own strengths and weaknesses.
  • Take calculated risks in the spirit of innovation.  

Practice Makes Perfect

What makes a great performance? If your answer is “hard work,” you’re wrong, according to Geoff Colvin, senior editor at large for Fortune magazine. Everyone has a co-worker or employee who may work incredibly hard but is not a world-class performer.

What about a large IQ or impressive memory? Wrong again. There are chess masters, for example, with below-average IQs, Colvin pointed out. And innate talent— such as that shown by Mozart— also does not reliably translate into a great performer, especially as a person matures.

“Where does great performance really come from?” asked Colvin, who also authored the business book “Talent Is Overrated.” “It matters because the standards are rising faster and higher than ever before.”

Colvin offered a few examples of truly great performers for attendees to consider, starting with Jerry Rice, considered the greatest wide receiver in major league football history. He wasn’t the fastest, Colvin said, but he “trained more intensely than anyone else.” He estimated that Rice spent 98% of his time practicing to play professional football during the 2% when he wasn’t practicing.

A 1990 study of violinists at a music college in Berlin, meanwhile, found that those musicians who practiced the greatest number of hours were able to land the most prestigious seats at world-class symphonies.

What made the difference for these performers? Something Colvin calls “deliberate practice.” The key characteristics:

  • It is focused to improve your performance in a specific area.
  • It pushes you just beyond your current ability and forces you to grow.
  • It is guided by continual, rigorous, honest and constructive feedback. “Great performance from [deliberate practice] seems unlimited,” because it defies the limits of age, he said. “As long as you’re willing to do it, you will keep getting better.”

It’s also a huge opportunity for businesses to apply to their own organization. One medical-device manufacturer put the theory into practice as part of new-product training for its salespeople. The sales staff attended classes to learn about a new product; prepared presentations to teach others about it; practiced these presentations over six weeks in front of their colleagues; and practiced demonstration of the device on medical simulators for six weeks.

“All of the salespeople complained,” Colvin said. “It was more work than they were accustomed to, and they thought it was a waste of time.” But clearly, the results prove it wasn’t: The sales team improved its conversion of customers to the new product from the previous average of 25% to a high of 95%.

Putting deliberate practice into work at your own company is a threepart process. First, think about what you or an emplo yee is t rying t o accomplish. Then, during practice, monitor performance and growth. Finally, after the activity, review the strengths and weaknesses—the more specific the critique, the better.

In the early stages, it’s common for people to need motivation to practice. “Eventually every performer reaches a point where they are doing it for themselves,” said Colvin. “There’s an incredible motivating force in showing people you believe in them and trust them to do the right stuff.” —Samantha Oller 


Tips to Grow On

  • Great performance is not rooted in hard work, talent or high IQ.
  • Deliberate practice has unlimited potential to improve performance.
  • With time, motivation to practice will come from within.  

Financial Stability

Guarded yet optimistic was the mood of panelists representing sale-and-leaseback lending, traditional lending and the retailer perspective.

Compared to its restaurant holdings, its c-stores are “recession-resistant,” said Brock Rule, chief operating officer and managing director for restaurants at Hopkins Appraisal Services, Independence, Mo. Multiples—a measure of a c-store chain’s value—have come “back to normal compared to the peaks [mid- to late 2000s],” he said.

In his study of private-company transactions, those completed from 2000 to 2004 had multiples at about 6.3, Rule said. They rose in 2005-2006 to 6.9, hitting 7.7 by 2007-2008. Then the recession brought multiples back down to the mid-6’s and, in 2010, the low 6’s. The panel seemed to agree that multiples are holding in the range of 5.5 to 6.

Don Bassell, chief financial officer of GPM Investments LLC, Mechanicsville, Va., operators of the Fas Mart chain, agreed, saying the company’s last big acquisition was in 2007 and that “we would not get that deal today.”

“Valuations on top-tier properties are still healthy,” said Kevin Shea, executive vice president of Getty Realty Corp., Jericho, N.Y. “For second- and third-tier, valuations are just not there. People are looking at potential portfolios and [those properties] are not commanding the price.”

Shea did say that major oil companies are definitely garnering bidder excitement over their divestitures. However, panelists agreed, with lender stipulations becoming more conservative and buyers having to come up with more up front, the majors have had to break up initial packages into smaller groupings, allowing for more bidders to enter the fray.

“It’s one thing to get the multiples,” says Rule, “but another to find the terms.” To better position properties to sell, panelists agreed that having a firm grasp on the company’s numbers was critical. Bassell says lenders ask, “How reliable is your data, and how do you access it?” The ability to access data shows the sophistication of the organization and that the company can spot problems and solve them ahead of time, panelists said.

Of course, not all lenders follow the same road map. Sale-and-leaseback arrangements, traditional debt lending and even private-equity funding have different terms and criteria priorities. Steve Horn, senior vice president of acquisition for National Retail Properties, Orlando, Fla., even mentioned a type of deal wherein the retailer can switch a one rental property for another if a shift in traffic flow on a local highway or increased competition changed the value of the original sale-and-leaseback property. “I just want the cash flow to keep paying dividends to my shareholders,” Horn said. “I’m not in love with the land.” —Angel Abcede 


Rewarding Green

Three convenience organizations were rewarded for their environmental efforts at CSP’s Outlook Conference. The Environmental Stewardship awards were given to 7-Eleven, GetGo and Green Valley Grocery, in partnership with the Captain Planet Foundation. Each company was chosen because of its efforts to recognize corporate excellence through sustainable business practices. CSP launched the program in 2009 as a way to recognize those that are making strides toward greater sustainable business practices for purely environmental, as well as pragmatic, reasons. 

7-Eleven

Darren Rebelez, executive vice president and CO O of Dallas-based 7-Eleven, was on hand when the c-store giant was recognized for its green commissary and combined distribution center (CDC) in Bohemia, N.Y. The facility prepares and delivers fresh foods to 674 7-Eleven stores in New York, New Jersey and Pennsylvania. The commissary and CDC was designed to lower energy consumption, water use and utility costs. The 130,000-square-foot facility is equipped with a gas-energy mixing system that treats the water before it is discharged, among other environmentally friendly initiatives. The company was also recognized for its first location that meets Leadership in Energy and Environmental Design criteria (LEED). The DeLand, Fla., location is landscaped with native, drought-tolerant vegetation and permeable surfaces, and it has an outdoor eating area with cypress pergolas and arbors. It’s the nonvisible features of this store that give it most of its sustainable cache: local and regional building materials; recycled materials; Forest Stewardship Councilcertified wood; and high-efficiency energy, water and lighting systems. 

GetGo

GetGo, the c-store arm of multi-format retailer Giant Eagle Inc., received LEED certification for its GetGo location in Wexford, Pa., in March. The store is designed with air-quality sensors that constantly monitor for carbon dioxide. To improve general air quality, the facility uses adhesives, sealants, paints, carpeting and wood products that are low in volatile organic compounds. It also practices water conservation by landscaping with drought-resistant vegetation. The facility consumes 21% less energy by using increased insulation. No ozone-depleting refrigerants are used in its refrigeration and cooling systems. Most of the construction waste was sent to other companies for reuse, and all wood used in the site is harvested from sustainable services. All of the company’s WetGo Car Washes use a Pure Water state-of-theart water reclamation system. All WetGo Car Washes discharge their water into a separate sanitary sewer, where it is treated and recycled. As such, the discharge from the car washes is not emptied into storm drains. WetGo Car Washes use approximately 30 to 40 gallons of water per vehicle, equivalent to the amount a person uses for an average shower.

Green Valley Grocery

In accepting his company’s Environmental Stewardship award, Rick Crawford, CEO of Crawford Oil, dba Green Valley Grocery, mentioned the company’s commitment to building new, and remodeling old stores to be more environmentally friendly. All green innovation in the chain had to have a payback of two years or less. Of the chain’s 41 stores, four have been remodeled to implement new green ideas, and one was built from the ground up. When the company began its green journey, a team of designers, contractors, architects, suppliers and G reen Valley personnel gathered to discuss ways in which they could design a store that would conserve energy and keep costs down. Nearly 50 environmentally friendly items were considered. In the end, 37 were implemented in the ground-up build. Some items, such as solar panels, wouldn’t see payback for at least 12 to 15 years; they were deemed unrealistic goals. However, in the short term, energy-efficient lighting for both inside and on the canopy, water reclamation efforts in its car washes, and EnergyStar equipment all made sense. Companywide, the chain is installing energy-efficient fixtures in all stores.

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