Smithfield Foods gave awards in the categories of Responsibility, Organizational Excellence and Innovation. President and CEO Ken Sullivan discusses the origin of R-O-I at Smithfield Foods and the recipients of the inaugural awards.
Andy Hanacek: Ken, thank you for letting me interview you here and get some access to Smithfield for our February cover story. It’s an exciting time around Smithfield, and I’m glad to be writing about it this month. One of the things I wanted to ask you about on video for this Question and Answer is about the new ROI Award that you have launched in the last year. Can you tell me a little bit about those awards and how Smithfield developed them?
Ken Sullivan: Let me start with what ROI stands for. Most people when they hear “ROI” they associate it with Return On Investment. There is a linkage to that, and I’ll get to that here in a minute, but the ROI acronym actually stands for Responsibility, Operational Excellence, and Innovation. Those three things are the things that I felt when I took over as CEO that we needed to create an awareness and a culture that respected those three ideas. It was really my attempt to put a stamp on the organization that said we are going to be responsible, and that fundamentally means that I want a culture of accountability. I want people up and down the line from all our 50,000 employees, whether you are a production worker or somebody in the office, to feel accountable for the success of Smithfield. I can’t make Smithfield successful sitting in my office dreaming and wishing that we are successful. I want everybody to feel like they are responsible and accountable for the success of Smithfield. That starts with the basic principle of and the basic idea of if you see something, don’t walk by it. Fix it. The idea is if you walk by it, you’ve accepted it. Don’t accept things like that. That’s the first principle. The second principle is operational excellence. That really is an acknowledgement that we need to be excellent operators. That relates to cost. We certainly need to improve our cost structure at the plant level. It also relates to quality. Ultimately, we’re here to serve our customers. Our customers demand quality, and we need to be the best in class, and we need to have operational excellence. The third principle is innovation. Innovation is somewhat of an overused buzz word in today’s business world. The reality is for a food company we need to be innovative. The fact is the landscape changes every day in terms of what consumer tastes and trends are. We need to have a culture where we think in terms of innovation. What I mean by that is not just product innovation but innovation across all disciplines of the company. If we’re truly going to be an innovative company, we have to have that as part of our DNA. We have to think in those terms. That’s why we appointed Will Brunt our Chief Innovation Officer. We appointed Will to that role with the idea that Will’s job is to foster innovation, to highlight innovation wherever it occurs in the organization and whatever form it occurs in the organization. Those are our guiding principles, and I think we’ve had great success this year in terms of people understanding what those principles are and that is becoming our culture at Smithfield.
Hanacek: So someone won [an award] in each of those principles, correct?
Sullivan: In order to breathe life into the ROI principles and concepts, we set up an awards program. It’s one thing for me to talk about our culture and our principles. It’s another thing for it to become who we are, our identity. In order to help that, we established an awards program. It’s twice a year [when] we hand out awards for people who epitomize what we want out of Responsibility, Operational Excellence, and Innovation. So we had our first ever awards a few months ago, and we award people a monetary prize. I would call it very successful from a standpoint of… we received about 175 submissions from all over the company. These are submissions that their coworkers nominated them for these awards. We had an employee town hall, which was broadcast to the entire company, and we recognized those first award winners. We gave an award in each category.
In the first category, Responsibility, we had a maintenance mechanic from one of our plants, a dried sausage plant, who really epitomized what it means to be responsible. We award him the inaugural award based largely on the testimonials that we got from his fellow employees. You talk about don’t walk past something; if you do, you’ve accepted it. He’s someone who clearly never walks past anything without wanting to get it fixed, so we are delighted that he was the inaugural winner, because he’s almost the poster child for someone who is committed to making our company better. [He is] someone who at any level in the company can have a major impact on our success. That was the Responsibility Award.
So the second is Operational Excellence. The inaugural award winner was our sow operations in Utah. They had been near the bottom of our performance metrics, and they put together a plan to attack that, and ultimately now they’re at the top of our production metrics. So again they are a group that has epitomized by Operational Excellence, which is we need to be the best at what we do. They are very performance-oriented, metric-oriented, and ultimately, that’s how they climbed to the top of that ladder. That was the award winner in the Operational Excellence category.
The third category is Innovation, and again, it is part of our effort to make it a part of our DNA. I was particularly happy with the innovation aspect that we had a number of unique submissions in terms of the innovation that people are expecting or that we’re seeing out there. Again, it is not just about product innovation. It is innovation across the board. For example, in Romania, we had someone in the production area recommend a boxing strategy that ultimately reduced our cardboard consumption by 15 percent or something like over 100 tons of cardboard every year. Similarly in a boxing area, we had somebody in Utah recommend a change to our boxing layout that resulted in 7,000 pounds less tape every year. Now, these are examples, some small examples, but it’s the kind of micro-thinking, meaning innovation at the micro level, that ultimately if we can get that to flourish throughout the organization, that’s ultimately what we want to achieve with these cultural values and principles that we are ingraining in the corporation. The winner in the Innovation Category was our farm division, which forged what I think is a very unique partnership with the Environmental Defense Fund. That partnership really contemplated that we would work throughout our supply chain and this case specifically with our corn growers. We buy a lot of feed grains and corn and soy beans, but partnering with the Environmental Defense Fund and the agronomists we have on staff, we are able to work with our supply chain really to optimize the use of fertilizer so that we don’t have excess fertilizer applied and the implications from the runoff. Ultimately, I think that’s a win-win proposition. One, we are being good stewards of the environment, and two, for the farmer. They will see better yields in their crop production. It’s the sort of thinking that we want, and we are very proud to have partnered with the Environmental Defense Fund.
Hanacek: Now when I visited the plant in Smithfield, one of the things that we looked at kind of extensively while we were touring the facility was the new blade stop concept and the worker safety aspect there. Did that fit into the awards?
Sullivan: It did. Couple things about blade stop: there’s some commercially available blade stop technology that we’ve implemented that we think has reduced our injury rate, but we’ve also had some homegrown ingenuity related to home stop design. We had a mechanic at one of our plants craft his own design using some impressive metal working skills, and we’ve actually used that design, not just in that plant, but we’ve propagated it in a couple other places. That’s another example of the micro-innovation that ultimately flourishes throughout the company and adds up to big ideas.
Hanacek: It sounds like a great way to give back to your people who like you said bring Smithfield forward.