Reducing Back Injury

1
Driving Competitive Advantage Through HR at
Sysco
Patrick M. Wright Professor and Director,
CAHRS April 25, 2002
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Competitive Advantage Through HR

• What is Competitive Advantage and Sustainable
  Competitive Advantage?
• How Does HR help build them?
• How Can We Demonstrate Empirically the Value we
  Create through Driving Business Performance?

3
Sysco Corporation
The 100 Best Companies to work for provided a
significantly better return to shareholders than
Russell 3000
Average Annual Return to Shareholders
100 Best
28
30
Russell 3000
25
20
15
15
10
5
0
100 Best
Russell 3000
Fortune Magazine
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So, what does it take???

• Framework for understanding competitive advantage
• People-Value Conceptual Model
• Metrics tied to the model
• Data to prove the model, and thus the value of HR
  in driving business performance

5
HR and Sustainable Competitive Advantage (VRIO
Framework)
How do we drive SCA with HR Practices? The
Question of Value The Question of Rareness The
Question of Imitability The Question of
Organization
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The Question of Value
Does our HR system provide value, and is it
greater (Revenues-Costs) than competitors.
How do we drive cost reduction in HR? How
do we drive revenue enhancement in HR?
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The Question of Value (contd)

• HR and Value at Fed Ex
• If a resource or activity is not valuable, to
  have it or engage in it results in a competitive
  disadvantage.
• If a resource or activity is valuable, it might
  only result in competitive parity.

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The Question of Rareness
How many of our competitors already possess this
resource or capability or are engaged in this
value creating strategy? Common Resources are a
Source of Competitive Parity Common Does Not
Equal Unimportant Valuable and Rare Resources
are at Least a Source of Temporary Competitive
Advantage.
9
The Question of Imitability
Do firms without this resource or capability face
a cost disadvantage in acquiring or developing
it? Performance in the five finger
industry Sources of Inimitability History
Safety at Dupont Problem Substitutability U
ncertainty Value at Koch Industries Problem
Identifiability Social Complexity Culture
at Southwest Problem Fragility
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Value, Rareness and Imitability

• Southwest Airlines
• Compensation at mean of industry
• Turnover significantly lower than industry
• Top ten companies to work for
• Productivity - 81ees/aircraft vs.134
• 2.2 ees/1000 passengers vs. 4.2

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The Question of Organization
Are we organized to take full advantage of the
competitive potential of our resources and
capabilities? With V, R, and I, firms can mess
up O and still make money Better Resources
at Merck With V, but no R or I, O makes all
the difference Better Alignment at Shell
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The VRIO Framework
Is a resource . . .
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Putting it to Work - Sysco

• Sysco Foods
• Entrepreneurial Culture
• No Corporate Authority to Demand HR practices
• Creates need for data driven persuasion

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SYSCO PROFILE

• 1 foodservice marketer distributor in North
  America
• Combined Foodservice Hospitality market of
  190 Billion
• FY 2001 sales of nearly 22 Billion
• 140 locations
• 370,000 customers
• Approximately 275,000 products
• 50,000 associates

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Consistent Sales Net Earnings Growth
Net Earn. (Millions)
Sales (Billions)
5 Yr. CAGR Sales 10.2 Net Earnings
16.6 10 Yr. CAGR Sales 10.3 Net Earnings
14.5 20 Yr. CAGR Sales 14.8 Net Earnings
16.8 30 Yr. CAGR Sales 15.7 Net Earnings
18.5
Sales
Net Earnings
All net earnings data is before accounting
changes.
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Keys to SYSCOs Growth Performance

• Customer Service Relationships
• C.A.R.E.S. iCARE
• Operational Strength Execution
• Operation efficiencies
• Technology
• Autonomous Operations
• Benchmarking
• Flexibility
• Financial Strength
• Reinvest for growth
• Strong cash flow
• Focus on Profitable Growth Leverage
• Customer mix penetration
• Market Opportunities
• Steady growth
• Small market share

• Leveraging People
  Processes
• Integrity

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SYSCO-A Model for Success
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Five Cornerstones People Strategy
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FY 2001 Operating Expense
The value proposition is tied to Human Capital
of Total
Wages 55.82
Other (Payroll) 13.00
Overtime 3.93
Sub-Total 72.74
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The impact of Human Capital must be measured,
(even if conservative) leveraged and
communicated.
Key Positions Nearly 30,000 employees Marketing
Associates (15 point improvement) 52
MM (65-80) Delivery Associates (15 point
improvement) 42 MM (65-80) Night
Warehouse (20 point improvement) 16
MM (5-25) 110 MM
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The Work Climate Survey at Sysco

• Rolled out in 2000/2001
• Conducted twice a year with each company choosing
  which time
• Purely voluntary
• Conducted by Computer Assisted Survey Team (CAST)
  at Cornell

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Human Capital MetricsWork Climate Survey
Overview
GOAL

• To be 4.0 Satisfaction Level or Higher
• To have 60 or higher of employees satisfied or
  very satisfied.
• To better leverage associates performance
• 85 of the companies have improved over previous
  year scores

RESULT
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Five STAR ModelCreating a STAR organization
provides better link to customer needs and
profitable growth


Total Brand Commitment Brand Culture Employer Brand Job Brand Job
Provides optimal work experience and self-worth. Brand SYSCO synonymous with business individual success. Sum of Corporate attributes greater than the parts. SYSCO embodies what their work function is. Employee sees as part of company as well as the job Some emotional values. Takes pride in being a driver Employee sees only the job. (type of work, pay, hours, etc.)
lt 3.54
3.55 - 3.74
3.75 - 3.94
3.95 - 4.19
4.2 or higher
Highest Employee Link to Customer
Lowest
Employee Engagement
Level Commitment
Capability
Compliance
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Human Capital MetricsSTAR Employer
Below is the number of operating companies that
are classified according to the above model.
These scores are based upon the Winter/Summer
2001 Survey results.
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The Basic Service- Profit Chain
Long Term Profitability Growth
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Sysco Corporation
There is a strong correlation with employee
satisfaction and customer satisfaction at SYSCO.
High

• A

4.50

• C

• B

• F

• D

• E

4.40

• G

Customer Satisfaction

• H

4.30

• M

4.20

• L

• K

4.10

• I

• J

4.00
Low
High
Employee Satisfaction
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The Service- Profit ChainA Revised Model
Long Term Profitability Growth
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What drives Employee Satisfaction?
(FLS) ? ?My supervisor removes obstacles so I can
do my job better (LS) ?The leadership of
our operating company spends a good amount
of time talking with employees (R) ?
Doing my job well leads to monetary
rewards (FLS) ? ? My supervisor cares about me
as a person (FLS) ? ? I have received
constructive feedback on my performance
within the last 6 months
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Management Practices Assessed

• Performance Eval.
• Merit Pay
• Individual/Group Incentives
• Communications
• Promote from Within

• gt16 hours Training
• Supervisory Training
• Grievance Procedure
• Structured Ints
• Testing

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HR and Organization Commitment
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The Service-Profit ChainA Further Revised Model
Long Term Profitability Growth
Innovation
(2)
(1)
Operational Execution
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The Complete Model
Operational Performance Workers
Compensation Productivity Quality Shrinkage
HR Practices
Organizational Commitment
Expenses
Profits
Time 2 Two measures
Time 1
(3-9 months and 9-15 months)
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Organization Commitment and Workers Comp.
34
Organization Commitment and Productivity
35
Organization Commitment and Quality
36
Organization Commitment and Shrinkage
37
Organization Commitment and Operating Expenses
38
Organization Commitment and Pre-Tax Profits
39
HR Practices and Operating Expenses
40
HR Practices and Pre-Tax Profits
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Key Metrics/Shared Practices is Working at SYSCO
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The first metric reviewed is overall workers
compensation
43
The next metric is a detailed breakdown of key
factors driving workers compensation costs.
44
The next step was to communicate tools for
improving safety
Phase II
Preferred Work Methods Strong Hiring
Practices Supy Coaching Skills
Phase I
Safety Manager Steering Committee 10 min. Safety
Mtgs.
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The Result Shifted the curve in Safety!
Annual savings 20 million
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Conclusion

• Driving Competitive Advantage and Business
  Performance Through HR requires
• Basic Framework (VRIO)
• Conceptual People-Value Model
• Metrics tied to the Model
• Data Gathering/Analysis to Prove Value!