HR proves its value: At SYSCO, subsidiary companies only buy HR programs that achieve results. That means HR has to figure out what they need—and what will affect the bottom line

Workforce, March, 2002 by Patrick J. Kiger

For evidence that SYSCO Corporation's innovative Virtual Human Resource Center is making an impact, consider this. It motivated Jim Hope, president of a Kansas City subsidiary of SYSCO, to station himself in the warehouse one morning before dawn, so that he could give a presentation on stock options to the company's truck drivers. "We did a workplace-climate survey," Hope says, "and one of the things it showed was that employees wanted to see top management in person more."

Undoubtedly, there are companies where regional management might gripe at having to implement initiatives flung down from corporate headquarters. But SYSCO--the largest food-services company in North America, with $22 billion in annual revenues--isn't one of them. One reason is simple: regional executives such as Hope are free to accept or reject the programs pitched by the Virtual Resource Center. The three-year-old program uses a "market-driven" approach to HR, in which SYSCO's corporate HR professionals have to convince regional subsidiaries to "buy" its initiatives--and to pay for them.

"We get to choose what we think will help us," Hope says. All the same, he and other regional managers--as well as SYSCO's top management--are enthusiastic about the results that the Virtual Resource Center's unorthodox approach has produced. Since the center's inception in 1998, for example, SYSCO has experienced a 30 percent reduction in workers' compensation claims--a $10 million annual savings, the company estimates. It also reports a 20 percent improvement in the retention rate for tough-to-keep night warehouse employees, at an estimated yearly cost-savings of about $15 million.

Corporate management is also impressed by HR's contribution to bottom-line performance at SYSCO, which in its most recent quarter posted a 6 percent increase in sales and a 14 percent increase in earnings per share over the previous year, despite a faltering economy. "I really feel like HR has helped our profits," says SYSCO president and chief operating officer Richard Schnieders.

SYSCO isn't the kind of business that would lend itself to a conventional top-down approach to HR. The company's 43,000 employees work to supply food and other products to more than 370,000 establishments, ranging from fancy restaurants and posh hotels to corner delis and hospital cafeterias. In addition to selling food and beverages, the firm supplies items such as napkins and kitchen equipment, and provides consulting advice about menus and food safety issues. SYSCO is able to serve the diverse needs of its vast clientele by allowing the regional managements of its more than 120 far-flung business units to operate with a high degree of autonomy.

Over the years, the HR department at SYSCO's Houston headquarters has developed an approach that mimics the corporate culture. Corporate HR functions as an entrepreneurial entity, with the regional SYSCO subsidiaries acting as its customers. HR has to sell every initiative it develops to the regional companies, which generally are free to accept a particular program--and fund it out of their own regional budgets-- or reject it.

The system puts pressure on corporate HR to figure out which programs and services the subsidiaries really need, and to demonstrate how those initiatives will affect the subsidiaries' bottom line. That may sound like a tough sale, but SYSCO's HR team has become adept at closing the deal, by providing information that shows how its programs can enhance a regional subsidiary's bottom line. They make innovative use of work-climate surveys, correlating the findings to data on customer satisfaction and business performance. And they've developed a company-wide intranet database that enables the subsidiaries' executives to see which HR programs are achieving results at other company facilities.

"SYSCO has taken a very traditional approach to HR and turned it absolutely upside down," says Patrick Wright, director at the Center for Advanced HR Studies at Cornell University which has assisted SYSCO as a consultant. With the creation of the Virtual Resource Center, the business has achieved demonstrable results. Workforce congratulates SYSCO on its HR accomplishments, and recognizes the company as this year's Optimas Award winner for General Excellence.

Creating and selling an HR "brand"

SYSCO's corporate and regional HR group has evolved into a collaborative, innovative team. For most of the company's 30-year history, it wasn't so innovative. But as the company grew, its thinking about corporate HR did too. SYSCO wanted to provide services to its employees and help them improve their performance. But the company didn't want to force them on the local subsidiaries, whose managements traditionally had been free to run things as they saw fit. That independence, after all, had been a crucial element of SYSCO's success at serving markets large and small across the continent.

The company brought in Ken Carrig, a former HR executive for Continental Airlines and PepsiCo, to oversee the delicate task of creating a new corporate HR program. "Early on, I sat down with [SYSCO founder] John Baugh, to learn his thoughts and values," Carrig recalls. "I followed up with a meeting with our current executive team. From those conversations, it was obvious to me that the SYSCO culture was intensely entrepreneurial, and that HR had to find a way to complement that."