I had the opportunity to catch up with Avnet’s Chairman and CEO, Roy Vallee after he gave a keynote presentation at Thunderbird School of Global Management.  Like an alchemist, Roy focused on how to mix the ingredients of employees and customers into to a successful business formula.  Here are some excerpts from my discussion with him.

What was the main point you were conveying to attendees at your Thunderbird presentation? 

Roy Speaking at Thunderbird

I talked about two ways to build a successful business. The first way is the tried and true approach supported by the strategic planning industry. Conventional wisdom says that you start with the company vision, move on to a set of long term objectives, develop strategies, assign owners, review progress quarterly, conduct variance analysis, etc. It’s the classic strategic planning and management way to run a business. 

Then there’s this other concept called the Service Value Chain. It says that engaged employees will create loyal customers which will ultimately result in profitable growth. 

Once we walked through how the Service Value Chain operates, it was easy to make the case for why Avnet uses a balanced approach. We place careful attention on interconnecting the global strategic planning and management process with our global employee engagement and customer loyalty programs.

What were some of the highlights of your discussion regarding employee engagement?

I showed them empirical evidence from third party surveys and research data proving that companies with more highly engaged employees tend to perform to their best and create more satisfied customers, and that profits are higher at companies with more engaged employees. After highlighting these proof points, I shared Avnet’s employee engagement process and the progress that we have made in this area over the past five years.

Can you share with us the highlights of your presentation regarding customer loyalty?

Straight Talk with Roy

My presentation was intentionally set up to show that the collect-measure-analyze-act methodology that we prescribe to with employee engagement is similar for customer loyalty. In this portion of my presentation, I shared another round of the empirical and research information showing that companies with more customer loyalty outperformed their peer groups during both up and down markets. Although we’ve been working on customer loyalty for a shorter amount of time than employee engagement, the audience heard how our customer loyalty program has become a permanent part of our culture and the results that we have achieved so far.

Given the power of customer loyalty and employee engagement, what results is Avnet seeing?

For the past five years, our EPS and Engagement scores have concurrently gone up and to the right. Can I tell you with 100% certainty that these two things are cause and effect? I can’t do that, but I wonder: is this a coincidence?

Given the macro economic conditions that we are facing, do these two initiatives lose their value when things are tight?

Research from Watson Wyatt, a global consulting firm that provides services including HR strategies, indicates that companies with highly engaged employees outperform their competitors by an even wider margin during down markets. I think that when business is bad, for a variety of reasons, it is natural and predicable that employees become more internally focused. If you have more highly engaged employees who are staying externally focused, you have a greater opportunity to outperform because weaker competitors are more distracted. This is exactly what Avnet is doing during this slowdown.

Do you have a personal philosophy on customers or employees that you would like to share with us?

There are a couple of things to keep in mind:

1.  You should always be listening more than talking. We have two ears and one mouth for a reason, and we should use them in that proportion. If you ask, customers and employees will tell you what they believe is important, what they want and what they need.

2.  Be committed to adding value. This step is much easier if you’ve already listened and understand what your customers and employees value.

My experience is that employees and customers will reward you in various ways when you are adding value. To take it one step further, I’ll use the analogy of a bank account. Employees and customers know that you’re not always going to be able to perform at 100% or do everything that they request. But over a long period of time, the question becomes: what is your bank balance? If your deposits to the relationship have exceeded your withdrawals, you will be growing value. But if the withdrawals exceed the deposits, the relationship goes bankrupt.

If you wanted to communicate one thing to employees and customers what would it be?

Avnet is a company that is committed to doing the right things consistently over time. We won’t always be perfect, but we will always strive for perfection. That promise is embedded in our vision statement.

Entering the World of Avnet

In closing, leadership is a critical component of what a company culture represents and Roy has struck a fine balance to create a performance and values culture here at Avnet. He knows his secret mixture accelerates the long term success of our employees, customers, suppliers and shareholders.  If I know Roy, he will continue to refine his mixture and strive for a more perfect formula for even greater success.