Retail Leader of the Year: Joe DePinto of 7-Eleven

Read all about why CSP has chosen DePinto as its 2011 Retail Leader of the Year.

By
Angel Abcede, Senior Editor/Content Development Coordinator

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As s Joe DePinto was going through airport security one day, a TSA agent noticed the 7-Eleven logo on his shirt and asked him, “Have you seen that show ‘Undercover Boss?’ ”

DePinto, president and CEO of 7-Eleven and one of last year’s debut subjects for the CBS reality series, smiled and said yes. The woman went on about the show—clueless, simply and utterly.

A step behind, his wife, Ingrid, having taken in the entire exchange, interjected, “You know, he was the Undercover Boss.”

The agent looked to Joe, paused, and then whispered to Ingrid, “They made him look heavier on the show.”

Joe DePinto laughs when he tells that story, knowing the spotlight burns as much as it shines.

Truth is, DePinto is pretty fit. It’s no wonder, though, that Hollywood starlets have to be stick-thin just to look normal. But what cameras can’t distort is this guy’s sincerity. As a close industry colleague says, “There are no secrets with Joe.” His personable, affable style runs almost contrary to someone in charge of the largest convenience-store chain in the world. He’s not overly tall or statuesque. He has cheeks that grandmas want to pinch and a voice that is congenial, not domineering. And yet clearly, the man CSP has named its 2011 Retail Leader of the Year has made a monumental impact.

In just six years at the helm, this West Point grad and former Army serviceman has successfully launched initiatives that are literally transforming an iconic brand, strengthening both 7-Eleven’s portfolio and balance sheet:

Financial Turnaround: A focus on finances has greatly enhanced the chain’s capital ability, with Moody’s recently increasing the company’s credit rating from Baa3 (in December 2005) to Baa1 and Standard & Poor’s from A to AA-.

Culture Change: Whatever day-today mantras were in place prior to DePinto are gone. The new “servant leadership” paradigm has been a source of physical and psychological transformation, influencing everything from corporate response time to potato chips at the store.

Strategic Vision: If culture change greased the wheels, strategic direction laid the track. DePinto’s leadership led to a tangible plan that both sets a course and fuels momentum.

Supply Chain: What’s in the stores, and how and when all that stuff gets there, is also morphing. Proprietary goods, wine, sandwiches and pastries are today helping 7-Eleven reintroduce itself to a new generation. Indeed, some 7-Eleven execs now call it the “demand chain,” impelling suppliers to respond to the consumers’ wants.

Aggressive Consolidation: Buoyed by its newfound fiscal strength, 7-Eleven has made acquisitions integral to its rebirth, with more than 400 stores bought in Florida, Texas and the Northeast in recent months. Not since 1986 has 7-Eleven been this aggressive, company officials acknowledge.

Agreeably, these milestones define a retail leader. But the dichotomy remains. On one hand, DePinto is a visionary executive, with military credentials and a string of high-profile positions in business. Then there’s “Danny,” the late-shift persona DePinto took on in “Undercover Boss”—fighting a losing battle with facial hair and a yawn building since midnight. CBS asked DePinto to be himself, so inside DePinto there’s got to be a little bit of Danny.

So who is this guy? And more importantly, what emanates from someone to effect change of this magnitude?

A hint comes from Darren Rebelez, 7-Eleven’s executive vice president and COO. “Part of servant leadership is providing what [franchisees and field staff] need, which is not necessarily what they want,” he says. “Improving store standards takes a lot of hard work. It’s easier to maintain the status quo than to change. So we provide leadership, set standards, have a friendly relationship with franchisees, but nevertheless, a poor store isn’t an acceptable outcome.”

So what appears unsaid in the servant leadership CliffsNotes—and something DePinto seems adamant to uphold—ties back to personal responsibility. And quite possibly, it took an everyman, an average Joe, born and raised with Midwest sensibilities of fair play and teamwork, to help a vast network of executives, vendors, franchisees, managers and cashiers to think differently.

It’s a hypothesis, in any case. The truth is difficult to pinpoint.

But take the current triumphs and roll back the clock. Six years ago, the Dallas-based behemoth with more than 8,900 stores in North America and above 43,700 worldwide was in financial strain. It had a nonresponsive, Ma Bell culture; customers were becoming increasingly less satisfied with the product mix; and the economy was about to hit the skids.

Then DePinto’s phone rang.

Game Start

At the time, DePinto was president of GameStop Inc., a video gaming and supply retailer based in Grapevine, Texas, with 6,500 stores worldwide. He had climbed the executive ranks through businesses such as Thorntons Inc., Louisville, Ky.; and PepsiCo Inc., Purchase, N.Y. This is not to preclude his time with Dallas-based 7-Eleven, having been its vice president of operations from 2003 to 2005, and its division vice president the year prior.

After getting the call from 7-Eleven, DePinto recalls, “I was in a comfortable spot, doing interesting stuff with Game- Stop, but the thing that was so intriguing was I knew we could change 7-Eleven for the better.”

That assurance came from somewhere.

Born in Chicago in 1962, the eldest of four to parents John and Ann, Joe DePinto grew up in a stable, middle-class environment with his father, a dispatcher for Alberto-Culver of Melrose Park, Ill., for about 35 years; and his mother, who worked as a hair stylist and a shop owner. Stories such as that of a doting grandmother, Josephine, who taught him how to play cards, and a young Joe caring for an abandoned robin’s egg until it hatched, sketch a childhood of support, care and self-reliance.

Baseball and hockey were fertile training grounds on his path to leadership, with his coaches his first formal role models.

DePinto remembers growing up in Little League from age 8 to 12, starting as one of the runts yet eventually leading the team.

DePinto learned a tough lesson in fairness while on his Junior hockey team, says his former coach, Peter Roche. With his sights already on West Point, DePinto was elated to learn a scout from the school would be at one of his games. Unfortunately, on game day, the scout could stay for only the first of the day’s two games. But Roche needed his best goalie, DePinto, for the tougher second match. The coach stuck to his decision, and the scout did leave before the second game.

“It was a sellout crowd and Joe had the game of his life,” Roche recalls. “We needed him the entire game. It went into overtime and we won 4-3.” Joe’s performance earned him an MVP nod.

“All I can assume is that his performance and that [MVP] trophy alone convinced West Point that he was the guy they wanted,” Roche says.

West Point would undoubtedly defi ne DePinto. After his graduation, when the family was returning from the ceremony to his campus home, his brother David remembers, “Joe had his diploma. He kind of pointed it at me. ... ‘This represents a lot of hard work,’ he said.”

Those familiar with Joe DePinto during his West Point days recall someone who thrived in that environment, learning how to take orders at fi rst and then setting high standards for underclassmen.

Yet while trained under a traditional military hierarchy, DePinto embraced the military’s underlying ethics of teamwork, commanders supporting those in his unit, and the motto of “no man left behind.”

Today, DePinto fi rmly believes what he learned in the military corresponds directly with servant leadership. “There are different styles and different ways people react, different buttons to push to motivate people,” he says. Ultimately, he says, quoting former President Eisenhower, “Leadership is the art of getting someone else to do something you want done because they want to do it.”

Leading by Serving

DePinto often says servant leadership means “turning the pyramid upside down.” So with top-down management out, what’s in is a structure in which corporate is meant to support those in the field.

The way he describes it, one store out of thousands will call in with a problem, major or minor considering the big picture. In the past, corporate may have been slow to act. “But to that store, it’s a big problem,” DePinto says. “So we have to respond like it is.”

Farazana Mannan, who runs a 7-Eleven store in DePinto’s current backyard of Southlake, Texas, agrees that a “big, big change” has occurred: “I feel like people are listening a little more closely now that he took over.”

Change wasn’t easy, according to Rebelez. “A large organization rarely moves quickly,” he says. “There’s a lot of inertia. ... It takes a lot of energy to change.”

The culture shift needed an infrastructure of training, incentives and supervision, a process that objectively measures people’s performance not only by the result, but also how staff achieved those results. So the metrics included rewarding behavior they believe reflected servantleadership values.

New faces accompanied the culture change; among them were Rebelez and Jesus Delgado-Jenkins, the company’s senior vice president of merchandising, marketing and logistics. Both West Point graduates also, the two share similar sentiments regarding leadership style. “Joe gets good people in and leaves them alone,” Rebelez says, a point echoed by other executives in the company who are more likely to extol DePinto’s overall managerial style than to cite flashes of genius.

DePinto himself would concur to a degree. “You have times when the organization doesn’t need a lot of push—where people are self-motivated,” he says. “Other times you have to get engaged.”

Cleaning Financial House

Though a successful shift in culture may have provided a psychological boost, 7-Eleven’s current success stands on a solid fiscal foundation because of DePinto and his team. At the dawn of the recession in 2007, he sounded the alarm.

“We thought, wow, it’s tough now and it’s going to get tougher really fast,” DePinto says.

Crediting CFO Stan Reynolds, DePinto and his team huddled for what he calls “tough decisions,” the charge to reduce overhead and boost income. “We had to be efficient, productive and improve overall margin and profitability,” he says.

Cuts occurred internally and externally, with jobs and processes scrutinized and streamlined. The moves also included environmental efficiency and installing LED lighting throughout the chain; re-evaluating the supply chain, and stepping up data-collection and inventoryimprovement efforts; and expanding high-margin items with foodservice and proprietary goods.

In the end, the company turned out a “clean” balance sheet, sharply cutting debt and positioning itself to not only ride out the recession, but also grow at a record pace.

In the past five years or so of DePinto’s tenure as CEO, Reynolds says, the company has experienced double-digit annualized growth in net earnings, which was fueled by the more than 20% growth in the chain’s store base and its continuing 14-year trend of positive same-store merchandise sales growth.

“At Joe’s direction,” Reynolds says. “7-Eleven has also undertaken a number of projects over recent years that have been focused on reducing costs, driving earnings and restructuring our organization to increase efficiency and effectiveness.”

Reynolds cites the improvements in its ratings from Moody’s and Standard & Poor’s as further validation of the company’s financial efforts.

Along with the financial piece, DePinto ushered in a strategic plan meant to provide concrete direction moving forward. In the past, “it was plan du jour,” says one executive.

“We have an excellent, excellent strategy map,” says Delgado-Jenkins, citing how it ties to merchandising, franchising, real estate and company culture. “That strategy map grounds us and helps each area of the company understand its role within the broader corporate strategy.”

Rebelez agrees that much of the strategy development and culture-change movements go back to DePinto, but ultimately, these decisions fit in well with a franchised operation. “Franchising is suited to servant leadership,” Rebelez says. “It’s about co-prosperity. We split gross profits vs. taking sales off the top, so we’re … linked” to their success.

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