Texas Leadership: Charles Butt
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Texas Leadership: Charles Butt
Charles Kelley
Webster University
Texas Leadership: Charles Butt
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Abstract
In 1971, Charles Butt assumed control of the family owned grocery business. When Butt
started managing the day to day operations of H.E.B., the company earned $250 million the first
year of his tenure. H.E.B. is a Texas legacy. It has been in business for 105 years and in 2010,
the company had earned $16 billion in sales from 329 stores located in South Texas and Mexico.
Under Butt’s control, H.E.B. expanded in sales, developed new store designs, created its own
private label, and has managed to keep H.E.B. privately owned and close to its roots. Of course,
Butt would have to contend with a predatory pricing law suit filed against H.E.B. and the
emergence of Wal-Mart but he was able to drive the chain to control 55% of the grocery business
in San Antonio even with other competitors such as the Defense Commissary Agency, a grocery
store for military families. Butt’s dedication to the family business has made H.E.B. synonymous
with South Texas.
Texas Leadership: Charles Butt
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Texas Leadership: Charles Butt
When asked to give an example of a leader, society tends to look towards the military,
political venues, massive corporations, and even the sports world. Hardly anyone stops and
thinks locally. Not all leaders need to be on the nightly news or on the front page of a national
newspaper. In the state of Texas there is a man who personifies the word leader. In 1971,
Charles Butt took control of the family grocery store business, H.E.B. H.E.B. is a south Texas
landmark. The company has been in business for over 105 years and is privately-owned. This
paper will discuss Charles Butt as a leader focusing on the seven core competencies and his
leadership style.
One could look at Butt’s self competency two ways: Butt improved himself and
associated the family business as a part of him-self. Knowing that he would work in the family
business, Butt earned a BBA from Wharton School of Business, University of Pennsylvania and
a Harvard MBA. The simple fact that he attended these two prestigious universities to run a
home grown operation is fact that he wanted to better his education and thus him-self. If career
success or failure is determined by the individual and not the people, then there is no doubt that
H.E.B.’s success is due to Butt’s leadership.
It is plain and simple to state that H.E.B. is a part of Butt as Butt is a part of H.E.B. Butt
has remained true to the standards and practices set forth by the founder of H.E.B., his
grandmother. Florence Butt started the tradition of giving fiver percent of pre-taxed sales to
charity. This practice is alive today thanks to Charles.
Charles Butt took control of H.E.B. in 1971. Times and attitudes about diversity have
definitely changed since then. According to Hellriegel and Slocum (2011), Career success or
failure is related a person’s self-concept, goals, and competencies” (p. 13). Butt’s commitment to
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diversity is transparent in H.E.B.’s diversity policy. The company’s commitment to diversity is
supported by their sponsorship and volunteering at cultural events such as Martin Luther King
Day march and Juneteenth celebration. The company also honors month-long observances such
as Black History Month, Women’s History Month, and American Indian Heritage Month (HEB
2011). H.E.B. also encourages women and minority-owned businesses to apply to the Supplier
Diversity Program. Diversity is also promoted in the workforce, marketplace, and workplace. It
is understood that the customers of H.E.B. come from varied cultural and ethnical backgrounds
and the company tries to employ a diverse workforce to provide a better service and product to
its customer base. It’s important to show that H.E.B. doesn’t have employees, they are partners.
Texas’ population is very diverse and consisting of people of German, Asian, and
Mexican Heritages, just to name a few. The Mexican heritage is huge in South Texas, especially
the San Antonio area. Butt’s policies in H.E.B. embrace this rising demographic. A visit in one
of the grocery stores, a customer will find bi-lingual partners to help customers feel at ease.
There is a vast Mexican section to include food items to candles. Butt also made the decision to
cross the border into Mexico and also created Mi Tienda, a Hispanic oriented grocery store. The
Mexican heritage isn’t the only culture embraced. All new H.E.B. grocery stores have employees
making fresh sushi throughout the day. Butt has the vision to understand that to be successful, he
and his chain need to understand different cultures and be able to supply some fundamental
needs for the cultures. So while his competitors try to find their niche in South Texas, H.E.B. is
already built across the border into Mexico and his stores offer German wines, prayer candles,
sushi, and even fresh made tortillas.
Since Butt’s early days with H.E.B, he instilled the motto of “one company, one team.”
By being privately owned, the partners earn a voice with H.E.B. It has been reported that
Texas Leadership: Charles Butt
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company has empowered the partners by training to make their own decisions and give the
partners autonomy. This team effort is visible and is understood because Butt believes that
people are first. Of course every grocery store believes that customers should come first but
H.E.B. also places value on their diverse group of partners. With this team dynamic in place, it is
obvious to assume that communication flows freely. This statement couldn’t be any truer. Butt
has always had an “open-door” policy where partners and even customers can stop by to voice
concerns, criticisms, and even just to talk. There are other chains of communication such as
annual leadership meetings; biannual meetings at every work location; quarterly financial
updates; internal newsletters, Inside H-E-B; weekly e-mail news updates; and periodic regional
leadership exchange sessions.
The question of ethics is always a tricky issue. For the most part we as humans know
what’s right versus what’s wrong. But sometimes ethics is not that clear. Is it ethical for Apple to
create the Ipod and bear the risks of creating a market for the MP3, just to let the MP3 companies
come in make modifications to their product just to get a piece of the pie? In 1982, Butt and
H.E.B. were hit with a predatory pricing lawsuit filed by Deluxe Inc. and Handy Andy. There
was also a F.T.C. complaint filed by a local grocers’ association. The suit claimed that H.E.B.
was dropping prices too low and it was also stated that these extremely low prices were used to
scare off national grocery chains looking to build in South Texas, such as Kroger. Kroger had
planned on building twenty stores but ended at fourteen as H.E.B.’s control grew. It was
estimated that H.E.B.’s share of San Antonio’s business went up two percent in one year and
climb to 50% between 1980 through 1982. The suit also claimed that H.E.B. was selling 60% of
their product below costs and the only way to recoup the money was to raise prices in H.E.Bs. in
smaller towns where there was no competition. Yes, predatory pricing is illegal and it would be
Texas Leadership: Charles Butt
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unethical for a store to participate in just for the sakes of keeping an advantage against any
outside competition. As the old story goes, Butt and H.E.B. settled for $6.5 million to Deluxe
Inc. (Centero) and an undisclosed amount to Handy Andy. Throughout the ordeal, H.E.B.
claimed their innocence.
Charles Butt’s change competency is phenomenal. Butt’s leadership of the family
business has been nothing less than visionary. Butt was able to change the face of H.E.B without
changing the service. Under Butt’s control, H.E.B. morphed additional stores. Butt had the
mindset that not everybody wanted to shop for low cost, everyday items. Central Market is a
high-end grocery store with gourmet lines, expensive wines, and a multi-cultural bakery. Mi
Tienda caters to the rising Mexican population in Texas. To ensure that Wal Mart couldn’t take
control from H.E.B., Butt also devised H.E.B. Plus. The Plus stores are one-stop shop grocery
stores. Butt also realized the additional sales by offering a private label. These private label
products are often considered generic and are usually offered at a reduced price from the
category leaders.
Authentic leaders have a number of attributes in common, but the two that are a must are
insight and innovation. Butt has the insight to see that the United States is changing. He is
keeping the old family tradition of charity alive. Butt has created scholarships for students and
has often donated money to museums and other causes. Butt has always been a supporter of the
GOP but he and another political backer have help kill the “sanctuary city” bill. This bill would
allow Texas law enforcement to question nationality and citizenship. Is this a shrewd maneuver
to sway the Hispanic vote for the right even though most conservative Hispanics supported the
bill?
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There is no doubt that Charles Butt is passionate about H.E.B. and the welfare of South
Texas. He took H.E.B. from a small chain of grocery stores to a bi-country force. H.E.B. is a
giant in the grocery world considering that Forbes listed it as the #11 privately owned business in
the United States, and it is only in South Texas and Northern Mexico. Butt has continued family
traditions and stayed true to the roots while expanding its customer base by offering what is
wanted. Butt is an innovator, a humanitarian, and a true Texan. Because of his transformational
leadership, H.E.B. will be a force in the grocery world for years to come. As for his referent
power, Charles Butt will go down a Texas icon in the Texas history books.
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