Tyson’s Bad Move
It is always interesting when a company does something that just doesn’t make sense. Tyson’s announcement that it was closing its Chicago office is one of those decisions.
The Announcement
Last Wednesday, Tyson put out a press release announcing that it was closing its Chicago office and moving the positions to its global headquarters in Springdale, Arkansas. This affects about 500 people, including a large portion of Tyson’s marketing and innovation teams.
It is a big shift. Tyson has had a major presence in Illinois since it acquired Chicago-based Hillshire Brands in 2014.
The Official Reason
According to Tyson, the move is to accelerate innovation. In the press release, CEO Donnie King is quoted saying “Bringing our talented corporate team members and businesses together under one roof unlocks greater opportunities to share perspectives and ideas, while also enabling us to act quickly to solve problems and provide the innovative products solutions that our customers deserve and value.”
The official statement is gibberish.
The move won’t bring the team together, for the simple reason that most of the Chicago employees will quit. People used to the vibrant life of Chicago won’t be moving to Springdale, the fourth largest city in Arkansas. It is hard to get talented MBAs to move to the great city of Cincinnati. Springdale? No.
Why
So why did Tyson make this decision? It isn’t because financial results are terribly weak. Tyson had operating income of $3.6 billion in the first 9 months of 2022, up dramatically from 2021. Let’s consider some other options.
To accelerate creativity and innovation
No. Moving to Arkansas is not going to accelerate creativity. When you think of creative places, Springdale doesn’t jump to mind. Creative types live in New York, LA, Chicago, London, Tokyo, Miami and other vibrant cities.
To attract better talent
No. If you put the company in Springdale, you limit your selection of talent. Tyson can now choose from all the business leaders that are open to living in Springdale.
The trend has been just the opposite; in recent years, companies have been moving to urban centers to attract talent. Kimberly-Clark, Kellogg, McDonalds, Whirlpool, Abbott and other firms have all expanded in Chicago.
To shift to a less troubled city
No. Chicago has tax and crime issues, but Tyson isn’t moving to another urban center, like Boeing and Caterpillar recently did. It is moving to Arkansas.
To embrace remote work
No. Tyson isn’t moving to a remote format. Indeed, the company is going the other way; the firm will be expanding and renovating its headquarters building, a clear move to embrace in-person work.
To save money
Yes. This move will save money. That is guaranteed. Many of Tyson’s Chicago employees will quit. Real estate is cheaper in Springdale. Salaries, too, are lower in Arkansas.
The Outlook
Whatever way you look at it, this move suggests that Tyson’s outlook is grim. There are two possible scenarios.
If this is really a move to save money, then it indicates that Tyson is retreating from building brands with innovation and creativity and embracing life as a commodity meat producer focused on efficiency and low costs. This is a reasonable strategic choice, but it is not likely to lead to high margins and growth.
Of course, this might just be a bad decision, likely made by people who enjoy living in Arkansas and think the creative and dynamic business leaders of tomorrow will love that life, too.
If Tyson’s stock wasn’t already down so much this year I would sell.
Housing prices in Chicago vs housing prices in Arkansas? Might that enter into the equation?
I think you missed a potential “Why” in your analysis, Tim. This was always part of Tyson’s master plan.
I worked for Hillshire Brands when Tyson acquired the company. When I heard the news, I told my wife it was a matter of time until they moved everybody to Arkansas.
When Tyson bought Hillshire, the CEO of Tyson was Donnie Smith, and he’d been with the company for 34 years when the deal was announced. When he started at Tyson, the company was essentially a family-run business from Arkansas (Don Tyson was CEO). They said all of the right things at the time, but I don’t think they ever really embraced the diverse, urban team Hillshire Brands had assembled (largely by design, after being spun off by Sara Lee and moving its HQ to downtown Chicago).
In an incredibly surprising move, Chicago-based (and Kellogg MBA) Tom Hayes was selected to succeed Donnie Smith. It didn’t go well. Not because Tom Hayes wasn’t good at the job, but because he wasn’t a “fit” for the organization.
When Tom stepped down, he was replaced by Noel White, who had been at Tyson for 37 years (i.e., part of the extended “family” who ran Tyson). After White retired, another Donnie (this time, Donnie Smith) took over. Donnie started at Tyson in 1982, which means he’s now been with the company for 40 years.
Tom Hayes was an outlier. Attempting to embrace a more urban & diverse employee base was an outlier. This is, after all, a publicly-traded, Fortune 100 company that touts “We strive to honor God and be respectful of each other, our customers, and other stakeholders” as one of its core values. The company is incredibly proud of its chaplain corps, which exists to “provide a sense of comfort during high-anxiety situations, while also helping team members celebrate their greatest wins—either at work or at home” (not something I’m looking for from my employer, thanks). It starts every single meal at each of its national sales meetings with a prayer. These things may have resonated with employees from the Deep South, but they tended to turn off those in Chicago. In other words, the relationship was always a rocky one.
I think the powers that be in Arkansas thought the high-priced MBAs in Chicago never really “got” the company, and I believe they used Tom Hayes’ stint as CEO as “proof” of that (he may have even been set up to fail). I think the choice to move everybody down to Arkansas is being used a litmus test of sorts…who’s all in on Tyson vs. who prefers to live in a city like Chicago? In the process, of course, Tyson will lose a lot of talented people…experts in consumer insights, branding, communications, and innovation, among other functions. Said differently, many of the people responsible for improving Tyson’s profit margins from 2.3% (per its 2013 10K) to 6.5% (per its 2021 10K).
My only question is “What happens next?” When Tyson bought Hillshire, Tyson’s plant managers were its P&L owners (which is quite a bit different than any other consumer-focused CPG company, to include Hillshire Brands at the time). Will Tyson shift back to that model? I wouldn’t be surprised.
And that brings me back to a point you’ve made here: attracting talent to Northwest Arkansas is going to be very challenging. Walmart has a much higher profile than Tyson and struggles to do so. That said, I can’t believe the crew that made this decision thinks it will continue to be able to attract talent from MBA programs like Kellogg, Booth, Ross, Fuqua, etc. Instead, I think the company believes it won’t need to…that those people are more trouble that they’re worth and prefers the way things used to be (i.e., a family-run business from Arkansas). As a result, I predict Tyson will spend much more time recruiting at places like the University of Arkansas in the future.
Mr Calkins..have you ever lived in NW Arkansas? I’ve lived there and grew up in Chicago as well. AND I SPENT OVER 20 YEARS W SARA LEE, the parent company of Hillshire Brands. Thus, I know a number of people who have already made the move and have yet to hear a single one complain. In fact, virtually everyone who has moved loves it. NW Arkansas is consistently ranked as one if the top places in the country to live. And Chicago, my home town, is a dying, crime infested shithole with terrible weather, super high taxes, declining property values, and a dried up job market. These people should be thankful they are getting this opportunity to move.
Hi Bill! I’ve heard NW Arkansas is lovely. I grew up in Buffalo, NY and that is a great town, too. Still, these smaller cities are tough when it comes to recruiting.
Love that you took the time to roast a company for relocating the office somewhere you’ve never even been. At least make an effort to understand what’s going on before you author a shitty write up for ckucks
Staying on topic: IF Tyson wasn’t giving such MASSIVELY HORRIBLE CAREER SECURITY & RELOCATION COST OPTIONS to their 500+ employees then the innovative talent they have might consider the move but “Tyson’s 1 Family” basically told everyone they get a paycheck but might become a janitor with no definitive job. “Tyson 1” isn’t putting their money where their mouth has been with this decision. it’s absolutely horrible how they’re treating their career driven talent without a doubt, given the options they provided, Tyson does NOT want their ‘family’ to stay together !!!! Your overzealous diversion about BEAUTIFUL ARKANSAS is a mute point.
That’s an issue that I’m unaware of. Are you an employee? All I know is that the folks who have moved are quite happy.
As someone who has spent several years involved in MBA recruiting efforts for a company located in Central Valley California, I can attest that the pool of talent that would consider moving away from large metro areas is very small and dwindling. I am sure there is a handful of people who swear by the benefits of places like Springdale, AR, but they are in the minority among top talent, in my experience.
With respect, your sample isn’t exactly unbiased.
You’re basically saying, “Of those who were willing to make the move to NW Arkansas, none of them complained.” That’s like saying, “Customers who switched to GIECO saved an average of $700.” Of course, such a statement ignores all of those who didn’t switch, just like yours ignores those who decided NW Arkansas wasn’t for them and, therefore, didn’t make the move.
I’ve spent time in both locations, and I understand the pros and cons associated with each. I would choose Chicago every time. That’s not to say I’m right and you’re wrong; it’s simply proof that people are motivated by different things.
I work with hundreds of graduate students every year. That population–the future employees of corporations like Tyson–generally prefer urban centers like Chicago to places like Springdale or Bentonville. To tell the author he’s wrong because your anecdotal evidence (and stance on Chicago as a city) suggests otherwise is a pretty big reach.
As a former Tyson employee, this is 100% a power move by the chairman. He’s a petulant child who used to throw a fit if anyone dare insinuate that Chicago was Tyson’s headquarters. He’s costing 500+ people their livelihood for the sake of his fragile ego.
Couldn’t agree more. Terrible decision which will harm the company.
No chicken nuggets for you, Tim!
Hear hear! Not the worst decision in corporate history but I suggest they move to Seoul for innovation and creativity, the land of Squid Game, BTS, Samsung, LG
Hi Professor Calkins,
I gleefully disagree. You note “Tyson can now choose from all the business leaders that are open to living in Springdale” implying that it would be a small pool. But Springdale is less than 20 miles from Bentonville, Wal-Mart’s HQ. If you want to attract top retail talent – and retail is Tyson’s core customer – being near the HQ of the worlds largest brick and mortar retailer is a pretty good place to be. Consider that executives from all the major brand companies in relocate there to work with Walmart, and many stay (or want to stay) because of quality of life is so high. They are well compensated, cost of living is low, schools are good, and there is a thriving cultural and dining scene, plus great outdoor recreation nearby. I suspect that many from the Chicago team will take the move. You want creativity, hire an agency in the city. You want to build a more cohesive team, bring them to Springdale.
For the record, I love the city of Chicago, lived there for 5-years, and I do not live in Arkansas.
Regards,
Bill
Hi Bill–The Walmart link is indeed a huge plus. I still suspect that recruiting to that area will be a challenge!
You’re correct on recruiting. My helped with recruiting college grads for JB Hunt and no one knows NWA or thinks it’s Little Rock. Most vendors have staff stay for 3 years.
Any company who makes type of announcement via email to their greatest resource is…well…shady.
Here’s what we know.
1. The majority of employees from IA/IL will not move.
2. The loss of jobs in IA/SD/NE is devastating.
3. Some positions will become redundant = less employees.
4. Tyson will lose thousands of years of employee experience.
Are they getting ready to sell?
Another sociopath agribusiness CEO who wants everyone in his backyard so he can feel like a king, like when ConAgra’s CEO moved its HQ from Omaha to Chicago. Unlike the wealthy CEO, the people moving to Arkansas will be met with a lack of available housing in the area and for those buying a home will be met with high mortgage interest rates.
Bravo Professor Calkins! Well said and simply summarized.
Thanks Kyle!