David Novak 0:04 

Welcome to How leaders lead where every week you get to listen in while I interview some of the very best leaders in the world, I break down the key learning so that by the end of the episode, you'll have something simple you can apply as you develop into a better leader. That's what this podcast is all about. You know, one of the trickiest parts of being a leader is taking lots of different people and departments and getting everybody to actually cooperate and work together. I mean, let's be honest, just because people work for the same company doesn't mean they're on the same team. If you can relate to that, then boy, have I got the perfect leader for you to learn from today. Joe Scarlett is the former CEO of Tractor Supply Company, a retail chain that has been growing like crazy for a couple of decades now. And as you're about to hear a big reason for their success is how intentional they've been to get every team member on the same page, cooperating towards the same goals. If you want to unify your team, believe me, you're about to get a lot of practical ideas to do just that. So let's just jump in right now. Here's my conversation with my good friend head soon to be yours, Joe Scarlett.

You know, I always like to go back to the beginning, you know, what's the story from your childhood that shaped the kind of leader you are today.

Joe Scarlett 1:27 

I grew up in New Jersey, and my dad worked in on Wall Street. And he would he would be in the city every day. And he'd come home at night. And he would very often be listening to CEOs and CFOs talk about their company and talk about their business strategy. And he'd share stories with us at night when he came home. And that sort of got me interested in business and interested in leadership. He would talk about not only about the business strategy, he would also talk about the culture. Anyway, he would talk about what he thought of the individual and stuff. Sometimes he'd say, I didn't trust that guy. And it was one situation in which that guy wound up in jail, five or six years later,

David Novak 2:03 

What's the best advice your dad ever gave you?

Joe Scarlett 2:06 

The very best advice they gave me. There are two things in life that you never need to be cheap about. One are lawyers, you get a cheap lawyer, you might go to jail. And the other is doctors, you get a bad doctor, you might die. So always get the best doctors and lawyers.

David Novak 2:20 

That's great advice. You know, I understand you work with the legendary Bernie Marcus, who we happen to do a podcast with earlier, before he found at Home Depot. What's a big insight you learn from Bernie over the years,

Joe Scarlett 2:34 

Bernie was a good leader all around, he was very focused on on the people he worked with, the company that we work together at was a company that was not doing well at all, it was very poorly managed. And Bernie was one of the fellows and top management that we thought for those of us in middle management, thought, Bernie, if you can ever get that job, this business is going to take off. If we had gotten there, we might have been the Walmart of the world instead of Walmart. But unfortunately, that didn't work out. The company didn't work well, and Bernie left. And several years later, he found at Home Depot. You

David Novak 3:05 

know, I've listened to a few of your interviews. And you know, when you talk about this company that wasn't doing well, you never mentioned the name. I've never heard you mentioned that name. And I was just wondering, what is it about you that doesn't want to denigrate a company that wasn't doing so well.

Joe Scarlett 3:23 

It's strictly because nobody's ever heard of the name, I'd be happy to tell you. The name of the company was two guys from Harrison. And they were two brothers who started selling appliances during or at the end of the Second World War, and eventually evolved into a huge discount store chain called two guys. It used to be two guys from Harrison, and they change them down to just two guys.

David Novak 3:42 

Well two guys could have been the Walmart, if you and Bernie Marcus would have taken it forward. Now what brought you to Tractor Supply?

Unknown Speaker 3:49 

Burning, I

Joe Scarlett 3:51 

worked for the same company and the company was in trouble. And I started looking around and our reputation in the New York metropolitan area was not good. It was hard to get a job if if you've been working at two guys. These people from Tractor Supply contacted me and wanted to talk to me about about going to work for them. And I wound up doing that I should back up here a little bit. And when I was working for two guys, most of my time was in store operations, running departments running stores, supervising stores. And then the last two years of my career. The chairman came in one day and he said Joe, I just fired the guy running the personnel department. And I want you to become our personnel director. On Monday morning. I worked in personnel for two years. And it was a great learning experience for me that helped me develop my skills as a leader. When you're an operations you can tell people what to do when you're in personnel. You got to sell your ideas, you got to convince people of what to do. And it helped me grow up tremendously. And then I went to work for Tractor Supply as the vice president of personnel, which didn't last very long. I moved up to other jobs that right after that, as

David Novak 4:51 

I understand that you were one of several VPs and you got tapped to be the number two person in the company. What was it about your leadership? You think that guy He that nod and got you into that number two spot,

Joe Scarlett 5:03 

the fellow who hired me. Very nice, nice man. He just didn't have a good strategy for running the business. He got fired. And we were half a dozen vice presidents like myself together. And the parent company brought in a senior executive named Tom Hennessy, 12 or 14 years older than I was. And he was there as a caretaker. And I decided I had nothing to lose by working with him. And I worked closely with him. He was a good businessman, I understood retailing. So we worked together on a number of different projects. And then he decided he really liked his business. And he went back to the parent company, he said, you know, working for you for 25 years, I want to be the CEO of Tractor Supply. And the parent company said you are, and he came back to Nashville. And he mapped out a plan for the company said, I'm going to, I'm now the CEO. And I personally, I'm Tom, I'm going to manage operations, merchandising, and real estate. And I'm creating a new position of senior vice president responsible for everything else. And I'm thinking to myself, where are they going to find this guy, and he looked around, he said, Joe, that's you. So I started off in a whole different part of the world, I had to learn, learn all about accounting, I had to learn all about data processing, marketing, things I didn't, I knew very little about and but it worked out very well, we developed a tremendous partnership. The reason I got the job, as opposed to the other four or five VPS is that I was helping him and working with him and the others were very loyal to the previous president, and sort of steered clear of him to a great degree. The advice there that I was giving everybody is, no matter what you think your boss to help your boss be successful, you have nothing to lose and everything to gain.

David Novak 6:37 

When you take over a function where you don't really you're not the subject matter expert, you know, what do you think is the critical thing you need to learn so that you can be effective in that role? Knowing that many you know the people that work for you actually know the subject better than you or usually do? Well, I

Joe Scarlett 6:54 

think the first thing you have to do is to get to know your people, become partners with them, listen to them every way you can, and figure out what the measures of success are in these areas. What is it to really take takes to be successful. If you work with your people, and listen to your people, you can learn about the business. If you figure out what what's most important, you can give them the best possible direction. You

David Novak 7:14 

know, you and a few others eventually go on and buy the company. Walk us through that decision, Joe, after

Joe Scarlett 7:21 

Tom Hennessy. And I and others took over running a company in 1981, we were losing money at 81 and 82, we were beginning to make a profit. But at the beginning of 1982, the the big boys from the parent company came in and they said and this is almost a quote, they said boys, we love you, but you're for sale. And we spent the year trying to be sold both by an outside organization and ourselves. And finally, at the end of the year, after the five of us, begged, borrowed and stole everything we could, which wasn't much. We had a little equity to put up. And then we hooked up with three wealthy guys from New York City. Well, that was what put us into buying the company, December 28 1982. So we started off 1983 running, owning our own company, when we were beginning to make a profit then so things were looking pretty good. Now a little story about the three fellas that loaned us the money from New York. We're also the fellas that financed and ran the Woodstock Rock Festival. So our board meetings since we were making money and going in the right direction, our board meeting, we'd spent, you know, two hours on the business. And then we spent two hours listening to Woodstock stories. And it was a great partnership and a great friendship. And I'm still friends with the two of those three fellows today. The one is passed away.

David Novak 8:30 

What did you learn? That's the most interesting thing about the leadership it took to put that rock festival on

Joe Scarlett 8:36 

the biggest mistake they made was under estimating the size of the audience. They were expecting 30,000 and got 300,000 They just completely underestimated things. And they did the best they could in that situation. The biggest issue they were dealing with were drug overdoses. And then how do they get people to safety quickly, they found ways to rent helicopters to get people out in the worst possible situations. And they lost their shirt on that but they made a ton of money with us.

David Novak 9:05 

You know, it sounds like you had a leveraged buyout basically, you know you take on all this debt the five of you go in there, you know what what is that like having the pressure of that debt show?

Joe Scarlett 9:18 

It's tough. I mean, you know it's there. And in our business springtime is our like our Christmas time, because so much goes on in the spring and the planting season and lawn mowing and so many other things. During the first two springs, we ran out of money, we couldn't pay the bills. And what we did is we talked to our suppliers. We said listen, we're going to be two months late paying you we're going to be three months late paying you we're going to be six weeks late Pena, we talked to them very professional way. And only one supplier out of all the hundreds of suppliers we had cut us off at all everybody else stuck with us. They believed in us and stay with us and many of those suppliers are still with us today.

David Novak 9:51 

So give us a real short summary of what you'd say to these guys that to get them to believe that you would actually pay him and be up hire someday.

Joe Scarlett 10:00 

We talked about how we were rebuilding the company, how much effort we were putting into helping and training our people, and developing the right people. And the fact that we're focusing on a little bit different customer, they just came around to believe in us because we were telling the truth. And we were honest about it, we were straightforward. One of the things my predecessor used to say all the time is, we're a no secrets company. We don't keep secrets from anybody. We work closely with everybody.

David Novak 10:23 

Tell us when you became CEO, and what that was like?

Joe Scarlett 10:26 

Well, there's a history that worked up to that. I think I told you that Tom Hennessy may be number two person in the company. And while after that, he made me the executive vice president, and then then it became president and then finally became CEO. And it was, Tom slowly over time, stepped down what Tom was good at, is he delegated responsibility. In fact, I had been the CEO longer than than my title shows me being the CEO, because he was sitting back and letting me run this and run that and pretty much run the company for a long time. So I, I didn't jump into the CEO role overnight. I evolved into it over time. And it was very, it was a very smooth transition. No dramatics involved.

David Novak 11:03 

What would you say? Joe? is the key to getting people on your team to work together so you can really grow a business like you did? Well,

Joe Scarlett 11:12 

that's a question has a lot of answers to it, first of all, is about selecting the right people in the first place. It's about sharing with people, it's about putting people on the right path, it's about making sure people understand where we're going, what we believe in, talking a lot about the values of the organization, continually working on the skill base. Additionally, working on, we spent a lot of time on this, working on the development of our people as we went forward. For example, with hundreds of stores, you're forever going to have some degree of growth and potential turnover. And we work very hard to analyze groups of people throughout the company all the time, you know, these 10 stores, these three are doing a great job, these two have potential to move up the ladder. So let's give them other experiences, put them on other programs, give them a new store, keep continual process of, of developing people so that everybody can see where the future is. We worked very hard at that. And tried always, not always often tried to promote from within, because it just gives you better results. You

David Novak 12:10 

know, I know you're a big believer admission what? What was your mission?

Joe Scarlett 12:13 

Our mission is to work hard and have fun and make money by providing legendary service and great products at everyday low prices.

David Novak 12:20 

Now, many people say have fun. I mean, what why did you put that in the mission statement 90%

Joe Scarlett 12:25 

of our employees or team members, as we call them today, are customer facing, we want people to feel good about themselves. There's no downside to having fun, you make people feel good about themselves, they'll stay with you longer, they'll deal with customers more effectively. It's what we do work hard, have fun and make money. The make money part is also it's not about the company making money necessarily, although that's an essential component. But everybody in our organization is on a performance based incentive plan of one sort or another. And the more money we're paying out in incentives throughout the company, the better I was doing, that

David Novak 12:59 

makes a lot of sense. And you did something that was pretty unique on that front, because you you not only had incentives, but for the store managers, I believe you had monthly incentives. What drove you to that? And what learning did you get that you think could be a value to others.

Joe Scarlett 13:15 

That Incentive Program was started in 1981 by my predecessor Tom Hennessy, it goes like this every month, when you hit the sales plan, we take one half of 1% of the sales, put it into a bonus pool, and it's paid out proportionately, a couple of weeks later, originally, we were paying that out at the end of the six month period, or the end of the year period, something like that. And what we found is, when you're paying hourly people, you need to pay them quickly. So every month you have a new plan. And every month, if you're a manager, you can get your people fired up about you know, we've just missed it last month, but let's go this month, and we post the numbers in the break room all the time. And when I go into a store, I'll always say, you know, how are you doing? I'm planning this month, and almost all of them will tell you we're just a little behind it just a little ahead, or we're way ahead. And if I go into a store and find that they don't know where they are in plan, we may have somewhat of a leadership issue there.

David Novak 14:04 

I want to go back to this point that you made that you called Tractor Supply, a no secrets company. unpack that a little bit more for me, I understand how it worked with your your suppliers. But how did you make that come alive inside the company?

Joe Scarlett 14:20 

Go way back in time to the beginning. Every time we'd have a store managers meeting, my predecessor and I would stand up in front of the group and we talk about how we're doing financially, what our sales are, what our gross profit is, what our net profits are, we would share with people where we're building new stores, what the future looks like, what new products are coming down the road. We just kept sharing information all the time so that we don't keep secrets. And we also always open ourselves up for questions, any venue wherever we are. Anything you want to know just ask we're happy to share. Now we don't share confidential information obviously, as a public company that something hits, can't share stuff as a public company where you could as a private company, but we just always keep our people feel dinner where we're going. Today, the company has semi annual store managers meetings where they get all 2000 managers together. And they'll spend two or three days together, and they'll learn about what's coming down the road where the company's going, where the growth is going to be, where the new distribution centers will be. We just keep everybody in the loop. That's

David Novak 15:16 

interesting, Joe, because so many leaders don't really share what's going on in their business. What have you learned about those kinds of leaders? Why is it that they don't,

Joe Scarlett 15:26 

they're just small thinkers so clear that your people are going to help you get where you want to go. So the more they know, the more they can help you get where you want to go. It's just common sense to me. It doesn't take a lot of thinking, why some leaders don't do that. It's sometimes blows my mind why leaders just don't share. There's no downside and there's so much upside.

Koula Callahan 15:49 

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David Novak 16:43 

your stock at Tractor Supply, I think really took a big hit once there were rumors that Walmart was opening Farm Stores. What do you do about that? You know, you got this behemoth the you know coming in opening up farm storage, it's your stocks going to in a tank. How'd you get out of that hole? After

Joe Scarlett 17:02 

we went public people started paying attention to us, including WalMart. We heard through the grapevine through a vendor community that Walmart is going to open a farm store. But that's not too much of a concern that week later, Walmart's gonna open 10 Farm Stores a week later Walmart's gonna have 100 Farm Stores a week later Walmart's gonna open 500 Farm Stores just too much so I called down to to Bentonville to talk to David Glasson got on the phone, I said, I'd like to speak to David glass plays and boons and thanks, um, goes through and Greg picks up the phone and says, David glass here. And I was stuttering then because I was amazed that he answered his own phone. And I just told him that we have some concerns about this farm store. But as you already did, he said, Oh, Joe, I know who you are, which surprised me carrying the conversation with two, three minutes. He said, Joe wants you to come down here, I want to talk to you. I want to get to know you. So I went down to Bentonville as fast as I could, along with one of my partners. And we spent an hour and a half with David glass talking about business. Very little about the farm store business, but mostly about retail business. And he was complaining about some of the drugstores were selling stuff below cost and blah, blah, blah. And we had a great conversation. Finally I said, Well, why are you getting into the farm store business? He said, Well, Joe, we want to find a few products we can knock off from your channel and put them in our Sam's Club. And that was the end of the conversation. I asked her you can open any more Farm Stores? I don't think so. The one they had was in Kirksville, Missouri. And so along the way, we had also developed a good working relationship with a Walmart real estate department because as Walmart opened super centers, we would often when at least a portion of their old store. It got to such a big deal that they would call us and they say we're planning on opening all these super centers. How many of these stores would you lease from us? So we had this great relationship. Less than a year after my conversation with David glass. We called our friends in a real estate department down there and said, We know your store in Clarksville is doing terrible and it was and they had the wrong inventory in the wrong people it was just wasn't doing well at all. We said to the real estate people said we'd make your deal. We'll lease back part of that store the part we want. And we'll buy your inventory at cost and we know we're getting screwed and take you out of the business. That was that nine o'clock in the morning by three o'clock in the afternoon we had a deal. Three or four months later we reopened that as a Tractor Supply Store. And I was able to go to Wall Street and say we took Walmart out of the farm store business.

David Novak 19:24 

That's a compelling story. That

Joe Scarlett 19:26 

was a good laugh. And then Bernie Marcus went down the same path about a year later. And he opened two Home Depot Farm Stores in Waterloo and Quincy Illinois, I think and but they didn't last very long at all. He just turned them into home center stores in less than six months.

David Novak 19:42 

So you take out Walmart and you take out Home Depot that probably drove your stock a little bit.

Joe Scarlett 19:48 

Yeah Did our stock during the if you take a snippet of time from 2000 to 2020. We were the third best performing stock on this s&p 500 better than Apple.

David Novak 19:57 

Congratulations on that you know As I understand you would often cold call competitors and ask to get together. I mean, how did you get them to even meet with you?

Joe Scarlett 20:08 

There was interesting, I've traveled all over the country, we were going to be somewhere I was going into that town, I just call on the phone and say, Hey, I'm Joe Scarlett, and they typically knew who I was. And I said, you know, I just like to come by and have a cup of coffee with you and chat about the business a little bit. And with with almost no exceptions, they were just thrilled to come on and stay overnight with us have dinner with us and love it. So it was just getting to know them. Most of the time, when you talking to competitors. It's not about pricing or competitive selection. It's about issues in the business. And a lot of times we have common issues that we can work on together. Do you

David Novak 20:40 

recall a story where you learn something from a competitor that actually changed the way how you ran Tractor Supply,

Joe Scarlett 20:46 

I would say we have learned a lot from competitors about product assortment, and where things really make sense. And we're continually refining our product assortment both geographically and supplier with the product to the kind of product it is. We learned from competitors all the time by observing what they're doing, not so much by talking to them. You really

David Novak 21:04 

went on a tear when it comes to opening up the stores. And I know one of your very successful markets was the Florida market. Tell us about how you made the decision to move Tractor Supply into Florida.

Unknown Speaker 21:17 

That actually

Joe Scarlett 21:18 

was inspired by Walmart, Walmart came to us and they said, we have 11 stores that we want you to lease in Florida where we are building super centers. And we need to get this real estate off our books. And we worked with them back and forth for a little while. And then we signed a deal with him to pick up I think 10 of the 11 stores and wound up having a big grand opening sometime after that. And Florida has turned into a fabulous market for us was a market that we didn't know much about. But we know a lot about it today. In

David Novak 21:45 

addition, your store count your revenue obviously went through the roof over the years and and you say once you got clear on your customer being a hobby farmer, it really impacted your business. Who was your target? And then how did you decide to make it the hobby farm? And what's a hobby farmer?

Joe Scarlett 22:04 

Let's go back in history when Tom Hennessey and I and the three of us took over running the company, company was not doing well, we were in trouble. We were trying to figure out what's right. So we all spent a lot of time in the stores. We talked to customers, we talked to our employees, we talked to our managers. We even talked to the truck drivers. And we were observing what's going on and paying attention to what's going on. What we found is that although most of the vehicles outside were pickup trucks, there were not many farmers in the store. There were people there. Maybe 10%, or 15% of the customers were farmers. But there were lots of other people. They were buying stuff. So we also were fortunate to be we were data rich, we have a lot of information. So we could study what's selling, how many items were selling, how much we're making on it, where it's selling geographically. And what we found pretty quickly was that, that the product that related to production agriculture, was at best flat and most of the products were declining and sales. But all these other products that we're not you wouldn't think of necessarily as foreign products. We're growing and grow so I'm growing pretty quickly. Anything with a gasoline engine on it, riding lawnmowers, push mowers, tillers, snowblowers, generators, other things like air compressors, and specialized hardware and truck toolboxes, men's work, clothing, pet food was on fire, animal feed was beginning bird feeding all these categories that were not tied directly to production agriculture were growing. We came to the conclusion after a while that this really is not a farmer, we have this is somebody else. And we tagged the name hobby farmer on there, it made all the difference in the world, it changed the trajectory of the company changed the trajectory of how we bought product, what kind of product we're going to buy, it changed, where we put stores, no more stores in the cornfields of Iowa, we put them where there are large numbers of hobby farmers and we got, we figured out how to define a hobby farmer. Hobby farmer is typically a full family unit, not dependent on agriculture for a living could come from any walk of life. They could be doctors, or lawyers or factory workers or school teachers. They always have dogs and cats. They usually have other animals, chickens, or goats or horses or cows or something like that. They have a tractor, probably, they have a barn or shed. And this is their lifestyle. And the more we learn about that customer, the more we just market it to that customer, that customer for example, you and I probably go out for a steak dinner on Saturday night, but our customer is more likely home, feeding the animals and repairing the fences. That's their lifestyle. And once we went hell bent for election after that customer, it changed the dynamics of the business. It changed who we hired, where we put stores, what hours we're open, how we advertise what we advertised, who we advertise to put us on an entirely different path. And our competitors, although they had a lot of the same customers, they continued for the most part to think about themselves as marketing to farmers because that's how the company was founded.

David Novak 24:55 

I love that story about really understanding your customers and And from that experience, what advice can you give to others on how to get clear on who your customer is, or really needs to be? How would you sum up that learning you just talked about,

Joe Scarlett 25:12 

get close to your customer, spend time with your customer, wherever you are, go visit a customer on their on their turf. If you can, we encourage our people to go out, go out to the customer's farm or format, or wood or hobby farm, get close to your customer. And in our case, our employees are close to our customers. So we're always learning from from our employees or team members, as we call them today. Talk about

David Novak 25:34 

this idea of your leaders being and you have this great phrase for this. I love this, you know, ministers of culture, what's a minister of culture,

Joe Scarlett 25:43 

whenever we have managers meetings, we have get togethers, myself and the CEOs that have followed me, we always talk about our culture in the company. We talk about our values, we talk about our mission. And we're very committed to the value structure. And we talk about it all the time, we just tell them, I'm the CEO, I'm talking about the culture here. But every one of you in a leadership role, you also have the responsibility to maintain the culture and grow the culture in your business. So beside your title, as a store manager, you're also the Minister of Culture for your business unit. It's up to you to continue to promote the culture, encourage the culture and practice the culture. That's

David Novak 26:18 

a vivid word picture, I love that word you can put into words, something that everybody really understands what it beats, I'd like you to tell us the iodine story. You know, it's a great example of what you're talking about. This first one was definitely a minister,

Joe Scarlett 26:31 

we obtained 10 values in the company, the first value is ethics. And it says do the right thing. And always encourage others to do the right honest and ethical things. Well, the IDI story goes back to a one of our very smart young buyers, buying animal health products. And one of the products we sell is Iodine. And iodine is used in dairy production, somehow I don't know how but using dairy production, not a lot of it, but some of it. And she's studying her business, and she finds one store that's selling five or 10 times as much iodine as any other store. So she goes to the store. And she does a lot of research. And she finds that iodine is used in the production of methamphetamine. So without saying anything to any of us and leadership, she went to the manufacturers and maybe the scientist, I'm not sure where and Pfizer, what can we sell that does the same effect as iodine in our stores that can't be used for methamphetamine. And she found a substitute product, line it in there kept selling your new product, stop buying the old product that took us out of the iodine business, and we didn't know anything about it till after the fact. And once we found out about it, we made a big deal out of it and give her a big pat on the back and give her some awards and whatnot. So that's how deeply embedded the culture is in the organization, people just know that we're going to do the right thing. We're gonna do the right thing in every circumstance. And that's why that's why we, we feel very strongly about doing the right thing with our people. First of all, always doing the right thing, then developing them and choosing them and Bill giving them the right environment. Second, doing the right thing with our customers, or people will do anything for a customer, we always we talk to our people about the lifetime value of the customer. Forget this transaction, we talk about the lifetime value. And there are all sorts of examples about how you know if you have enough horses, you're going to spend $100,000 with us over a couple of years. And we use those examples. Plus, there's a sign in the stores that says satisfaction guaranteed. But underneath that are the words that says every team member has the authority to do whatever it takes, which means every team member, they can do whatever it takes to take care of the customer. And if we lose money on a transaction, and save a customer, we celebrate that that's fabulous. We love it. So we empower our people and trust our people. And third, we always build strong relationships with our suppliers, and our vendors, not just merchandise suppliers, but contractors and trucking companies and so on. So we're all on the same page working together. And if we fail, if we do the right thing with our people to do the right thing with our customers, and we do the right thing with our business partners, our stockholders will do just fine. So we spend as little time as possible with stockholders, and as much time as we can with the three constituencies that make us successful.

David Novak 29:05 

I know you spent a lot of time Joe, teaching leadership inside the company and you're a big proponent of developing really outstanding soft skills in addition to just functional capabilities that you have to have. What do you think is the most important soft skill a leader can develop and why?

Joe Scarlett 29:24 

Well there there are a number of them that are very important. I would start off with with the selection of people you're only as good as the people you surround yourself with. As I like to say, surround yourself with stars and you can be a star surround yourself with turkeys and you get sliced up for Thanksgiving. But the whole skill of recruiting of interviewing of building the team is is so incredibly important. And that's not a skill you learn overnight. That's something that takes a lot of practice and a lot of years. We taught all sorts of those skills and attractive supply but the starting point if you surround yourself with good people, you can do just about anything

Koula Callahan 30:03 

Have you ever wondered what David is thinking as he interviews our guests each week? Or have you been interested in hearing David's take on some of the questions that he asks his guest? Well, I do and I know a lot of you do, too. My name is Kula Callahan. And together with David, I host the three more questions podcasts that airs every Monday. These episodes are just about 15 minutes. And in them, I asked David three questions that dive deeper into the themes of his episode with his guests. David shares incredible insights and stories from his career leading yum brands. And all of His answers are super practical and inspiring, like this great insight David shared and one of our most recent, three more questions episodes.

David Novak 30:45 

If you're going to run a company, you got to be able to play on two teams. You can't just care about your team, which is obviously critical to the success of the company after care about the total team, which is the enterprise and the great leaders, the people that take on more responsibility always show that they're more concerned about the company than just their particular piece of the company. They care about the total enterprise. So I think that's an absolute fundamental thing. Get

Koula Callahan 31:14 

the three more questions podcasts in your feed each Monday and dive even deeper into the episodes you know and love. Just subscribe to how leaders lead wherever you get your podcasts.

David Novak 31:32 

In your opinion, what's the risk of a leader being too much in the weeds,

Joe Scarlett 31:37 

leaders who get in the weeds get lost? You see, that happened very frequently. And I worked very hard not to get lost in the weeds. And I know that our current CEO feels the same way. And when I was a CEO, I made very few decisions. I made high level personnel decisions with with the input of a team. high level strategic decisions were the input of a team. But most of the time I surrounded myself with good people, empower them, and had them make decisions on what needs to be done. They share it with me, they wouldn't be keeping a secret. But we talked so much about our mission, we talk so much about our value structure, that it's easy for them to run with the ball. They know what the guardrails are, and they move forward down that road making decisions. Tell you a little bit about the development program we have for store managers. If we decide we want to hire you to be a store manager, or promote you to be putting on our program, there's a great big training manual you have to go through. And you can only train in stores where the store manager has been certified as a teacher. So you're going to store your learning profile or woman who's been there and done that. And the district manager comes in and quizzes you every couple of weeks. And each time you're training based on your background. And then but before you can actually run a store, you have to come in to Nashville and spend a week in a class taught mostly by senior executives, and much of that's about the softer skills in business. It's about how to build teams and create teamwork and how to interview how to get people working together, how to get along in the community, how to do performance evaluations, how to deal with with difficult situations. And so by the time you leave there on Friday, you know that you're empowered to be the CEO of your store. You know, what the guardrails are, you met every senior executive. So whether you're around the corner or 2000 miles away, you feel a part of the company because you know, everybody, and you know the CEO walked in tomorrow, you could say good morning, how are you today, because you have been there and met met those people. You're

David Novak 33:26 

very well known for spending a ton of time in your your stores. Tell us how you make the most of a store visit?

Joe Scarlett 33:33 

Well, first of all, about half of my work weeks, I will be out in the stores. And some of the distribution centers to I leave town on. On Monday, I take with me a regional vice president responsible for 150 stores or something like that. And often take another promising individual with me, somebody could be from it or marketing or accounting or real estate anywhere. We would fly off somewhere and hook up with a district manager late that day or maybe go to one store. And by the way, the stores would never know we're coming. We don't want stores getting ready for us. We want stores getting ready for customers. And we walk into a store and we just say hello and I start talking. And I know a lot of people will say well, here comes the CEO who's going to tell him what he wants to hear. Somebody walk up to me and say hello, Mr. Scarlett, I'll say no, the name is Joe. I said so what part of the story you take care of David? Well, you take care of the pet area. Come on, let's take a walk down the pet aisle. David, how's this new pet food selling? How's this new dog food selling? Right away? You know, two minutes into this conversation. We're best buddies and we're talking about the business. And we're just two partners in the same business talking about what's going on in the stores. And that's how we all conducted ourselves in the stores. And we never chewed anybody out in the stores ever. If there was bad stuff happening in the stores, we would talk with the district manager later on about it but never there we made a point of leaving every store on a high note. When we left people would say gee, I'm glad the bosses were here today. And all the time we're listening and people come up with good ideas. So let's say somebody comes in my great idea, we want to be selling XYZ dog food. And Wallace, thank you very much. We start with the next door, and we say, What do you think about the XYZ dog food? You asked the question five or six times, and you get an idea whether that makes sense or not. And if it makes sense, you make a note of it. And you pass those thoughts along to the buyer when you get back to the office. So

David Novak 35:21 

that's basically how you process the bigness of the idea. Yes,

Joe Scarlett 35:25 

but I never went back and said, Buy this back. I said, here's what we heard. Take the ball, run with it wherever it makes sense.

David Novak 35:33 

You mentioned promising people and you say, when you see promising people, help them get ahead. Give us an example of where you did that. And you're really proud of it. I

Joe Scarlett 35:44 

can tell you about one situation where I made a bad decision and a good decision, I helped the fella get along. I made a bad decision hiring somebody. And I did what most of us do, which is bad, we waited too long to do something about it. But after I'd let this fella go, for other folks spoke up and said, Well, I want that job. I want that job, who's an operations job. And I spent a full day with each of the four people. And when I originally had those four people lined up, I was sure that the guy was number four would never get anywhere. But you know what? After I spent a full day with him, I realized, hey, this guy's really a star. I put him in charge of store operations for the company. And he was the best store operator I've ever worked with.

David Novak 36:25 

How did you get to the bottom line that hey, this person is a star. I mean, when you when you say Star, what qualities does a leader have to have? Good with

Joe Scarlett 36:34 

people decisive, good communicator, the fellow I'm talking about just he relates well with people, people gravitate to him to listen to him. And when he speaks, everybody listens. Not only does he speak, he also listens when people are talking to him.

David Novak 36:47 

I understand you really don't think highly of calling your your corporate offices, the headquarters,

Joe Scarlett 36:54 

way back in the 1980s. I think we had a headquarters in Nashville. That's where all you know, all this big cheese's were in the headquarters. And then we changed the name from headquarters to the store Support Center. And people thought that was a little corny, but we took it one step further, it wasn't just a name change, it became a cultural change. Because we took everybody who works in a store Support Center, and they put put them out in the stores work two or three days. And we still go through a cycle rotation of that to this day. And when you work in a store, you wait on customers and you stocked shelves, and you run the terminal and you unload trucks, you make different decisions. When you're back at this store Support Center, you make decisions that are much more pro company, pro customer and pro employee. That was a big step in changing the culture of our company to being one where everybody's on the same page, everybody's working together.

David Novak 37:43 

And that brings me to something that's really exciting. I know in your life. Now, you just completed your first book, it's called the culture warrior. Tell us a little bit about that, Joe, I've got an order that on Amazon, I haven't had a chance to read it yet.

Joe Scarlett 37:56 

I wrote a column for our company newspaper pretty regularly. But that was like four or five times a year. And as I was stepping down to the company, I started writing the leadership column for the National Business Journal. And I've been doing that now since 2008, or 2009. And I've got like 170 columns I've written all about leadership and the kinds of things we've been talking about here today. I've been pushed by a number of people to put all these things in one book. So I've done that. Most everything you would read in this book would be about cultural related to those kinds of things.

David Novak 38:28 

All right, there's been so much fun. I want to have some more with this lightning round of questions. That idea. Are you ready for this far away? What's one word others would use to best describe you?

Joe Scarlett 38:38 

good listener?

Speaker 1 38:40 

What would you say is the one word that best describes you? Determined?

David Novak 38:45 

If you could be one person beside yourself for a day? Who would it be?

Joe Scarlett 38:50 

Sam Walton?

David Novak 38:52 

Who would play you in a movie?

Joe Scarlett 38:56 

No idea.

Unknown Speaker 38:58 

What's your biggest pet peeve?

Joe Scarlett 39:00 

People not on time. That's o'clock here. It's called Joe time. Because Joe time is. Meaning starts at nine o'clock. You better get your butt in the seat by nine o'clock.

David Novak 39:09 

What's the word or phrase that comes to mind? When you think of the growth of Tractor Supply?

Joe Scarlett 39:14 

Exciting.

David Novak 39:17 

What would you have done if you you hadn't gone the Business Route?

Joe Scarlett 39:20 

That never crossed my mind?

David Novak 39:23 

What's one of your daily rituals? Something you never miss?

Joe Scarlett 39:26 

I exercise every day six days a week not seven. I take one day off.

David Novak 39:30 

If I turned on the radio in your car, what would I hear Scottish music in Nashville. I was thinking you might say country but that's good. What's something about you? Few people would know.

Joe Scarlett 39:42 

I used to repair my own cars when I was a kid gig.

David Novak 39:46 

Alright, that's the end of the lightning round. I just got a few more questions here. We'll wrap this up. You know you started the Scarlett Family Foundation almost 20 years ago. Tell us about it

Joe Scarlett 39:58 

as being part owner of the company I come into some very fortunate situation. And as people always remind you, you can't take it with you. So we want to put some of what we had to good use, we created a foundation. My wife is from England, and she was unable to have a college education when she was young. And she always kept talking about, let's help those folks who fall through the cracks within education. We started our foundation providing scholarships for business students from Middle Tennessee, this is our home and is where we support people. And we've added stem scholarships to that since then, we've also become very supportive of charter schools. And charter schools in Nashville are among the best in the country. We also contribute a lot to all sorts of programs to help young people understand what career opportunities are out there. And our daughter today runs the foundation.

David Novak 40:47 

You're also the chairman of Scarlett Hotel Group, which your son runs. What's the key lesson you've you've learned running a family business?

Joe Scarlett 40:57 

I'm the ceremonial chairman. Our son runs the business, he and two partners run the business day in and day out. I do some leadership training for his people. By the way, that's probably my number one involvement there. But he and his buddies run the hotel business themselves. He and his two buddies came to us, but seven years ago, and they said we're tired of working for these creeps that we're working for help us get started in the hotel business. And so Dorothy and I helped him get started with two hotels. And that was it no other help other than my coaching. And they're up to 17 or 18 Hotels today, and doing very, very well.

David Novak 41:31 

What's the key learning you can share in terms of working with your son, a family member?

Joe Scarlett 41:36 

We work together very, very well. He asked me questions, I give them advice. I asked him questions, he tells me what's going on. I've learned about the hotel business from him. He's learned a lot about leadership and management from me, from a long, long time ago, I can tell another little story. When he was six or seven, he and I went to our first major league ball game together at Shea Stadium. And over the next 15 years, he and I went away every summer without mom and says and went to one or two or three major league ballparks and by the time he was 22, we'd been to a major league ball game and every one of the 30 major league cities. Now along the way, when he was young was all about baseball then later on, it's about girls later on, it's about beer, we formed a tremendous relationship. And as part of the travel, we would stay in different hotels all the time. And he started becoming critiquing the hotels because I was talking about management leadership. And he taught Oh, man, they didn't have enough soap or the guy behind the desk wasn't nice, or they shouldn't have to do this. And, and he got very involved in in the hotel management and wound up going to Purdue and got a degree in Hospitality Management. That's what got him into the right. And

David Novak 42:42 

that relationship you had is really carried forward in the business and and both your passions have been leveraged in the right way. That's that's really good stuff. You know, Joe, what's your unfinished business? With

Joe Scarlett 42:54 

unfinished business. I like helping other people, I coach other executives, doing what I can to help in the community and various and sundry ways. Where every time I find out somebody I know is retiring, I go into a long coaching mode with them about how they can sustain themselves both physically and emotionally, by making sure they commit to doing the right things when they retire. You

David Novak 43:14 

know, you mentioned your dad gave you those two bits of advice about lawyers, the doctors, and when you're coaching people, What's the best advice you give them?

Joe Scarlett 43:24 

Keep an open mind. Listen carefully, you don't know at all, pay attention to what's going on going on around you. And don't try to bite off more than you can chew. Joe,

David Novak 43:34 

I have to tell you, there's a reason why Tractor Supply did so well and continues to do well. It's your leadership and the shadow that you cast and the culture that you created that stayed on as you've moved on. And I want to thank you so much for taking the time to share your insights. This has been a fantastic conversation. And I've learned a lot by listening. You're awesome. I

Joe Scarlett 43:58 

love talking about leadership. I love talking about the business. I love talking about management. And I want to make it clear that there have been five CEOs of the company in the last 40 some odd years and all five of them have contributed greatly to the company

David Novak 44:11 

to I can't tell you how much I enjoy this conversation. And thank you so much for being on the show. I

Joe Scarlett 44:16 

enjoy the conversation also.

David Novak 44:30 

Okay, I know there was a lot of great stuff in that conversation. So you may have missed the mind blowing stat that Joe casually dropped in there. He said, if you look at the s&p from the years 2000 to 2020, the Tractor Supply Company outperformed all but two companies in that timeframe, including Apple is yet more proof that when you take care of your team, they can take care of customers and that's what drives growth. To me, that's the power of a unified team. Give people a clear mission, support them with the right incentives, and do it all with a level of transparency that makes everybody feel like they're a part of the team. You know, a lot of leaders hold their cards close to the chest and leave people in the dark. But when you can bring everybody in on big picture plans and financials, you'll create the kind of buy in and unity you need to get big things done. This week, ask yourself, what opportunities do you have to be more transparent and open with your team? And what would change if you did? So do you want to know how leaders lead? What we learned today is that transparency unifies the team. Coming up next on how leaders lead is Michelle Cosmo, the President and CEO of the National Restaurant Association. I

Speaker 2 45:53 

have three young girls and I've spent a lot of time watching really interesting kids programs, including the Magic School Bus. And for anybody that's a fan of Miss Frizzle on the Magic School Bus. They've heard her say, take chances, get messy, make mistakes. And I've always thought that that really should be a great mantra for everyone. So

David Novak 46:14 

be sure to come back again next week to hear our entire conversation. Thanks again for tuning in to another episode of how leaders lead where every Thursday you get to listen in while I interview some of the very best leaders in the world. I make it a point to give you something simple on each episode that you can apply to your business so that you will become the best leader that you can be