Cleared For Liftoff

With the company he resurrected 20 years ago at the optimal altitude for departure, Safeway's longtime captain pivots from history to begin a new journey.

With one eye cast on past missions accomplished and another focused squarely on those yet to be revealed, Safeway Inc. Chairman and CEO Steve Burd is poised to commence the next leg of his fantastic voyage, a natural progression of his stellar career as a lightning rod of change, gatekeeper of wellness, paragon of efficiency and trailblazing visionary.

And though Burd's exit from the industry in which he's been a fixture for the past 21 years is just weeks away, he has no intention of slowing down following his planned retirement, after which he envisions moving full steam ahead in his pursuit of health care reform — preferably alongside fellow "doers" on the leading edge of work and research to address and repair the infirm state of the nation's health care system.

Credited with transforming the 1,650-store, Pleasanton, Calif.-based company over an unprecedented 20 years at the helm — president since 1992, CEO and board member since 1993, and chairman since 1998 — Burd has garnered global attention for his impassioned views on integrating health into corporate culture through carrot-and-stick incentives to balance spiraling health care costs faced by both individuals and businesses.

In 2005, faced with a $1 billion tab that was rising 10 percent a year to cover employee health care costs, Burd put on his pinpoint-precision economist's hat and determined foot down to zero in on the cause. He found that 70 percent of health care issues were related to behaviors. To address this, he set out to incentivize a culture of health and to make it possible by integrating fitness facilities, health programs and internal awareness campaigns.

"Our insurance now works like automobile insurance has worked for decades — driving records dictate premiums," a system that has produced dramatic results company-wide for the self-insured employer. "Personal behaviors really matter," explains Burd, "so they became a form of currency. The healthier your behavior, the more currency we give you to buy down your health care premium." The practice has been permitted under the law for more than a decade, he adds, though few, if anyone, had ever taken advantage of it before.

Consequently, the more he learned about the nation's health care odyssey, the more fascinated he became, not only with employees' roles, but also with those in the medical provider community, where firsthand experience led Burd to learn that "all doctors are not created equal. A model" offering world-class health care services with equal-opportunity access system-wide — from the c-suites to store clerks — took wing with "a transparency tool that gives our employees a chance to have function as consumers shopping for specific needs."

Once in motion, Burd's "Healthy Measures" platform set off a chain reaction that vaulted him to the national stage, where he's made the rounds at countless forums with pleas for business, labor, government and health care leaders to work together to stem the bleeding of a bloated, counter-productive system that's badly broken. And he's got the goods to back up his gospel: In the past eight years under his watch, Safeway's average 2 percent annual growth rate for both employer and employee health care contributions is far below that of the average U.S. company, which experienced an estimated 8 percent annual growth in employer health care costs from 2005 through 2011.

In Search of Solutions

In the years before his defining role as a health care reformer, Burd was the driving force behind Safeway's transformation of a disparate collection of store banners into a cohesive brand that unfolded with vigor in 2003. Burd has worked tirelessly to place the consumer squarely at the center of all of Safeway's strategic development and decision-making while breathing new life into its stores as "solutions for living," or, as its well-established tagline since 2005 aptly reinforces, "Ingredients for Life."

While the road traversed to maintain Safeway's solid industry stance hasn't been without its share of trials and tests, Burd has faced enormous pressure and profound competitive challenges for the unionized company via extraordinary growth in new retail formats, virtually all of them non-union. The changes put downward pressure on both sales and margins, but through strategic initiatives and cost reduction efforts, Safeway still managed to outperform the S&P 500 over the past 20 years.

Some of his key initiatives include establishing a culture of thrift and capital discipline, creating an industry-leading customer service program, developing the Lifestyle store format, introducing a high level of quality in perishable products, and forming the prepaid payment network Blackhawk, which has become one of the world's largest gift card distributors. He also accelerated Safeway's efforts in charitable giving and sustainability. During his tenure, the company raised more than $2 billion for charities, including more than $200 million for cancer research, a cause near and dear to Burd's heart.

Teed Up

During a recent visit by PG in the final weeks of his 21-year Safeway tenure, Burd, a lifelong sports and fitness aficionado, shared a question recently posed to him by a fellow golf enthusiast regarding his post-retirement plans "for the back nine."

"I'm just looking forward to finding out if I can improve my score on the front nine," quips Burd, quickly affirming that he's still weighing his options while directly dismissing the prospects of becoming another chief executive. "I don't need to be a CEO to get things done. I know of several situations that I can become involved in, and where I'll potentially work with people who will literally change the world."

Attributing his avid interest in transferring his vast knowledge and dogged determination to "all that I've learned and the many people on the cutting edge of change," Burd says the health care space "has become very appealing to me in light of the opportunity to do some really interesting things," most likely in the role of a coach or a challenger.

While navigating the subterranean traps and brutal bunkers marring the present state of the national health care landscape, Burd discovered that "as a pure business guy, I think differently than the medical research community." As such, he adds: "I can have a positive influence on the next frontier. There's a lot of interest out there in where we will go from here, and I'm most drawn to freely choosing what will be the most fun, with the biggest impact."

Goodwill Ambassador

Recalling the "pre-Steve" era prior to Burd's being named president in 1992, Safeway was struggling with suspect service, high debt, disproportionately high operating costs and substandard store conditions, notes Burt P. Flickinger III, managing director for New York-based Strategic Resource Group. Burd's attention to detail and executional discipline produced immediate results throughout the company, and were subsequently adopted by many others within the grocery sector.

"Steve Burd grew from humble beginnings to help save what Charlie Merrill, co-founder of Merrill Lynch & Co., and the Magowans had built earlier during the 20th century," Flickinger says. "Burd applied his formidable financial, strategic and leadership skills to solidify Safeway, while being a humble team member of one of Safeway's many softball teams."

Moreover, Flickinger adds, Burd's abilities to keep pace with Safeway's "United Nations of consumer constituencies" is manifested in his exceptional recruitment and development of "a United Nations of great executive leaders and CEOs at Safeway who excel when compared with virtually any company in the consumer industry." (See related sidebar on page 34.)

Contrasting some of Burd's most marked characteristics — analytical, direct, opinionated and methodical — with his lesser-known, often overlooked traits as a thoughtful, attentive, good-natured and compassionate leader, those who have worked closely with him through the years speak effusively of Burd's astute judgment and selfless sweat equity, which enable his generals to balance and prioritize plans and projects while minimizing fluctuations and disruptions.

"He's a guy who can take big, complex issues that haven't even showed up on the radar screen, and wrestle them to the ground while connecting the broad issues, not only on the macro level, but the micro level as well," explains Larree Renda, EVP, chief strategist and administrative officer, as well as chair of The Safeway Foundation. "By providing the framework and tools to give consumers a chance to unleash their own power in the realm of health care, it's unprecedented how really, truly visionary Steve has been" with Safeway's widely publicized wellness strategies in recent years. However, adds Renda, "Steve has long been able to see the value of wellness programs" rooted in personal responsibility and transparency, while communicating the "extremely successful efforts for our employees and the effects to our company's bottom line."

In his role as the driving force behind the retailer's ever-expanding private label portfolio, which builds on the success of its O Organics, Eating Right and Open Nature meat brands, Renda notes how Burd's lasting legacy will reverberate for years to come through the continuing evolution of the company's next-generation products, stores and corporate strategies. "I have had the unique advantage of working directly with Steve for all but four months of my tenure here," Renda says. "Many people have come and gone, roles have changed, but Steve has been the best and most important mentor I could have ever imagined."

Often told by her boss of 20 years that she and he make decisions similarly, Renda says that Burd's confidence has been a personal source of faith and pride for her as Safeway's first female EVP. Yet while his departure is bittersweet, Renda is certain that "whatever Steve does, he will have a huge impact. He's the youngest 63-year-old I've ever seen; he has so much energy and drive — he's just not going to retire."

Poised for Greatness

Diane Dietz, Safeway's EVP/CMO, vigorously seconds that emotion. "Steve will obviously be very much missed; he's had a huge fingerprint on Safeway as a strong, confident thought leader who is able to take complex problems and big and lofty goals, and transform them into business-building opportunities. When I first started with Safeway in 2008," the former Procter & Gamble exec recalls, "Steve had already been working on figuring out how to personalize pricing on an individual basis as a way of driving traffic and loyalty."

Burd's vision, which spanned several years in various iterations, has since manifested in Safeway's recent "just for U" digital marketing/loyalty platform tailoring personalized prices to individual shoppers. Seeing early success as both a same-store sales catalyst and unit-volume driver — the one-two punch of retail bliss — "just for U" has only begun to scratch the surface and may well enable the company to discontinue print ads in the United States in the not-too-distant future.

"The critical part of being a great leader is the ability to set up their team for success," with or without direct oversight, notes Dietz, in a nod to Burd's related visionary leadership of Safeway's fuel, wellness, advocacy and associate development programs. "The positive thing about Steve's well-planned departure is that he is leaving the company in great shape and poising it for greatness."

Renda and Dietz — as well as Bruce Everette, the company's longtime EVP of retail operations, who recently retired after 41 years as one of Safeway's most seasoned and experienced executives — speak warmly about Burd's abounding compassion and caring heart, which he demonstrates in countless, meaningful behind-the-scenes ways.

Everette is particularly quick to admit "learning so much from Steve," including an important lesson on reserving judgment in the face of change. "When he came aboard in 1992 and I found out we were going to have a bean counter for a president, who I assumed knew nothing about running grocery stores," he recollects, "I was beside myself."

His initial trepidation has long since solidified Everette's view that "Safeway would not be here today if it wasn't for Steve Burd. I can give you many examples of the exceptional business, operational and distribution-oriented results he implemented and vastly improved upon," Everette explains, "but I always marvel at how well his calm temperament and personal qualities of really caring about people, and helping them succeed, balance his analytical skills and uncanny abilities to identify opportunities to improve something that has avoided the attention of everyone else."

He resoundingly applauds all that Burd has done to give back to the community and the industry throughout his life, which Everette says has made him the outstanding executive that he is, and why he's been recognized far and wide for his contributions — not just by his own company, but also by the industry as a whole.

Valuing the Enterprise

Burd readily admits that it's unusual for a CEO in the grocery sector never to have worked in a grocery store. "But from the age 17, I ran the night shift for a local candy factory, with hiring and firing responsibility, and throughout college and grad school, I routinely held multiple hourly-rate jobs, which allowed me to be able to relate to hourly workers." As a result, he adds, "Nobody in this company, including the CEO, has employment contracts or parachutes of any kind. We have 185,000 people — from the highest to the lowest — who are equally at risk every day. We can't expect people to follow our lead unless we're as close to being in their shoes as possible."

Subsequently, according to Burd, the sole assignment of everyone who works in business, no matter the position, is to increase the value of the enterprise.

Cracking the Code

As the clock winds down on his time as one of the industry's most innovative CEOs — his successor is to be revealed at the grocer's annual stockholders meeting on May 14 — Burd will be waiting in the wings to assist the company after he transitions out of his posts. "I delayed my retirement until now," he notes, "when it feels that the wind is behind the sails, after struggling a bit. But we will be on an upward glide for years to come, now that the pieces are firmly in place."

Closely involved in the search process and deeply involved in writing the specs for his old job, Burd has participated in the interview process and, as a board member, will have a vote when the final choice is made regarding his replacement, a choice that ultimately will be based on "a board decision." Remarking on "the range of talent from inside the company," Burd clearly has a personal preference for the person he wishes to succeed him. However, he acknowledges that in the present era of corporate governance, it's incumbent on boards of directors to vet candidates from both within and outside the company.

In any case, the naming of a new successor won't be long now, nor will it be before Burd's next chapter unfolds.

"I'm a big believer in setting the bar really high in terms of goals, which I like to marry with a timeframe for accomplishment that the whole world thinks is unrealistic," he says. "The reason I do this is twofold, and we have lots of examples around here that bear this thinking out."

First, Burd explains, "It forces people to think about a problem differently," and second, it diminishes fear of failure, in much the same way as the end result of Apollo 13. "I contend that had the astronauts simulated the depths of the circumstances in the simulator, they would have failed 1,000 times. The reason they succeeded was because they had to. That's the way I've approached all of my work, and the way I would propose to make great changes in health care."

One issue that weighs heavily with Burd is the need to accelerate the rate for a new drug discovery, which he says "takes about 17 years to be implemented in full clinical application. I think it should take four or less." Tightening the timeline, he notes, "might be fun to help change." In the same vein, Burd says he'd like to help close the window on the current protracted time span for best standards of care and protocol, so they'd be implemented in six months rather the average three decades.

"And I can tell you right now how to do it: Put the payer in charge, and we make changes to health care plans that will force the folks in the clinical world to define the top 20 conditions, where the ranks and protocols are clearly delineated. Then we can tell our employees that we will cover their health care costs if they follow the prescribed regimens; if they don't, they can pay for it themselves. That's how we've lowered the obesity rate for 28 percent of our workforce to 21 percent. We've had several clinicians say, 'If you want to make a change, you follow the money.' So in this case here, while I realize I'm drastically oversimplifying it, that's what a determined business person does: pursues a goal with a will-not-be-denied mindset to make the necessary change."

The most promising upshot of Burd's fundamental philosophy of solving the national health care crisis with a prescription that encourages people to live healthier lives and be personally accountable is a companion solution to crack the debt crisis.

"Almost everybody in Washington believes that," he says. "They just need a little help getting there."

"I don't need to be a CEO to get things done. I know of several situations that I can become involved in, and where I'll potentially work with people who will literally change the world."

— Steve Burd

"As a pure business guy, I think differently than the medical research community. I can have a positive influence on the next frontier."

— Steve Burd

"He's a guy who can take big, complex issues that haven't even showed up on the radar screen, and wrestle them to the ground while connecting the broad issues."

— Larree Renda, EVP, chief strategist and administrative officer

Looking ahead, Burd is most drawn to freely choosing what will be the most fun with the biggest impact.