Your number one asset

Valero is the largest independent oil refiner in the US, and one of one of the nation's largest retailers. With 20,000 employees and revenues of around US$55 billion it ranks 22 on the Fortune 100.

Under the leadership of Bill Greehy, Valero's unique culture and employees' ‘caring spirit’ have been the cornerstone of its success. Among the many awards it has garnered, Valero has received the ‘Spirit of America’ award twice, United Way's highest national honor; ranked third on the 2006 "100 Best Companies to Work for" list (published in Fortune); ranked No. 1 on Forbes' "Platinum 400-Best Big Companies" in 2004; and received the international "Oil Company of the Year" at the Platts Global Energy Awards Program.

Valero has always made a point of striving to be an employer of choice – its mission statement explicitly commits it to making the safety and development of its employees core business values, as well as providing a challenging environment that encourages teamwork, communication and creative thinking. Valero is not alone in corporate America in stating that its employees are its ‘number-one asset’; unlike many others though there is no doubt that it puts its money where its mouth is in backing up these claims.

An example of Valero’s approach was seen when Hurricane Katrina hit in New Orleans. It dispatched supplies, set up temporary housing for employees – and donated US$1 million to disaster relief. It also got its worst affected refinery back online a week a head of schedule. To find out the secret of its success, HRM had the pleasure of speaking to Mike Crownover, the SVP Human Resources at Valero. As it turns out there is nothing mystical about Valero’s approach to HR, just a commitment to looking after its staff and communities.

HRM. Valero was featured as number three on the Fortune 100 great places to work list this year. Can you tell us a little bit about Valero's approach to keeping staff happy?
MC. At Valero we truly value our employees as our number one asset. We have the best pay and benefits in our industry. We have all-employee bonuses: If our executives get a bonus, everyone in the company gets a bonus. And stock options are available to all exempt employees. Through its Fit Valero Wellness Program, Valero provides either an exercise facility at each location or a fitness membership subsidy for employees and their families to join a health club in their area. Each year Valero recognizes employees for their contributions by holding an appreciation event at its various locations. Our educational reimbursement program pays 80 percent of tuition, fees and books for full-time employees pursuing continuing education, undergraduate or graduate degrees. Valero provides the Support Aid for Family Emergencies (SAFE) Fund to employees who have suffered a catastrophic loss, and offers recognitions such as Employee of the Month and Volunteer of the Year.

But perhaps most important of all: we have never had a layoff. This is critical to the culture of our company because our employees know that if they work hard they will always have a good job.

HRM. Your Chairman and CEO Bill Greehey has strong views on how employees act at work - can you tell us about the culture of Valero?
MC. At Valero, every job is equally important and everyone is treated with equal respect. No one is talked down to, and everyone takes great pride in the company, their jobs and their fellow workers. Valero has always had a strict code of professional ethics.

Community involvement is another integral part of our corporate culture – from our organized Valero Volunteer Councils to our financial support of countless community organizations. This commitment dates back to Valero's beginnings when the company's top management made community involvement a key part of our mission statement. Through our work over the years, Valero has touched tens of thousands of lives, helped hundreds of non-profit groups, and improved countless communities. In 2005 alone, Valero and its employees contributed US$12 million to the United Way and donated 220,000 hours to volunteer in their communities. The Valero Caring & Sharing Spirit is the cornerstone of the company's success & a source of great pride among employees.

HRM. You offer a range of different incentive plans - for example, an all-employee bonus plan as well as a long-term incentive award scheme. Could you describe your different schemes, and explain how they work?
MC. Due to the varying industries in which we compete, our goal is to provide incentives that are both appropriate and competitive for the respective lines of business. For instance, for our core refining and corporate operations, all employees are eligible to participate in the Company’s bonus plan (often referred to as the “all-employee bonus plan”). The all-employee bonus plan is based on key company financial measures and takes individual performance into consideration.

In addition, in our retail operations, zone managers, area managers, store managers, and assistant managers participate in a bonus plan that is based on store performance, and our customer service representatives are eligible for bonuses based on length of service.

Beyond our short-term incentive plans, unlike many other companies, Valero believes in granting long-term incentives deep into the organization, not only to its executives and senior management, but also to the key professionals and technical employees who are responsible for the day-to-day operations. Non-retail exempt employees and non-store level retail management employees are eligible to receive equity compensation in the form of stock options and/or restricted stock awards.

HRM. And what's the thinking behind having a range of different schemes - are they aimed at different segments of your workforce, or are they aimed at reinforcing different behaviours within individual staff?
MC. Our rationale for the different incentive programs is to focus employees on what’s important to the success of their operations. As a result, for our short-term incentive programs, refining and corporate employees have different bonus metrics than retail store employees.

Recognizing that maintaining a competitive cost structure is fundamental to running a successful business, equity compensation is an incentive component for our non-retail exempt employees. And we believe our equity compensation philosophy has proven to be an excellent means for aligning our employee’s interests with shareholder interests in the long-term growth and profitability of Valero.

HRM. You also run individual recognition awards such as 'employee of the month' or 'volunteer of the year'? Again can you explain how these work - are these formal company wide schemes, or are they more devolved and localised schemes?
MC. The Employee of the Month, Volunteer of Year, service award program, recreational activities and appreciation events are all companywide programs.

The Employee of the Month Program was established to reward employees who exhibit exceptional performance as well as motivate others. This program is a vehicle for supervisors and managers to honor exceptional individuals for their outstanding attitude and performance. The program includes recognition of outstanding employees from Valero's various operations in addition to one companywide employee of the month honoree. Each operational group has a committee that chooses the honorees, who are presented with a specially engraved Employee of the Month pen-and-pencil set and a framed appreciation certificate. The honorees will then be eligible for the companywide award. An executive committee selects the companywide Employee of the Month based on his or her outstanding performance and contributions to the Valero mission. As the companywide Employee of the Month, this individual's photo is displayed at all of Valero's locations and on the Valero intranet site, and the individual receives a watch, plaque and luncheon.

The Volunteer of the Year Program is an annual event that recognizes outstanding employees from each location who have donated their time and effort to make a significant impact in their communities. Employees who are awarded "Volunteer of the Year" for their location receive special recognition for this distinguished honor. Employees have the opportunity to either nominate themselves or someone else. A committee will select a Volunteer of the Year honoree for each location. Employees who are awarded "Volunteer of the Year" receive special recognition at the Valero Volunteer of the Year luncheon, a watch, plaque and a photo on the Valero intranet site.

The Service Award Program recognizes the importance of employees' years of service with Valero. Upon completion of one year of service, employees receive a Valero emblem. Upon completion of five years of continuous service, and every five years thereafter, employees receive a Valero service award. Awards include selection from a variety of outstanding gifts, a certificate, and an individualized signed letter from the CEO.

The Annual Appreciation Event is to honor employees. Valero holds a Family Day Picnic for employees and their immediate family members throughout all locations. The theme of the event is consistent among all locations, employees and their families enjoy a fun-filled day of events, food, and gifts.

Valero also holds an Annual Recreation Event at all locations. It consists of either a golf tournament, bowling tournament, fishing tournament, etc. This event is to provide an opportunity for camaraderie and fun outside of work.

These recognition programs are all formal programs and administered by Corporate Headquarters so that employees at all locations can enjoy the function without having to work at putting the event on. In addition to pay and benefits, we have found that recognition and rewards are important to our employees.

HRM. You seem to create a strong sense of buy-in and belonging to the Valero ethos amongst your staff. What challenges do you face in assimilating new starters - do you recruit with a type of person in mind? I'm particularly interested in executive level recruitment.
MC. Potential candidates are told about Valero and especially the culture of Valero. This way candidates know exactly what to expect when they start working and there are no surprises. In addition new hires go through an extensive new hire orientation program. The orientation program is tailored by location. At Corporate, the program consists of:

• The Knowledge to Take you Anywhere – four-hour session going through all the company information and paperwork.
• The Services to Take you Anywhere – four-hour session going through all the company programs
• The Culture to Take you Anywhere – eight-hour session going through the culture of Valero
• Breakfast with the President – An informal roundtable breakfast meeting which allows new hires to hear from the President of Valero and have the ability to ask questions.

Also, as you may know, Valero has acquired 17 refineries since 1997, so introducing these new employees to our special ‘caring and sharing’ culture is critical to maintaining it. Immediately after every acquisition, Valero's senior management visits the new refinery, personally serves BBQ to each employee and participates in roundtables, where they talk about Valero and its culture and answer questions. Employees are given welcome letters, Valero hats and silver pen sets to make them feel welcome and a part of the team. Immediately establishing an active volunteer council in each location is also critical. The teamwork and camaraderie created by working together for common causes in the community is essential to instilling the caring and sharing spirit that has made Valero so successful. It gives our employees a tremendous sense of pride.

HRM. Have you got any hints or tips for how to best align your company culture with the formal and informal HR programs and incentives schemes that are available?
MC. Always treat your employees as your No. 1 asset – because they are.