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Greg Johnson started at a distribution center for Mid-State Automotive Distributors.
Greg Johnson started at a distribution center for Mid-State Automotive Distributors.

The Making of O’Reilly’s New Leadership

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Homegrown company O’Reilly Automotive Inc. (Nasdaq: ORLY) has a nationwide team of 74,000 employees and a formalized, constant conversation regarding succession on every level.

For the top spot, that currently means shared president duties.

In its earnings report released this month, the company named executive vice presidents Greg Johnson and Jeff Shaw as co-presidents, the second such appointment.

Johnson and Shaw both started on the ground level. Shaw started behind the retail counter, and Johnson worked in a distribution center for Mid-State Automotive Distributors, which O’Reilly Automotive acquired in 2001.

Johnson had moved up to oversee the supply chain, and Shaw was over store operations and sales.

“Greg and Jeff grew up with the company and know the culture, know the operations and know the systems,” said Mark Merz, director of external reporting and investor relations for O’Reilly Automotive. “They were the perfect choices to step into those roles and continue to lead the company.”

With the move, Greg Henslee stepped down as president but maintains his CEO role.

He worked closely with the board of directors in the decision.

Henslee and former chief operating officer and co-president Ted Wise, who retired two years ago, started the co-presidency model embraced by the company.

“O’Reilly’s promote-from-within philosophy is a pillar of our culture and a key driver to our long-term success,” Henslee said in a news release.

Henslee knows. He shared the president role with Ted Wise 1999-2013. In 2005, Henslee became CEO and co-president and Ted Wise was named chief operating officer and co-president as David O’Reilly moved from CEO to the board chairman position.

Merz said the latest co-president appointment does not spell early retirement for Henslee, who’s in his mid-50s.

“He’ll still be there to help mentor Greg and Jeff and at the point when he decides it’s time to step down out of the role of CEO, there will be a very significant and prior notice to ensure a smooth transition,” he said. “It’s likely he will always have some role in overall company strategic guidance.”

The appointments come as O’Reilly Automotive grew earnings 11 percent to $1 billion in 2016 – the first time crossing the profit threshold, according to a review recent earnings reports. After reaching $8 billion in 2015 sales, the full-year earnings report showed sales increased to $8.6 billion last year.

According to a proxy statement filed with the U.S. Securities and Exchange Commission, in their previous positions, Shaw earned $1.4 million and Johnson made $1.1 million in 2015. Another executive vice president named in the filing, Chief Financial Officer Thomas McFall, earned $2.75 million in 2015, while Henslee’s compensation exceeded $5.3 million that year.

The company’s announcement of co-presidents did not disclose salary adjustments, and O’Reilly’s 2016 proxy statements have not yet been filed.

Mentorship and collaboration within the corporation are essential to its future, Merz said.

“It’s a great system where you can take the knowledge and expertise of two individuals that complement one another and have them work together to lead the organization. It’s been a very good model for us,” Merz said.

Shaw’s resume has almost every stop at the store level. He started in 1990 as a parts specialist and was promoted to store manager, then the district and regional management levels, before advancing to vice president of the southern division, vice president of sales and operations, and senior vice president of sales and operations, according to his executive bio.

Johnson has a bachelor’s degree in business administration from Tennessee Technological University and worked with Mid-State Automotive in Nashville, Tennessee, for 19 years prior to O’Reilly, according to his LinkedIn profile. His automotive career began in 1982 as a part-time distribution center team member.

Succession planning is designed as a consistent and formal process within the company with each member of leadership reporting on the next generation of leaders – eyeing the bench and figuring out who will join the management team.

“With public companies, I would hope that most companies have a process like this. For O’Reilly, it’s extremely important to our future success that we have a structured, formal process to identify successors,” Merz said.

Merz said the methodology was essential to the family owned and operated company established in 1957 to make the transition to public ownership. O’Reilly’s executive team members report on successors to the board on a quarterly basis.

“Each member of the executive team has to identify who their successor will be and what steps they’re going to take over the period of time to develop that individual into the ability to take over their job,” Merz said.

Conversations about leadership are far more frequent at the store and regional levels, particularly with 190 stores opening this year.

“The success of those 190 stores is heavily dependent on the success of the store teams; how ready those store teams are to run that store, to take care of customers. All of our district managers across the country are constantly building the bench of that next assistant store manager, that next store manager,” Merz said. “Our regional managers are looking for who is going to be the next district manager. Our divisional vice presidents are always looking to see who is going to be the next regional manager.”


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