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Interview with Atmos Energy CEO Bob Best

AtmoSpirit culture helps company weather the storm

Dallas-based Atmos Energy Corporation, the largest natural gas-only distributor in the United States, stood out in 2008 as a company that is weathering the economic downturn quite well. It had a strong 2008 fiscal performance, and is preparing to meet the challenges of the industry in 2009 with a spirit of optimism and gratitude. CEO Bob Best shares his thoughts on why a strong foundational culture has made the difference.


The journey to build a strong culture began when Best become CEO

Atmos Energy has grown through a series of acquisitions to become the largest natural gas-only distributor in the United States, serving 3.2 million customers in 12 states. It has regulated assets in numerous states as well as one of the largest intrastate natural gas pipeline systems in Texas. Non-regulated operations provide natural gas marketing and procurement services to 1,000 municipal and industrial customers in 22 states.

When Bob Best was named chairman, president and CEO in March 1997, he knew there were a number of challenges that needed to be addressed. Atmos Energy was operating in a holding company model, with its regulated and non-regulated business units operating independently. The top leadership had left. There was a reorganization where 700 people were displaced and made to bid back on their jobs. From 1998 to 2000, the company was also going through a massive technology conversion, and building a new call center to go along with the technology conversion.

“It was a time of many challenges, some unaddressed, and not real good performance,” recalls Best. With a new leadership team and a new strategy for the future, Best wanted to build something of long-lasting value: a high-performance company that was financially successful and a great place to work. Best wanted to align the multi-state regulated and non-regulated operations and leaders around a one-company focus and a core set of values and centralize services to create synergies and cost-savings.

Instead of imposing a culture, he engaged Senn Delaney in 1998 to shape one through alignment, openness, trust and collaboration. Senn Delaney began to guide the process to shape the new culture, beginning at the top of the organization with the five-member Executive Leadership Team, and then engaging 100 leaders at the next level in the new culture. It was a powerful experience that so touched people's lives that they gave the culture a new fitting name, AtmoSpirit.

More than a decade later, people throughout Atmos Energy have taken to heart the shared values of employee focus, teamwork, customer focus, trust and respect, honesty and integrity, value creation and enterprise thinking.

“I do think that creating the right foundation for your culture allows you to make changes as you need to make changes. Culture is the foundation for all success. This has been a very important process to the long-term health and success of our company.”

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Atmos Energy has focused on developing and sustaining a strong culture ever since you became CEO in 1997. Has that helped during this period?

I believe it's an important and foundational part of our success. Employees are the heart of your company. Without a healthy heart, nothing else will be healthy. You've got to make the heart healthy, and you've also got to convince employees that as a financial company, we've got to be successful financially. You've got to create a great culture. That will help you be successful financially, and it will help you render better customer service, and it will help you be a safe company. Culture is really your foundation.

It was one of the worst years on record for many companies.
How did Atmos Energy fare in 2008?

We had a strong 2008 fiscal performance, a healthy balance sheet and credit capital, and affirmed fiscal guidance for 2009. I was also extremely gratified that we reached a milestone of paying our 100th consecutive dividend and our 21st consecutive annual dividend increase to shareholders.

What are the main challenges your company and industry face in 2009?

For those of us in the energy delivery business, part of the issue is that growth has slowed down. We're not adding the number of homes we had two to three years ago because they're not being built. There are also collections issues. If people aren't paying their mortgage, they're not going to be paying their natural gas bills. You've got issues with people who can't pay at all, so how do you get them help from social services to pay utility bills? With people conserving more, through-put may also be affected.

As a leader, what are you doing at Atmos Energy, and what advice would you give other leaders?

What I've seen over my career is that whatever the situation is with the company, tell employees as much as you can as soon as you can. What we're seeing now, with the impact on the economy, is psychological dynamics at work. It's hard to see white when everything looks so black. Employees read about other companies out there that are in trouble. If they don't hear anything, silence becomes a negative. They assume the worst. They read about it every day and then they see our stock price down and they ask what's going on.

What we've tried to do is step up our communications effort and be more sensitized to the need to make sure that employees are really included in what's going on. I've always believed the key to teambuilding, to building trust, to creating a long-term culture that's performance based, where employees really have faith in their leadership, is good, very honest communications through good times and bad.

We do a quarterly broadcast to all our employees. We also have a monthly newsletter. At the end of October 2008, we had a special broadcast where I talked to employees for about 20 minutes about issues that were transpiring in the company. That's when a lot of companies were having trouble getting credit and stock prices were plummeting.

We wanted to assure employees that our company fundamentally was in good shape. I told them there are a lot of things we don't control, but we do control our performance. We don't control the stock market. Typically, with the earnings we have, if you look at historical patterns, our stock would trade between $28 and $30. Today, it's at $22.50. One of the issues is that there are just not enough buyers in the stock market.

Have any of your people programs or company strategies changed?

The thing about a strong culture is it gives you a platform from which you make all your decisions. One of the credos we've had is to stay strong fundamentally. We haven't run our company on too much debt because in hard times that can cause a real downward pull. We don't prepare for hard times during hard times, we prepare for them before we get to hard times.

We've always balanced acquisitions, getting bigger, with making sure our balance sheet remains strong. We'll continue to do that. We've looked at ways we can increase cash flow. We've communicated our plan to our employees. And that plan has flexibility if things get better.

In the first quarter of 2009, we've deferred projects to conserve capital to make sure we've got plenty of credit. But that's just running our company right. We've been honest with employees about that...that we're taking steps to continue to be in good shape.

Have your longer-term goals changed in these times, or for that matter your vision and values?

The fundamentals of how you run things and do things even during rough times is essentially the same. On the core vision, values, even strategy, we're pretty much staying the course.

Our vision is really our long-term aspiration. That really doesn't change. Obviously, our values don't change. Those are there like the 10 commandments; bad times, good times, healthy times, lean times, your values are always going to be at the forefront of your behavior.

We're not going to lower our goals because of this economic downturn. We're continuing to focus on our top priorities: safety, we have high aspirations about financial performance, customer service and training.

Strategies might change some. There is some impact. It can't help but be. We're going to put more emphasis on collections. We have projects this year that we probably won't do because producers are not going to make commitments long-term until they see some stabilization of prices.

Will you continue to invest in people programs and the AtmoSpirit culture?

We went through another difficult time for our company in the late ‘90s, and even in the years when we managed our budget closely, we continued AtmoSpirit. We've kept our culture alive through thick and thin. There were a few years when we were making a number changes, putting in new systems and going through massive change. There was a lot of turmoil. But we didn't back off of doing the culture.

Culture shaping is not a program, it's not a process, it's a way of life. We tie the AtmoSpirit principles in all of our training, our leadership training and our tactical training. You've got to hire well, you've got to train well, you've got to promote well and you've got to nurture the culture and create trust.

You've had a number of changes of leaders at the top.  Has this impacted performance or alignment during this critical period?

There has been a turnover of four of the six leaders on our management committee in the last few years.

One of the beauties of having a strong culture is that when you make a replacement at any level, the first question you ask is who will fit this culture; not who is the smartest, not who is going to make us the most money, but who will fit the culture the best?

With a strong culture and obviously the choice of the right people on the bus and in the right seats, I think we're well positioned.

As a leader, what has been your core focus and top challenge this year?

The greatest pressure for me is to have this company be successful so that our employees can enjoy work. It should be something that people look forward to coming to and take pride in coming to work.

What I've focused my whole career on is I believe you can have a very healthy culture and also be a very high-performing company. That's really the greatest challenge of all. Because sometimes in tough times people resort to leading by fear or dysfunctional organizations become even more dysfunctional.

It's all about leadership and trust when you break it all down. You communicate to develop trust, getting people to feel part of the company. I tell people it's their company, it's not my company. We all work together.

Any final thoughts for 2009?

I heard something the other day that I thought was very apropos: Worry about nothing. Pray about everything. Be thankful for all things. Think good things. Do the right thing. Enjoy the real thing.

It's hard not to worry, but if you worry about things you can't control, you are probably going to create unnecessary stress for yourself.

Bob Best is chairman of the board and CEO of Atmos Energy.