The Culture-Customer-Profit Chain

A successful retail case

studyAn extract from a UK Best Practice Club presentation

Culture

CustomerCusto

mer

Profit

What this presentation covers1. Culture – what is it and how can it be

measured and improved2. The impact of culture on performance

(the culture-customer–profit chain)3. How we set out to test this with the

client4. Questions and conclusions

A successful retail case study1. Culture – what is it and how can it

be measured and improved2. The impact of culture on performance

(the culture-customer–profit chain)3. How we set out to test this with the

client4. Questions and conclusions

Definitions of Culture The ideology of

the organisation An integrated

pattern of human behaviour

The way we do things around here

Culture is a relatively stable set of behaviours and practicesClimate is a short term status affected by recent and current events(e.g. redundancy, pay rise/freeze etc.)

Measuring culture vs. attitudes

ME THEMATTITUDESof toward

champion victim

CULTURE

VIEWS ON VARIOUS ASPECTS OF THE ORGANISATION AND TYPICAL BEHAVIOURS

Likert’s Scales

Causal

Intervening

End-result

Rensis Likert - The Human Organisation (1960)

Well established and trusted scale and measurement methodology based on indicators at different positions in the cause and effect chain as shown

Uses a 9 point scale to expose extremes of opinion and problem pockets

Culture is primarily an end-result

Changing culture involves the 4 “A”s:-

e.g. through:-e.g. through:-Health checkHealth checkBurke Litwin ModelBurke Litwin ModelMcKinsey 7SMcKinsey 7SEFQM CriteriaEFQM Criteria

Systems &ystems &processesprocesses

SStructuretructure

Styletyle

Audit the results

Assess the culture

Analyse the causes

Act on the Solutions

A successful retail case study1. Culture – what is it and how can it be

measured and improved2. The impact of culture on

performance (the culture-customer–profit chain)

3. How we set out to test this with the client

4. Questions and conclusions

Profit through people?Recent research has shown clear links

Sears – USA (800Stores sampled)

Institute of Employment Studies – one UK retailer (95 stores sampled)

This research (700+stores sampled)

Culture

CustomerCusto

mer

Profit

Institute of Employment Studies

“Although we had recognised the potential influence that company culture may have upon staff , we had not expected it to feature so strongly.....”

“...Our final model found company culture was a powerful influence within our attitude chain.”

HypothesisManagementStyle

CompanyCulture

EmployeeCommitment

CustomerSatisfaction

CustomerSpend Int.

Changein Sales

Peo

ple

Cus

tom

ers

Pro

fit

A successful retail case study

1. Culture – what is it and how can it be measured and improved

2. The impact of culture on performance (the culture-customer–profit chain)

3. How we set out to test this with the client

a. Cultural surveysb. Links to KPIs

4. Questions and conclusions

Cultural Survey development Strategic drivers –

Board level ownership Values Brand Desired future culture

Who is the customer?

Testing/customising First results were key

to roll-out decisions

A brief history of our relationship with the client

1996 – first survey – assessing capability for change

1997 – static - confirmed stability/validity - preparing for change

1998 – major improvement across nearly all indicators

1999 – continued change and further improvement

2000 – plateaued – but survey changed to 100% and down to Store level

How the early surveys were used Testing the receptiveness of the

existing culture Identifying change barriers and

levers Customising the Visioning process Giving a go/no go to different parts of

the business Validating the survey itself

How later surveys were used Measuring impact of the change

programme called Living the Mission, especially on the Company Values:- Getting it right for the Customer Everyone making a difference Learning by doing Pulling together Being passionate about (company) Being Straightforward

How later surveys were used (cont)

Enabling decisions on HR and customer strategy, e.g. Implementing store standards Introducing an idea management programme Mystery shopper programme Reward and recognition systems Integration with balanced scorecard

Widening ownership of results

Results Real and verifiable movement in culture

occurred during 1997/8. Improvement continued in 1999

and was sustained in 2000 All balanced scorecard targets were surpassed Excellent results on

Approach to customer/supply chain and quality Teamwork Working conditions Communication, involvement and ideas

Plus major Improvement in Recognition and openness Focus of reward schemes

Change over 4 years in overall cultureCHANGE IN OVERALL AVERAGE DISTRIBUTION OF POINTS BY FUNCTION - 1996 TO 1999

0.00

1.00

2.00

3.00

4.00

5.00

6.00

7.00

1996 1997 1998 1999

Head Office Distribution Store Ops

MOST IMPROVED SCORES - 1997 to 2000

0.00

1.00

2.00

3.00

4.00

5.00

6.00

7.00

8.00

Focus of Rewards Openness Recognition Involvement Management style

2000 1997

LEAST IMPROVED SCORES - 1997 TO 2000

0.00

1.00

2.00

3.00

4.00

5.00

6.00

7.00

8.00

Seeking customer views Pay levels Approach to Suppliers Approach to Customers

2000 1997

A successful retail case study1. Culture – what is it and how can it be

measured and improved2. The impact of culture on performance

(the culture-customer–profit chain)3. How we set out to test this with

the clienta. Cultural surveysb. Links to KPIs

4. Questions and conclusions

Enablers to identifying the culture-customer-profit chain

Store number identified on forms Confidence in confidentiality 100% coverage Good management of form-returning

process Time off for staff to complete forms Common format for K.P.I.s All data collected in one place

What we looked at Store size (SqFt, takings, wages) Store position/customer shopping mission Third party opinions (Internal, Mystery

Shopper) Staff turnover and absence levels Financial results (sales, contribution, profit,

shrinkage) Impact of “good” managers The Company values (from culture survey)

Managementstyle

Storesize

“Good” manager

Mysteryshopper

CompanyRecognitionProgramme

Culture

CompanyValues Employee

Commitment

Stock loss

Budgetvariance

Absence

Staffturnover

Causal variables Intervening variables End result variables

Staff turn/attendance Staff turnover and absenteeism correlate

with management style Evidence that “engagement in the

business” is significant in reducing turnover

Pay satisfaction and alienation from the business correlate to absence levels

Absence is more correlated to store size than staff turnover

Business results Performance to Budget is negatively

correlated with absence which is related to culture

Shrinkage is lower in better cultures and more customer focused stores and especially those which do better on internal assessment

More stable staff and lower turnover correlates to lower shrinkage

What was gained? Data gathered across the board in one place Many assumptions about modern management

methods confirmed and quantified Many variables, but

consistent threads enormous immediate and potential value exciting possibilities

Greater ownership of the numbers Makes people look at the wider picture Makes sense of the balanced scorecard

What else could you do with it?

Measure impact of HR, strategic and customer initiatives

How important are management skills in influencing staff turnover and results and the opinions of customers?

What impact will additional training have on results? What is the impact of employee involvement,

communication, recognition etc. on performance and retention?

What is the effect of movement or change in local managers on employees and performance?

Are you measuring the right things in your business?

How do we go about understanding our own culture-customer-profit chain?

More detailed analysis of objectives Analyse current data sets for

compatibility Obtain Executive level support Set up a joint planning team Set up a pilot run

Culture

CustomerCusto

merProfit