The Culture-Customer-Profit Chain

1. Profit Customer Customer Culture The Culture-Customer-Profit Chain A successful retail case study An extract from a UK Best Practice Club presentation

2. What this presentation covers • Culture – what is it and how can it be measured and improved • The impact of culture on performance (the culture-customer–profit chain) • How we set out to test this with the client • Questions and conclusions

3. A successful retail case study • Culture – what is it and how can it be measured and improved • The impact of culture on performance (the culture-customer–profit chain) • How we set out to test this with the client • Questions and conclusions

4. 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 practices Climate is a short term status affected by recent and current events (e.g. redundancy, pay rise/freeze etc.)

5. CULTURE VIEWS ON VARIOUS ASPECTS OF THE ORGANISATION AND TYPICAL BEHAVIOURS ME THEM ATTITUDES of toward champion victim Measuring culture vs. attitudes

6. Likert’s Scales • 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 Causal Intervening End-result

7. Structure Systems & processes Style Changing culture involves the 4 “A”s:- Assess the culture Analyse the causes • e.g. through:- • Health check • Burke Litwin Model • McKinsey 7S • EFQM Criteria Act on the Solutions Audit the results

8. A successful retail case study • Culture – what is it and how can it be measured and improved • The impact of culture on performance (the culture-customer–profit chain) • How we set out to test this with the client • Questions and conclusions

9. Profit Customer Customer Culture Profit through people? Recent research has shown clear links Sears – USA (800 Stores sampled) Institute of Employment Studies – one UK retailer (95 stores sampled) This research (700+stores sampled)

10. 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.”

11. Management Style Company Culture People Customer Satisfaction Employee Commitment Customers Customer Spend Int. Change in Sales Profit Hypothesis

12. A successful retail case study • Culture – what is it and how can it be measured and improved • The impact of culture on performance (the culture-customer–profit chain) • How we set out to test this with the client • Cultural surveys • Links to KPIs • Questions and conclusions

13. Design Logistics Analysis Results Media Action 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

14. 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

15. 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

16. 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

17. 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

18. Results • Real and verifiable movement in culture occurred during 1997/8. • Improvement continued in 1999and 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

19. Change over 4 years in overall culture

22. A successful retail case study • Culture – what is it and how can it be measured and improved • The impact of culture on performance (the culture-customer–profit chain) • How we set out to test this with the client • Cultural surveys • Links to KPIs • Questions and conclusions

23. 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

24. 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)

25. Mysteryshopper Management style Absence Staff turnover CompanyValues Store size Employee Commitment Culture Budgetvariance “Good” manager Company Recognition Programme Stock loss Causal variables Intervening variables End result variables

26. 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

27. 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

28. 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

29. 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?

30. Profit Customer Customer Culture 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