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

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

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

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.)

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

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 Causal Intervening End-result

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

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

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

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.”

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

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

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 Action Media Results Analysis Logistics Design

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 culture

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

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)

Causal variables Intervening variables End result variables Mystery shopper Company Recognition Programme Culture Company Values Management style Store size “Good” manager Stock loss Budget variance Absence Staff turnover Employee Commitment

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?

More detailed analysis of objectives 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 Customer Profit