ORGANIZATION PRINCIPLES W. Frank Dell II, CMC September, 2003

DELLMART & COMPANY2 AGENDA INTRODUCTION STRUCTURE ROLES & RESPONSIBLITIES MOTIVATION

DELLMART & COMPANY3 Objectives  Introduce elements of organization  Bridge the theory and reality gap  Identify common problems and issues

DELLMART & COMPANY4 Definition “A body of persons grouped for some end or purpose”

DELLMART & COMPANY5 History of Organization  Tribal Chief –Division of labor Warrior Hunter Support –Report to Tribal Council  Birthright Leader King Earl/General Advisors

DELLMART & COMPANY6 Element - People  Employees are the greatest asset of every company  Types –Striving to get ahead –Takes pride in work –Puts in time  A great plan without good people is useless

DELLMART & COMPANY7 Element - Management  Organizations are built around management  Management skills –Inherent –Learned  You’re not a manager until you hired and fired someone  A good manager is someone who is right 51% of the time  Traits –Common sense –Right and wrong values

DELLMART & COMPANY8 Element - Culture  Definition – “The sum total of ways of living built up by a group of human beings and transmitted from one generation to another”  Types –Motherland –Company

DELLMART & COMPANY9 Element - Knowledge  Types –Education –Experience  Education –Accounting & Finance –Marketing –Information Technology –Human Resources –Distribution

DELLMART & COMPANY10 Factor - Size

DELLMART & COMPANY11 Factor – Span of Control Old – 6 to 1 New – 11 to 1

DELLMART & COMPANY12 Issue - Silo

DELLMART & COMPANY13 Issue – One on One Boss Worker

DELLMART & COMPANY14 People Vs Structure  Build structure around employees –Management talent –Span of Control –Knowledge

DELLMART & COMPANY15 AGENDA INTRODUCTION STRUCTURE ROLES & RESPONSIBLITIES MOTIVATION

DELLMART & COMPANY16 Board of Directors  Senior most advisors  Maximum independence  Diverse background and experience Board of Directors

DELLMART & COMPANY17 Managing Director  Chief Executive Officer  Strategy execution  Generalist Board of Directors Managing Director

DELLMART & COMPANY18 Management Team  Core requirements –Merchandising –Store Operations –Accounting & Finance –Administration (Human Resources)  Optional – Logistics/Distribution Managing Director Merchandising Store Operations Logistics Accounting & Finance Administration

DELLMART & COMPANY19 Expanded Management Team  New direct reports –Human Resources/Personnel –Information Technology –Real Estate –Treasurer (public company) –General Counsel Managing Director Merchandisin g Store Operations Logistics Accounting & Finance Human Resources Information Technology Real Estate Treasurer Legal Loss Prevention

DELLMART & COMPANY20 Executive Board  Board of Directors – Overall responsibility including strategy  Executive Board – Daily operating responsibility including tactics –Similar to the Management Team approach Board of Directors Executive Board

DELLMART & COMPANY21 Line Vs Staff Line  Merchandising  Store Operations  Logistics Staff  Accounting & Finance  Human Resources  Information Technology  Legal  Loss Prevention  Real Estate  Treasury

DELLMART & COMPANY22 Marketing & Merchandising  Marketing – “the total of activities by which transfer of title or possession of goods from seller to buyer is effected, including advertising, shipping, storing and selling”  Merchandising – “to plan for and promote the sale”

DELLMART & COMPANY23 Marketing  Competitive assessment  Customer identification –Research –Frequent Shopper program  Corporate image –Advertising

DELLMART & COMPANY24 Merchandising Issues  Number of vendors  Number of items  Number of transactions  Information Technology support  Promotional strategy  Warehouse Vs Direct Store Delivery

DELLMART & COMPANY25 Merchandising Models  Buyer  Category Manager  Merchant Prince

DELLMART & COMPANY26 Buyer Organization VP MerchandisingBuyer AdministrationRetail PricingAdvertisingSpace

DELLMART & COMPANY27 Buyer Time Allocation

DELLMART & COMPANY28 Buyer Alignment Vendor Category

DELLMART & COMPANY29 Category Elements  Manage the category as a strategic business unit  Develop strategic category plans based on category goals, competitors and market conditions  Determine price, merchandising, promotion and product mix  Collaborate with suppliers

DELLMART & COMPANY30 Category Process Category Definition Category Role Category Assessment Category Scorecard Category Strategies Category Tactics Plan Implementation Category Review

DELLMART & COMPANY31 Category Organization Product Supply Space Allocation Retail Merchandising Category Analysis Retail Pricing Advertising Coordination Price/Data Integrity Marketing Services Allowance/Cost Control Category Management

DELLMART & COMPANY32 Category Management Reality  Lacking education and training  Ignoring process  Selling Category Captain position  Result is Super Buyer

DELLMART & COMPANY33 Store Operations Issues  Alignment - format Vs geography  Training – support Vs Human Resources  Technology - support Vs Information Technology

DELLMART & COMPANY34 Store Operations Organization Vice President District Store District Store District Store Support Meat Product Bakery Labor Replenishment How many stores per district ?

DELLMART & COMPANY35 Store Manager Front EndMeatProduceBakeryGrocery Back Office

DELLMART & COMPANY36 Logistics Issues  Capital – own Vs lease  Management – operate Vs 3 rd party  Replenishment – Logistics Vs Merchandising  Production – warehouse Vs direct report

DELLMART & COMPANY37 Logistics Organization Vice President Transportation Inbound Outbound Warehouse Receiving Selection Shipping Inventory Control Production MaintenanceReplenishment Industrial Engineering

DELLMART & COMPANY38 Finance & Accounting Issues  Payroll – Finance Vs Human Resources  Computers – Finance Vs direct report  Control – checks and balances

DELLMART & COMPANY39 Finance & Accounting Organization Vice President Controller Budget Accounts Payable General Ledger Payroll Internal Audit Information Technology Tax

DELLMART & COMPANY40 Human Resources  Issues –Payroll –Training –Culture Vice President Recruitment Headquarters Stores Logistics PayrollTrainingCompliance

DELLMART & COMPANY41 Real Estate  Issues –Own Vs rent –Remodeling –Equipment selection Vice President Site Selection Contract Management ConstructionMaintenance

DELLMART & COMPANY42 Loss Prevention  Issues –Safety –Shrink Vice President StoresWarehouseHeadquartersSafety

DELLMART & COMPANY43 Dual Management  Dotted line reporting  Effective –Policy –Procedures

DELLMART & COMPANY44 AGENDA INTRODUCTION STRUCTURE ROLES & RESPONSIBLITIES MOTIVATION

DELLMART & COMPANY45 Board of Directors  Quarterly meeting  Responsibilities –Strategy approval –Budget approval –Audit –Executive compensation –Treasury –Shareholder communication

DELLMART & COMPANY46 Management Team / Board  Monthly meeting  Responsibilities –Strategy development –Budget development –Daily operations & execution

DELLMART & COMPANY47 Department Interact Merchandising Logistics Headquarters Stores

DELLMART & COMPANY48 Responsibilities  Merchandising – Supplier to shelf  Distribution – Purchase Order to store  Store – Receiving to customer  Accounting – All transactions

DELLMART & COMPANY49 Associate Communications  Training & Educations (how)  Directions (what & when)  Technology interface –Protocol –Methodology

DELLMART & COMPANY50 Control Components Standard Operating Procedure Budget Job Description Goals

DELLMART & COMPANY51 Job Description  Written  Components –Minimum requirements –Reporting relationships –Specific responsibilities –Corporate responsibilities  Updated annually

DELLMART & COMPANY52 Operating Procedures  Corporate  Store Operations  Warehouse Operations  Transportation Operations  Merchandising  Accounting

DELLMART & COMPANY53 Methods - Checkout  Shift start – Sign & check cash drawer  Customer – Log into register –Greet customer –Scan all items –Process payment –Bag items  Break – Lock register  Shift end – Cash drawer to office & balance

DELLMART & COMPANY54 Method - Receiving  Walk from office to receiving area  Open door and set dock plate  Count –Cases per layer –Layers per pallet –Record count  Walk to office and log in delivery

DELLMART & COMPANY55 Budget Management  Submit a realistic budget  Category –Controllable –Non-controllable / allocations  Authorization –Approval levels (amount) –Positive approvals

DELLMART & COMPANY56 Management Goals  Set annually –Review semi-annual  Driven from company strategy  Above & beyond normal job  Include some reach goals

DELLMART & COMPANY57 AGENDA INTRODUCTION STRUCTURE ROLES & RESPONSIBLITIES MOTIVATION

DELLMART & COMPANY58 Management is the Role Model Walk the walkTalk the Talk

DELLMART & COMPANY59 Not Pay Alone Title Perks Benefits Pay

DELLMART & COMPANY60 Reinforcement Positive  Recommended  Long term Negative  Use sparingly  Short term

DELLMART & COMPANY61 Lessons for Leaders  Timing is (almost) everything  Anything is possible if you share the glory  Trust, once broken, is seldom restored  Leadership is about building connections  Leaders learn from their mistakes

DELLMART & COMPANY62 Lessons for Leaders (Cont.)  Confidence – not just in oneself counts  Effective partnership requires devotion to one’s partners  Renewal comes from many sources  Leaders must be talent brokers

DELLMART & COMPANY63

DELLMART & COMPANY64 W. Frank Dell II, CMC President DELLMART & Company 125 Hardesty Road Stamford, CT USA Tel: Fax: