Coles’ comeback: how the company got everyone singing in tune
The gains made by Coles retail operations over the past two years provide an instructive case study in balancing top down direction – the orchestra – with bottom up diversity and flexibility – the jazz band.
Under the baton of Stuart Machin, Coles’ operations director, the Coles retail store musicians are starting to play impressive music; a combination of directed orchestration with local jazz band flair.
In today’s turbulent business environment all companies face the challenge of building a flexible and agile company: one that can sense and respond to changes in the wind. Whilst the orchestra plays beautiful music there is a danger of playing the wrong tune at the wrong time or in the wrong place. There is a limit to top-down planning and orchestration. This is especially the case with a major retail organisation such as Coles, with 95,000 musicians playing in 742 locations every day. Top down planning needs to be balanced with bottom up learning.
In building an agile organisation the role of the composer and conductor focuses on organisational design: the processes, team structures, performance measurement systems, incentives, people training and development, and organisational culture that foster jazz band music at a local level. The Coles experience illustrates a number of important characteristics of agile organisations.
The first challenge for any new leader is to assess the current team and build the new team. Machin said he resisted the temptation to bring in a new team or any new team members on day one. Instead he spent the first three months immersed in the business, gaining a firsthand understanding of the people, the processes, and the culture.
The Coles operations management structure consists of 16 General managers, eight of which are responsible for retail operations, with eight based in the Store Support Centre (this does include Coles Online, Renewal, HR and Coles IT), 66 regional managers, 742 store managers, and 95,000 team members including store department managers.
Diversity within each team, starting with the senior management team, is a cornerstone of Machin’s management style. Coles, for example, has an operations structure of eight regions spread across Australia each headed by a GM: two each in NSW, Qld and Victoria (which includes Tasmania) and one in WA and SA (including the NT). This senior management team comprises two GMs from the previous regime – both with over 20 years Coles experience – and another Coles’ veteran with 30 years experience who was promoted from a regional manager position. Two GMs have joined Coles from the wider Wesfarmers Group – namely Kmart and Bunnings – bringing with them Wesfarmers’ transparent performance measurement and return-to-shareholders culture. The final three have joined Coles as new members of the team: one was appointed two years ago with the final two having more recently joined. They have injected new ideas, perspectives and thinking to the group.
Machin is quick to highlight that 80 per cent of promotions come from within the organisation and only 20 per cent outside of Coles. He has attracted talent form the UK, as well as the US and South Africa, but now is more reliant in ‘home grown’ experience.
“Historically, Coles had too many metrics that in many cases were neither incisive nor relevant. In a number of areas, relevant information was not being collected..”
Diversity also has a broader importance, not only within operations, but within the wider Coles business, as there is a focus on women in senior management, and Machin is particularly proud of his team’s recent involvement within the Indigenous space.
Machin says his team has the ideal blend of experienced Coles leaders who can provide a sense of history and context, balanced with fresh perspectives from the new members.
During the first three months Machin and his team developed and implemented a simple yet powerful performance measurement system. The balanced scorecard performance measurement system consists of 16 measures split into four groups:
• Customers: “always come first” with measures such as average queuing time and stock availability. Average queue time for example has dropped from eight minutes two years ago to about 1.5 minutes currently.
• People: with measures such as team member turnover and the ratio of permanent to casual team members, as well as how many people are on a development plan.
• Store Operations: measured by metrics such as mark downs, wastage and safety.
• Commercial: sales, costs and profit, for example.
Machin says there is really nothing new in any of these measures: they are virtually identical to what he used as a young store manager in the UK, aged just 21: “Provide customers with an excellent shopping experience with no queues, great quality products, develop and empower your team, and manage efficient retail operations.”
Historically, Coles had too many metrics that in many cases were neither incisive nor relevant. In a number of areas, relevant information was not being collected.
For example, there was no absenteeism measure or readily available information on team member turnover and the balance of permanent and casual team members in each store. This information is now collected and used in the balance scorecard, supplemented with other information such as exit interviews when team members leave. “What gets measured gets done”.
When monitoring performance, Machin passionately believes that with such a vast number of operating business – 742 individual stores – it is imperative not to base decisions on averages. Every store matters. General and regional managers in particular are warned about managing by the averages. It is more important, for example, to monitor how many stores, and how many individual departments, reach each target. Not the average performance across all the stores in the region or zone. The conductor similarly listens to every single musician and not just the total orchestra: the final music is the result of every single musician.
The challenge: how to communicate to a team spread across Australia the importance of messages such as “each individual store matters”? This message was reinforced by signals such as when Machin visited the Tom Price Store in Western Australia the week before Christmas. The story spread rapidly throughout the Coles community that he was at Tom Price on Christmas Eve – not at an exclusive holiday destination, oblivious to the last minute and late night pressure that his team members were experiencing.
He also relates a story on checkout training. “Retail is detail” as the saying goes and Machin says it is important to fully immerse yourself in the details of actual retail operations. So Machin took check-out training and then spent four hours being a retail check-out operator. This experience illustrated that building check-out team member rosters is not as easy as he assumed, and revealed a number of flaws in the operating system, including lines that had been deleted six months before but were still on the system. Again, the word spread that Machin was now a trained checkout operator and “willing to get his hands dirty”.
Each GM subsequently also had checkout training and he challenged each store manager to complete the experience as well – to run a checkout for a week. To reinforce the importance of managing queuing time, this metric was incorporated into the balanced scorecard and provided a metric for the store manager’s bonus scheme.
A performance system with clear performance expectations Machin believes is an integral component of deciding who should be in the team. In fact, many team members witnessing the new performance expectations and measurement processes elected to make their own choice and leave the organisation. They decided that they were unlikely to succeed in the new high performance environment. Team member turnover has now settled down and is comparable with any leading UK or international retailer.
Machin is keen to highlight that he believes he has an exceptionally talented team both in the Store Support Centre and in his stores and is obviously very proud of them.
Performance expectations and feedback tend to create a self-fulfilling prophecy: high expectations lead to high performance. Store managers are provided with balanced scorecard feedback so that they know their performance rating on each of the 16 measures relative to other stores in their region, their zone and the whole company. They are provided with information to monitor their progress – while injecting a competitive element in the process.
Machin emphasised that during this time achieving the balance between giving direction and listening is not easy. He says – not surprisingly – that early in his time with Coles he adopted a highly directional style, but is now moving more to a coaching, challenging and involving. He had a clear vision of what needed to be done and how to do it.
But this had to be balanced with the ability and systems to listen to the 95,000 Coles team members in the store. He needed people to challenge him and provide their input. He believes the ability as the leader to admit to, and learn from, mistakes is absolutely critical to this process.
He relates the story of how early in the peace he introduced a new store rostering system which everyone told him was terrific: but in fact turned out to be a disaster. He admitted his mistake to the team and then asked them to support him as they sorted it out. They have now changed thousands of rosters based on customer service requirements and store trading hours. A brand new rostering tool and a way of managing wage costs in stores is soon to be rolled out and many store managers have worked together to develop this tool.
Regular feedback and interaction with stores is managed by a suite of mechanisms. First are the quarterly Roadshows where Machin, together with MD Ian McLeod, tour the country to meet and chat to all store teams. Second is what is called the Air Traffic Control (ATC) meetings. Every Monday morning for an hour and a half a group of 10 store managers, two regional managers and a ‘zone GM’ sit with Machin to review the past week’s performance and look at opportunities for the current week.
Coles is also passionate about listening to customers. A Listening to Customers program was launched with over 55,000 responses.
Machin says “listening to customers is part of our DNA now and customers are quick to tell us when we are right and when we are wrong”.
“You celebrate when you are praised and the opposite when customers are not happy: you give yourself a kick up the rear and work hard to rectify it.”
Coles is starting to put more emphasis on values and Machin constantly re-emphasises it’s very much how you do things, not just what you do.
‘Customers come first – always!’ is the first value, and another which Machin referrers to frequently is, ‘Supporting each other to get things done”’.
As well as listening and admitting to, and learning from, mistakes, Machin has found the ability to celebrate success has subtle nuances that have to be recognised. He discusses the importance of not only celebrating success, but when and how to celebrate success. The lesson from the Coles experience is to celebrate success early: “‘Celebrate the ‘green shoots’ when they emerge”.
“Do not wait until the plant is fully grown and flowering. Senior managers typically have – or should have – a clear view of what ultimate success looks like, and tend to be tough markers on both themselves and their team. The tendency is to wait until just before the plant is fully grown and ready to bear fruit before they celebrate.”
Instead, it is important for the team to understand that they are heading in the right direction and note when the green shoots are starting to emerge. It is also important to celebrate the green shoots with no ‘buds’.
“No caveats about a long way to go; we all understand that so let’s just celebrate the green shoots. This is the role of the balanced scorecard with its lead indicators, because it assists the monitoring process as the plant develops.”
Coles has implemented a number of mechanisms to recognise and celebrate success. The 15 top store managers, for example, have been awarded a study tour to the US. This major award is complemented by recognition of selected stores in the weekly note to stores, and Machin personally recognises the efforts of the top store managers every week.
He has also learnt the importance of balancing negative and positive feedback to stores. Initially the natural tendency was to take photos of the things he was not happy about during store visits. He then recognised that he was not taking pictures of the impressive things, with subsequent positive feedback.
With the performance measurement and listening mechanisms in place, Machin and his senior management team then started to develop their team of musicians to play better music.
Coles has a fundamental belief that no one comes to work to do a poor job, and that attitude is the foundation for performance: “We recruit for attitude and train for skills”. He says currently there is a spark, a feeling of excitement and pride in working for Coles.
“This does not mean that we are not under pressure to perform. We feel that every day but now that is a positive energy. “We are creating an environment based on success and pride, not fear.”
“Machin’s vision in, say, five years, is that shoppers will know they have been in a Coles store..”
Team members believing they will not succeed in this new environment have left the company. “Team members say to me that ‘there is a lot going on’, to which I reply ‘would you want it any other way?’.”
The introduction of the Retail Leaders program is a good case in point regarding building momentum within Coles. The aim was to develop an on-the-ground training program that was a small step in the process of developing leaders. Machin and his team developed their ideas and produced a poster for the stores launching the program, inviting applications for the challenge. In the first week they received 25 applications and Machin was “gob-smacked and devastated”.
On reflection he realised that “no one really knew what the program was about, what the vision was, the benefits, the process and the journey”.
On the next Roadshow he briefed every store manager and challenged each of them to identify a person on their team with untapped leadership potential. This first group would pilot the program before roll out.
They received 350 applicants from which 100 were selected for the first program. Feedback from this program included improvements such as tailoring the program for different levels such as department, store or regional manager: a clearer distinction between theory and practice; and an opportunity for in-store experience at a more senior level. Seven out of 10 of this first intake were promoted within the next six months. A second poster launching the second phase of the program was produced, generating a massive 2000 applicants.
Machin then personally thanked every store, regional manager and GM, for outstanding communication of and commitment to the program and the development of their people. Closing the loop is critical and often neglected.
Coles’ retail operations orchestra is now mastering the tune. It is working on three time horizons: the first, which has just been completed, is doing better at the basics. The focus has been on what needs to be done. The second and current stage is about delivering consistently well. The how is just as important as the what. The third stage will be providing Coles with a point of difference.
Machin emphasised that during the first “doing better at the basics” stage the whole platform was established to “deliver consistently well” in stage two. For example, “Coles’ renewal stores are not simply about trialling new formats or new produce displays. They are designed around end-to-end renewal, including product range, people, training and development, systems, and ordering and replenishment processes.”
The system provides clarity and accountability.
Machin argues that the organisation has “an absolutely crystal clear vision of where we are heading and what a good job looks like”.
“We have produced a 24-hour clock of what needs to be done in every department of a store which provides the roadmap of how we want to run our shops. It is then up to each store to add personality to their business. Whilst we want consistency of operations we don’t want robots. We do not want to be regimented.”
During the last quarterly road show Machin spent the first half hour congratulating the team on their successes before moving on to the next steps in the plan and the corporate culture. The culture is all about “how we do things at Coles”.
“We want to listen, to engage, to communicate, and to be different; it is all about Challenge and Involve.
“Coles believes that the store level personality will be a significant point of difference in the future: the third wave of the five year plan.”
Machin’s vision in, say, five years, is that shoppers will know they have been in a Coles store. The team members, level of service, store personality, and the store in relation to its local community will be different.
His vision is that in a few years shoppers will note the difference in the Coles shopping experience. The Coles people will make the difference, and to achieve this they will be committed and engaged team members.
Individual stores are now starting to develop their own ideas and personality. For example, during the launch of the Avatar movie a number of store employees dressed up in Avatar costumes. Similarly, many stores are now conducting their own Master Chef cooking demonstrations, tapping into the MasterChef phenomenon.
“Our store teams are fantastic and they just love to get behind events and have fun.”
The jazz band elements are starting to emerge. Says Machin: “We have given them permission to run their own stores.”
The orchestration has provided the vision, the performance management systems and tools, the operating processes and the training systems. The store now has the permission to play jazz.
* Michael O’Keeffe is a company director and advisor specialising in fresh food retailing. He can be contacted at email@example.com.
This feature first appeared in Inside Retail Magazine. Click here to subscribe