Paul Howard: Does that tie in to things like the integrity of the brand?
Val Butroyd: It is about reputation.
Paul Howard: And trust.
Andrew Bye: In some audiences, it would be a given. People do not necessarily write in about this kind of stuff. From an investment perspective and in terms of a new corporate brand, a lot of time and effort has been spent on corporate responsibility. When we were part of GUS, there were different drivers, and we were just one of many brands in a very large business.
Paul Howard: One of the issues that we are all facing now is that, given the presence of sites like YouTube on the internet, there are no hiding places, so you really must do what you say you are going to do. There are ‘suck’ sites which give upset consumers an opportunity to promote their gripe against large companies.
Andrew Bye: Is it like an internally-sponsored blog site?
Paul Howard: You can set up anything.
Paul Williamson: That is where I slightly disagree with John’s point about how much risk managers can do to contribute to the brand, since the most powerful consumer is one who has been upset, rather than one who is happy. Sainsbury’s and Marks & Spencer have gone through phases where they have found things difficult, due to stock issues, for example, but British Airways made a promise to be the world’s favourite airline, yet sometimes passengers were greeted at the check-in desk by a surly individual paid the basic wage, and all of its brand promise went out of the window. People turned away in their droves, because British Airways had set up a promise that it was not prepared to invest in delivering.
Paul Howard: Therein lies one of the key problems of being a retailer. Even in those days, you would have found some people who received a superb service from British Airways, and the problem that all of us face is the issue of consistency. All of us probably have some great stories, as well as some that are not so great. It reminds me of the ‘McDonald’s factor’: you know what you are going to get when you go to McDonald’s and you know what the standards are going to be. It is quite difficult for a food or clothing retailer to say that they know exactly what the service or experience that their customers are going to receive is going to be in any one of their stores. The issue of consistency is huge.
Andrew Bye: Argos has quite a sophisticated product management system and runs its business through a catalogue. Most customers will have done their research in terms of what they want, before they go to a store: the best brand, the lowest price, and what features they want. People buy what they want and they know pretty much how it is going to work, so having such controlled expectations makes things work very well. Many of the claims received by Argos mirror customer expectations as to what is generally provided, apart from for a few expected breakages.
John Windsor: We have not even touched on the physical risks in supply chain, such as warehouse security, or political and religious risks. We still run risks around distribution centres, transport, and particularly continuity of supply, since we now source from the Far East and further afield, and we need to know that our product is going to be supplied. If you have overseas warehouses, is your business reliant on one warehouse, one cutting shop, or one particular centre? You have to ensure that your suppliers have business continuity plans and that they can fulfil them. You have to impose your own standards on them.
Paul Howard: You raise an interesting point about a move to the Far East. On the food side, there is a big move back to local sourcing. On the one hand, there are the difficulties concerning global sourcing; on the other hand, there are challenges around sourcing yogurt from one small farm in Cornwall to distribute in a certain number of stores in the West Country, for example. The same concerns about standards apply to both scenarios.
John Windsor: You are also managing customer expectations. We have said that we will be carbon neutral by 2012; we are working steadily towards that and making some huge changes. In common with many other retailers, we are labelling our products so that customers know that they have been imported by airfreight, and asking whether they are prepared to have runner beans only when they are in season. We can at least educate people to understand that, if they eat runner beans in November, they have not been grown in Kent. There is somewhat of a dichotomy: rather than discouraging people from buying a particular product, we are just making them aware of where it comes from and what the ramifications are of flying it in from, say, Kenya.
Paul Howard: You are just raising their awareness.
John Windsor: We should all be more aware of these issues and accept the ramifications, or do something about it.
Paul Howard: From the Co-op’s perspective, sourcing and the range of products available is another huge area. Are you the only one among us that produces too?
Val Butroyd: I think so. We produce our own potatoes; we wash, pack and sell them.
Paul Howard: In theory, it would be easier, since you have a greater deal of control – it is ‘within the family’.
Val Butroyd: It should be, but if it goes wrong, it can be more catastrophic, in some ways. It depends on where in the chain it goes wrong. Not long ago, we had an incident where, instead of potatoes being washed, they were being covered in petrol from the machinery. They were phoning me, asking what my advice was, but I was saying that, rather than an insurance issue, this was negligence.
We recently temporarily lost one of our regional distribution centres (RDCs) in Scotland, due to a fire that started in the seat of a stacker truck. It was in a chilled area, so the seat had to be kept warm. However, it was overheating and, although it was the middle of the night, somebody managed to find it before the warehouse burnt down. The consequences were a big clean-up and two weeks’ disruption, but it added cost to our distribution to the Scottish highlands and islands, since we had to ship a lot of product from Halesowen, which is a long way to go. Within two days, however, as far as the sources were concerned, they knew no different, so that was a good test. In fact, things went quite well.
John Windsor: That raises the issue of whether you rely on a set of reasonably sized distribution centres or one mega-shed, with resulting consolidation and reduction in costs. When things go wrong, however, what happens?
Val Butroyd: Last year, we opened our first national distribution centre. We opened another this year, so we now have one in Coventry and one in Thurrock. All the independent Co-ops are in our distribution chain, so while they are still independent, they share the buying power and the logistics. However, the more you concentrate something into one area, if that is where things go wrong, you have a big problem. In terms of the Scottish fire, it was just a case of deciding what we could move from Harthill to Cumbernauld and Halesowen, and where the nearest chilled depot was.
John Windsor: The further that gets away from head office....
Val Butroyd: The higher the cost per unit, but that is all part of the claim.
Paul Howard: Expanding this point on how consistent the approach is that we take across our stores, what about employee attraction and retention? Someone raised the point about being greeted by a surly individual, which I am sure would not happen in any of our stores. An employee working at the checkout is the customer’s view of what we do as an organisation, and people generally do not like queuing, so absence management is a huge issue.
Richard Longster: It is vital to try to energise lower-paid colleagues, because of course how they perform in front of the customer is very important. If the customer goes away with a bad feeling about the store, that will affect your reputation and your customer loyalty. It is extremely easy for a customer to go elsewhere; they have a whole range of shops to go to. What we want is for individual shoppers to come away from our stores having had a good experience. How you try to energise people and get hourly-paid colleagues to ‘live the image’ is important.
Paul Howard: How many of the ideas that you import from the US into the UK have taken hold?
Richard Longster: The ‘front of store greeter’ is the first one that you will always see in an ASDA store. We are the only retail organisation to have that. They are the face of the ASDA – the happy, smiling face that greets you as you walk into the store and makes you feel welcome, which is very important.
Paul Howard: What about things like morning chants?
Richard Longster: I have been with ASDA for five or six months. In the first week of your induction process, there is a bit of ‘happy clapping’; beyond that, however, I have not experienced it further.
Paul Howard: It is more about trying to generate a feeling of team spirit.
Richard Longster: Yes – especially right at the beginning. You are now part of the team and you sing along.
Paul Howard: Are your people ‘associates’?
Richard Longster: No – ‘colleagues’.
Paul Howard: I think that’s the case for most of us.
John Windsor: That is so important, rather than just referring to people as ‘staff’. We have to make everyone realise that we are all part of the same family, all trying to do the same thing – trying to pay the mortgage – and that we have to keep the customer happy. How often do we interface with customers? Anyone at any of our stores is potentially more important than any of us sitting around this table. That is our bread and butter: keeping these customers happy.
Paul Howard: Some retail chains refer to their people as ‘partners’; some, such as Gap and Ikea, refer to them as ‘team players’. What themes do you try to bring forward, Andrew, in order to generate a sense of community or family in your two brands?
Andrew Bye: There is an active drive to try to get the businesses to swap skills, encouraging people to move between Argos and Homebase and to take experiences with them. In that respect, in terms of employee attraction and retention, you are not stuck in an Argos-type catalogue environment or in a Homebase-type DIY environment. The ability to move across is quite interesting for some people. There are also some benefits to the business. Although they are different types of businesses, you can gain some good ideas, not just in terms of customers but also how the stores operate and how distribution works behind the scenes. Only a very few people within Argos see the customer, whereas Homebase is very much a live environment, with many customer touch points. Other than those working in the back warehouse, employees are much more engaged.
Paul Howard: John, you mentioned franchising. How do you instil the brand name across different franchises?
John Windsor: We give people a degree of training, even though they are employed by another company. We put them in a Marks & Spencer uniform, so they have to do things the Marks & Spencer way. There are key performance indicators (KPIs) and contractual relationships. I have not heard of any difficulties with our franchises in the UK or overseas, but it is a case of constantly having to drive home the message that they are representing us.
In our own stores, we have to sell ourselves to colleagues to come and join us, because there are many areas in the country where it is now becoming difficult to attract staff. People have a choice of working for 20 different retailers and, in some parts of the country, there are not enough staff to go round, so you need to stand out in terms of wages and bonuses, and offering a good place to work, along with the paternalistic things that were commonplace years ago before disappearing. You have to treat people properly and have them realise that what they are doing benefits the well-being of the company, which translates into rewards for them.
Val Butroyd: The Co-op is different in that we are made up of a lot of small convenience stores rather than big superstores. A small store in a village might have colleagues who work from 8am to 10pm, but they are never all together, so doing anything with them is difficult. By the time they have stacked the shelves, cleaned up and seen to customers, there is not much time left for training, so the issue is around finding ways to make that work. There has to be something about what makes us different.
First, we are present in small villages and market towns, so we are a good part-time employer of people who quite often live just around the corner. Internally, we are looking at all sorts of schemes whereby colleagues can be nominated for an award if they have done something exceptional, and they receive an accolade in the internal journals.
We have also started what we call a Talkback survey, done by an external company across all employees in all the different businesses. It looks at their engagement with the business, and I am really impressed with how they have looked at all the signs where things are not good and seriously targeted them. Every senior manager has been given an objective to improve these engagement results, which sounds as if they could just go through the motions, but they are really making it work. It has an interesting effect on colleagues. People believe that you are taking them seriously.
One of the things that we are trying to do is in the area of the Co-op brand, which is not just about it being the local shop where you can organise a funeral and a holiday, but about it being different, with a political history aligned with the Labour Party, and wanting to be seen as an ethical trader. It can do that more easily, perhaps, since it does not have external shareholders to keep happy, since its shareholders are its members. These include our corporate members but because they all have the same political ethos, those issues should not be a problem. They are all in it for the same reason. We might not be the best payer, but we are a nice company to work for; we believe in what we say and we treat people right. It is these touchy-feely, intangible things that make people feel good about working for the Co-op.
Obviously, if you are isolated in a store somewhere not particularly nice, in an area with a terrible claims experience, your experience is going to be different to someone in a nice little market town. However, we look at places that do well, and at the good and the bad aspects, and at the differences. Interestingly, it might be in a fairly bad area, but if you have a good manager, sales will be good, staff will be happy and claims will be lower. It does not seem to matter where it is, so you then ask what makes this person a good manager and why they are performing in a way that makes them different to other managers. It is not just about money.
John Windsor: It comes down to treating people properly.
Val Butroyd: It is also about making people feel valued and supported. Ultimately, however, commercial reality has to come first.
John Windsor: What you said about managers is important: they need to have senior support. We put all 50,000 of our colleagues through a customer training exercise. It was a mammoth expense, but it worked. Much of it is not about reinventing the wheel, but simply reminding people what the right way is to conduct themselves. It came down from the very top in the company and had a major effect on the way that our stores treated customers. It was part of the catalyst of our improved results and, if you cannot get it right in stores, you will not get it right anywhere. Remuneration is still important, so we have an achievable bonus system and staff can see a correlation between doing the right thing and financial reward.
Paul Williamson: The cultural thing about giving people an opportunity to make a difference is an important one. In terms of the engagement that the Co-op is doing, I have seen it across a number of different businesses. They employed Six Sigma, but in essence it is a Post-it note on a whiteboard. It might be the lowest colleague in the food chain, but because they are working on that particular machine and in that particular environment, they are best placed to make the difference. The corporate objectives and messages are very important, but the bottom-up belief is just as important. If they feel as though they are engaged and can take some responsibilities to make improvements, you will really start to make a difference.
Paul Howard: I think they will if, as John said, they know there is senior-level commitment. It is the feeling of ‘we are all in it together’.
Paul Williamson: They have to see some action from it. There might be 20 ideas, 15 of which are thrown out for being silly, but if one idea is adopted, they can see that commitment growing within the business.
Richard Longster: We are all consumers, as are they, and they know how they want to be treated when they go into a store. It is getting that balance shifted, so it is about providing that sort of experience to a customer, to treat them as they would like to be treated.
Val Butroyd: Last Christmas, staff were able to volunteer to work in a local store. Until we merged with United, we did not have many local stores, and a whole host of people – including our chief executive – took the opportunity of working in their local shop for a day and helping them out during their busiest time.
John Windsor: We all do the same thing.
Paul Howard: I was stacking shelves at Easter.
Val Butroyd: It is a good idea.
John Windsor: It makes a difference and makes people realise what goes on.
Val Butroyd: It also enables people in the stores to see head office differently.
John Windsor: Again, it is all part of the partnership: a family, rather than ‘them and us’.
Val Butroyd: Breaking down barriers.
Paul Howard: Richard alluded to the point about treating people how you would want to be treated. Many of the issues that we would face might come from a distressing incident in store, or potentially a complaint, and it is quite often how the first-line colleague deals with it that makes it a complaint but a happy customer, or a complaint and potentially a claim. What strategies do you adopt when you put that forward in stores?
Richard Longster: We provide stores with an amount of money that they can use at the first line to deal with customer claims. They do not have to refer that to head office or to the insurance department. They have the authority to deal with claims and get them resolved in the first instance. It is much easier and cheaper to resolve claims as quickly as possible, especially when dealing with people whom you may know or have seen before, rather than having to refer it to a faceless, nameless person somewhere else.
John Windsor: I attended a seminar recently, where someone mentioned his wife having a small incident in a store 25 years ago dealt with sympathetically and quickly, and she has been a loyal customer since then. What would have happened if she had been dealt with differently and told that her claim would have to be referred to lawyers etc? It was a case of doing the right thing, at the right time.
Paul Howard: In addition, how many people would she have told about her experience?
John Windsor: We all know that, the quicker and more informally you can deal with a claim, the cheaper it will be. If you have done something wrong, you should hold your hand up and say sorry. Apologising to the customer if there has been a case of negligence, and having them understand that you take it seriously, is really important.
Paul Howard: The point there is that we might not have done something wrong, but we are genuinely sorry that the incident has happened.
Val Butroyd: Saying sorry is not admitting liability. That is what we tell our store managers. What worries them is that they are unsure of what they can and cannot say. A bunch of flowers and a taxi home make all the difference in the world.
Richard Longster: Along with a few phone calls later on: ‘How are you doing? Is there anything more that we can do?’
Paul Howard: Another risk issue is managing our properties in terms of planned maintenance and looking at what is reasonable to do. If stores are not open, we cannot serve customers from them. Planned maintenance is always an issue that people look at as an easy target in terms of costs.
Val Butroyd: That is the biggest problem.
Paul Howard: Val mentioned that we all have stores in ‘challenging’ locations, which will require more attention. I tend to find that, if a store is well-used, it requires more maintenance than one that is not so well used or in a remote area. What sort of things do you look at in terms of planned maintenance?
Val Butroyd: Planned maintenance is not something that I am particularly aware of, except when I am involved in arguments about it not being budgeted for and requiring store managers to fill a pothole, for example. Things like that do not fit their schedule, and I have not yet worked out what it is that we need to make that work together. They have a set amount of money and they will have large projects, such as the rebranding and refurbishment of stores, but that should not take away from the day-to-day maintenance. If potholes are filled in straight away, there will be no more incidents; if they are not filled in, store managers are responsible for every incident that happens.
Andrew Bye: How many of your stores do you own?
Val Butroyd: We own a lot. In recent acquisitions, we have gone more for leasehold, but we traditionally owned all stores.
