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The Culture-Customer-Profit Chain
A successful retail case
study
An extract from a UK Best Practice Club presentation
Culture
CustomerCust
omer
Profit
What this presentation covers
1. Culture – what is it and how can it be measured and improved
2. The impact of culture on performance (the culture-customer–profit chain)
3. How we set out to test this with the client
4. Questions and conclusions
A successful retail case study
1. Culture – what is it and how can it be measured and improved
2. The impact of culture on performance (the culture-customer–profit chain)
3. How we set out to test this with the client
4. 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 practicesClimate is a short term status affected by recent and current events(e.g. redundancy, pay rise/freeze etc.)
Measuring culture vs. attitudesMeasuring culture vs. attitudes
ME THEMATTITUDESof toward
champion victim
CULTURE
VIEWS ON VARIOUS ASPECTS OF THE ORGANISATION AND TYPICAL BEHAVIOURS
Likert’s ScalesLikert’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
Changing culture involves the 4 “A”s:-
e.g. through:-e.g. through:-Health checkHealth checkBurke Litwin ModelBurke Litwin ModelMcKinsey 7SMcKinsey 7SEFQM CriteriaEFQM Criteria
Systems &ystems &processesprocesses
SStructuretructure
Styletyle
Audit the results
Assess the culture
Analyse the causes
Act on the Solutions
A successful retail case study
1. Culture – what is it and how can it be measured and improved
2. The impact of culture on performance (the culture-customer–profit chain)
3. How we set out to test this with the client
4. Questions and conclusions
Profit through people?
Recent research has shown clear links
Sears – USA (800Stores sampled)
Institute of Employment Studies – one UK retailer (95 stores sampled)
This research (700+stores sampled)
Culture
CustomerCust
omer
Profit
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
ManagementStyle
CompanyCulture
EmployeeCommitment
CustomerSatisfaction
CustomerSpend Int.
Changein Sales
Peo
ple
Cus
tom
ers
Pro
fit
A successful retail case study
1. Culture – what is it and how can it be measured and improved
2. The impact of culture on performance (the culture-customer–profit chain)
3. How we set out to test this with the client
a. Cultural surveysb. Links to KPIs
4. 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
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
ResultsResults 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 cultureChange over 4 years in overall culture
CHANGE IN OVERALL AVERAGE DISTRIBUTION OF POINTS BY FUNCTION - 1996 TO 1999
0.00
1.00
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3.00
4.00
5.00
6.00
7.00
1996 1997 1998 1999
Head Office Distribution Store Ops
MOST IMPROVED SCORES - 1997 to 2000
0.00
1.00
2.00
3.00
4.00
5.00
6.00
7.00
8.00
Focus of Rewards Openness Recognition Involvement Management style
2000 1997
LEAST IMPROVED SCORES - 1997 TO 2000
0.00
1.00
2.00
3.00
4.00
5.00
6.00
7.00
8.00
Seeking customer views Pay levels Approach to Suppliers Approach to Customers
2000 1997
A successful retail case study
1. Culture – what is it and how can it be measured and improved
2. The impact of culture on performance (the culture-customer–profit chain)
3. How we set out to test this with the client
a. Cultural surveys
b. Links to KPIs4. 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)
Managementstyle
Storesize
“Good” manager
Mysteryshopper
CompanyRecognitionProgramme
Culture
CompanyValues Employee
Commitment
Stock loss
Budgetvariance
Absence
Staffturnover
Causal variables Intervening variables End result variables
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?
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
CustomerCust
omerProfi
t