THE NEW FACE OF COLES SUPERMARKETS In November 2007, Wesfarmers acquired Coles Group, at a time when the group was seriously underperforming. The Coles supermarket chain in particular, was seen as tired and shabby and no match for the Woolworths supermarkets with their signature ‘fresh food people’ catchcry.
In May 2008 Ian McLeod joined Wesfarmers as Managing Director of the troubled Coles division. McLeod, a Scotsman, came with extensive experience in the retail sector. McLeod says proudly, ‘I am a retailer; I have been in stores all my life. It’s what I love and it’s what I enjoy.’ This attitude is probably key to understanding McLeod’s grassroots approach to implementing change at Coles. He sees it as imperative to visit stores regularly, including at weekends, to talk to frontline managers. McLeod has been described as ‘a man who likes to fight and win’.
Before he formally commenced, he visited 30 retail outlets in the US, Canada and Europe, gathering many new ideas. Second, he built his own executive ‘dream team’ which included Stuart Machin, Joe Blundell, Andy Coleman and John Durkan all with extensive retail experience. With the impressive and eager new management team in place, McLeod wasted no time in beginning the long and arduous overhaul of the ailing Coles. In McLeod’s view, the previous management approach had resulted in a bureaucracy that undermined and constrained the initiative and potential of ‘shop front’ employees. Therefore, improving communication between head office at Tooronga, Melbourne, and shop fronts has been a key change strategy. It was imperative that head office respects the expertise of the store manager and plays a supportive, rather than ‘authorising’ role. To demonstrate this, store managers were given local autonomy, so that if competitors were charging less on certain items, a Coles store manager could match the price without requesting permission from head office. Tellingly, head office has lost 1500 staff while an additional 8000 staff have been recruited to the supermarkets.
The head office at Tooronga has been redesigned, with walls removed to make way for open plan offices and glass panelled meeting rooms. McLeod himself ‘walks the talk’ and does not have a private office. McLeod also started the ‘ask Ian’ internal email system, encouraging staff to ask questions and share their thoughts and ideas on ways to improve the business. He receives hundreds of emails to which he tries to respond within 48 hours. McLeod was ‘horrified’ with the state of the stores he visited. In attempts to cut costs, previous management would patch up rather than replace old machinery and equipment. McLeod saw these as short-sighted moves that severely affected the customer experience.
With $100 million from Wesfarmers, McLeod’s immediate priority was a major clean-up of the worst stores, replacing refrigeration units and faulty checkouts. Leadership development programs for managers were also reinstated. Rather than cutting infrastructure costs and training and development programs, the focus was on streamlining business systems and processes. The supply chain has been overhauled and the distribution centres have been cut from 40 to 20. The range of items for sale has been reduced and Coles is now beginning to reap the results with lower costs and more focused delivery. Coles’ private – label products, offered at three separate price points, are viewed as the key to future growth. More recently, the focus has been on enhancing Coles’ reputation as a fresh food provider and changing the supermarket shopping experience. At the 24-hour Coles store in Port Melbourne, bread is baked hourly, there are trestle tables on wheels for fruit and vegetables to give a ‘market’ feel. There is a salad bar too.
While there have been encouraging signs of improvement at Coles, it is a long way behind archrival Woolworths. McLeod recognizes that the ‘turnaround has to be sustainable’. He believes that it will be five years before the benefit of the reforms being put in place are realised. He is, however, optimistic that the competitive environment provides opportunities for Coles to grow the business. A good example is the distinctive identity Coles is developing through its high-end private-label products and as the fresh food provider of choice.
McLeod has implemented a program of changes since 2008. Imagine you have been approached as an external consultant by McLeod to manage one of the change projects within this program. Develop a three-part proposal with an Executive summary responding to the following:
1. Proposal – Identify one project you would like to be involved in and design a proposal to complete this work. Outline this project and approaches you would use to implement the changes. Indicate any assumptions and limitations (such as number of employees in a division or the structure of a department or the company) as part of the ‘Scope of Work’ in your proposal. (15 marks)
2. Underlying Change Management Concepts – Use models for managing change and your knowledge of change management theory to justify your proposed approach (5 marks)
3. Strengths, Weaknesses and Limitations – Outline the strengths, weaknesses and limitations of your proposal. (5 marks)