Recommendations For ASDA’s Turnaround

Introduction

During the 1920’s the Asquith family owned a butcher shop in West Yorkshire, United Kingdom (“ASDA Group Ltd. History,” 2015). They expanded their business to seven shops as business remained profitable. Around the same time the Stockdale and Craven families ran a dairy (Tugby, 2015). Their business grew as well. When these two collaborated, their resources to create the Asquith plus Dairies brand and the modern era of the supermarket was born in the United Kingdom (“ASDA Group Ltd. History,” 2015). In 1985, it was changed to ASDA (Tugby 2015).

As a background, the United Kingdom had many nationalized businesses in the marketplace because of state-imposed limitations on how resources were spent during World War II (Schifferes, 2008). The 1960’s and 1970’s were periods in the history of the United Kingdom that saw continue devaluation of the currency, a loss of jobs and industrial capacity, and increased unemployment and stagnation in the economy(“UK recessions since 1945: how they compare,” 2010). One of these brands in the United Kingdom was the state-run grocery called the Government Exchange Mart (Whysall, 2005).

Also following World War II in the United Kingdom, manufactures distributed their goods in services in the marketplace and required agents of their products to sell at a minimum or maximum price. This practice was called Resale Price Maintenance (Garrett, Burtis, & Howell, 2008). This form of Price fixing was legal in both the United States and the United Kingdom. The United Kingdom began to review this practice in 1954 with the Restrictive Trade Practices Act (Dennison, 1959) and ten years later the Resale Prices Act in 1964 (Rothstein, 1964). The latter Act considered the practice of price fixing to incentivize retailers to carry product lines as a practice against the public interest.

When the Resale Prices Act happened in 1964, the Government Exchange Mart was privatized and the Asquith plus Dairies brand was able to buy them off the state in a deal that amounted to a zero sum gain– or free (“Asquith + Dairies = ASDA,” 2015). This windfall allowed the massive expansion of the brand into profitable territory as a low price leader in the grocery marketplace. It opened more than 70 stores in the next decade in Northern UK and built a brand that had large box stores and parking lots similar to what Sam Walton was doing with Wal-Mart in the United States. Inexpensive grocery goods and services had built a successful brand going into the 1980’s.

To reinvent itself ASDA made several business decisions to change its culture. Instead of being a discount brand big-box retailer ASDA tried to upscale its image and as it invested in new stores, new looks, and a new brand logo, the company soon found that it had distanced itself from its customer base. ASDA merged with a furniture maker, a line of retail clothing and a carpet manufacturer to diversify its offerings to the marketplace. ASDA also tried to buy out their rival Gateway toward the end of the 1980’s for $705 million (DeVliet, 1995). This investment hindered the organization because it had taken on significant debt to make this acquisition. When the market shifted in the early 1990’s and a recession hit the United Kingdom, ASDA remained unable to respond to the marketplace and had incurred more than one billion pounds sterling in debt. ASDA, the United Kingdom’s largest grocer, was in trouble and remained on the verge of bankruptcy.

Analysis and Findings

In 1991, ASDA hired an executive who had made a name for himself at the company called Woolworths where his transformational leadership helped it become Kingfisher (DeVliet, 1995). His name was Archie Norman and the intent was to turn the struggling business around (Beer & Weber, 1997). While the preceding period was marked by growth that included mergers and acquisitions, the company’s expansion had diversified away from its core business into a loss statement that put it on the verge of bankruptcy with a billion Pounds of Sterling debt (Jensen & Consultancy, 2006).

When examining how corporations change two, archetypes known as O and E emerge (Nohria & Beer, 2000). Nohria and Beer noted that “Theory E is change based on economic value. Theory O is change based on organizational capability,” (Nohiria and Beer 2000). When companies implement theory E, layoffs and downsizing are usually associated with the company. When companies implement theory O-type, corporate change remains soft and seeks to enhance the capabilities of the corporate culture through education, training, and personal development (Nohria and Beer 2000). Type O changes usually improve trust with the employees and the organization by building people up, and Type E often fosters a culture of fear by cutting back on people and resources perceived as nonessential in the execution of the bottom line (Nohria and Beer 2000).

When Norman arrived at ASDA he found a “complete demoralization of the workforce; a highly politicized central headquarters; people caught up in their “chimneys”—operations—people did not talk to the trading people, and nobody listened to marketing,” (Spector, 2013). He noted that morale was very poor (Spector 2013). Norman noted that his managers were in touch with the customer on a daily basis and he strongly noted that the problems at ASDA were centered on culture (Startups 2013). This included the stigma that came from their clerk staff and produce managers who were often unemployable in other sectors of the economy (“‘Get your people on board’: Archie Norman on Turnaround Success and The Importance of Staff Happiness,” 2013). People did not like their jobs.

Recognizing the stovepipe culture, ASDA’s leadership sought to reinvent its culture through a process that was known as the ASDA “Way of Working,” which focused on the core customer base of ASDA. This customer was the average family in the UK and their grocery shopping needs (Spector, 2013). ASDA pushed away from the heavily centralized model and provided store managers with greater autonomy (Spector, 2013). This was done with care on the details of culture and from the ground up. Managers and staff were to be called colleagues (DeVliet, 1995). Another story noted that Norman empowered leaders with meaningful time management strategies amongst their peers so that if they wore one of the famous ASDA hats they would have two hours of uninterrupted and productive time (DeVliet, 1995). To eliminate these stovepipes and connect management with the staff on the ground he instituted a “Tell Archie” campaign that sought out good ideas to replicate throughout the company where managers on the ground could give corporate level feedback about how to run their stores and improve capacity, function and operation of the business (DeVliet, 1995). He steered away from how language was used in the company. After one store manager had been castigated for his performance by a regional manager (Norman, 2012), Norman steered ASDA away from using the word “wrong” amongst colleagues in discussion and focused on the word “change” instead (DeVliet, 1995). Norman noted that “you can’t motivate people when you’re saying everything’s wrong,” (DeVliet, 1995).
These changes were visibly the focus of O-styled change as described above. While this remained important to changing the way in which the company did business and it rebuilt capacity from its employees and staff, the company remained in serious trouble financially. Norman’s CFO, Cox, noted that the purchase of Gateway had really set the company back, “Indeed, even after a £357 million rights issues in October 1991, the company was still bankrupt,” (DeVliet, 1995). The company had to engage in an E-type change to bring the company back from the brink. This was done by selling off property, including some large stores, to the competition, its Grezeley arm of the business and evaluating each store realistically on the balance sheet (DeVliet, 1995). ASDA implemented a plan after six months and acquiring some cash to invest $3.25 million into retooling each store (Spector, 2013).

Spector’s case study of ASDA breaks away from Norman’s turned around and requires that the student provided guidelines to reverse the failure of communication within ASDA. What leadership characteristics are needed to report customer information to upper management? For the project, the student is then asked to describe a leadership program that the student feels would keep managers aligned with customer needs and responsible to their staff’s needs.

Recommendations
The following Type-O and Type-E change recommendations are made to improve communications and culture within ASDA and with ASDA’s customers.

Recommendation 1
Issue: ASDA has a major debt problem that will bankrupt the company
Recommendation: Sell off some unproductive assets of the company that is not focused on the core business of providing people with their basic grocery needs.
Rationale: Some stores have attempted at a higher expense to operate to change the brand image and customer base. In many respects, the market segmentation in the store brand continues to show that this direction is not a profitable adventure in trying to upscale the business model. Selling off a few stores that have failed at this attempt to re-brand our product lines in a fashion that remains unprofitable may be an opportunity to cut the losses of the company and recover cash and/or reduce debt loads. Perhaps being in the carpet or furniture business is not something that a grocer should do. Perhaps selling our farms and focusing on retail grocery would be a smart move.

Recommendation 2
Issue: ASDA has a major debt problem that will bankrupt the company.
Recommendation: Approach the financial institutions that have leaned on our business and restructure our debt by remortgaging certain aspects of the business.
Rationale: In order to improve immediate cash flow restructuring debt with the bank may recapitalize some of the short-term cash flow issues by reducing payments on existing debt and extrapolating the debt over a longer term. Some assets of the business may be used as collateral to accomplish this.

Recommendation 3
Issue: ASDA has a major debt problem that will bankrupt the company.
Recommendation: Restructure the way in which products and services are distributed to the shelves by using real-time marketing analysis and just-in-time delivery from distribution centers.
Rationale: There is not much required to innovate in the marketplace for basic food needs from a grocer and the market will not change too much in the near future. People will still need to buy their fruits and vegetables as well as their toilet paper. Discount branding in this marketplace remains the core focus of the business model but how those products and services get to the marketplace is an area of focus that can improve the bottom line. Distribution centers that respond with a frequency to what is coming off the shelves as noted by the individual store managers can be re-vamped to improve service time and qualitative aspects of delivery. This can be managed with digital technologies and may require some capitalization to accomplish this. It may also enable the company to set up regional distribution centers which can warehouse more products than are on the store shelves and thus allow the company to purchase at a better price point in volume for short-term storage.

This may require working with wholesalers, contracting with local farms in addition to the worldwide distributors to bring the most effective blend of regional and international meats, produce, and product to meet the basic needs of the customer. When products are not going off the shelf in a timely fashion it may require that we choose not to carry that product after six months or only carry that product if it is seasonal for a few months at a time. Efficiencies in this process will eliminate waste from the supply chain, reduce errors, and improve outcomes on the shelves by having more products that people want to buy.

Recommendation 4
Issue: There are ‘stove pipes’ in the communication between managers
Recommendation: Senior management should tour each store in a regular rotation.
Rationale: Managers on the ground may have only a few channels to go through formally and opening up informal channels through regular site visits can improve the communication between store managers and senior managers. This can informalize trends and other issues that managers may have with process and eliminate the filtering effect that many levels of management in between might apply to amplify or squelch things based upon individual bias.

Recommendation 5
Issue: There are ‘stove pipes’ in the communication between managers
Recommendation: Create a Best Practices Team and Implement a Mentorship Program
Rationale: Managers who have built long-standing areas and relationships can be valuable to an organization; however, in places where the information is stove-piped it can also hinder the organization because those leaders fail to understand the jobs and operations of others. Managers who are doing well may do well to share with other managers who are not doing so well. This sharing can come in the form of implementing a mentorship program or a best practice team that maintains a dynamic resource of standard operating procedures. While this may increase the overhead of maintaining such an item costly mistakes of lessons learned are likely a bigger money waster and may improve the customer experience from one store to the next form store to store.

Recommendation 6
Issue: There are ‘stove pipes’ in the communication between managers
Recommendation: Create a customer feedback system via the internet or telephone
Rationale: If a customer can call a toll-free number and report something awful about the business it may provide valuable insight into the way stores are maintained and improve the qualitative outcomes. This system may also work for positive feedback as well to identify when stores are doing well. When this happens in process or form, the information should be widely shared so that individual store managers may have cross-zone visibility on how their peers are doing and what is working and what is not.

Recommendation 7
Issue: There are ‘stove pipes’ in the communication between managers
Recommendation: Have an Open Door Policy for senior managers
Rationale: If a senior manager is inaccessible they will not be able to properly respond to calls or concerns from the field. If problems arise there should be a clear chain of command to follow, however, leaving an open door for senior managers will allow opportunities for process improvement to flow up and down and most importantly between senior managers and their subordinate staff.

Recommendation 8
Issue: There are ‘stove pipes’ in the communication between managers
Recommendation: Include individual store managers in the rotation of senior management meetings via conference call
Rationale: When a store manager sees something and can contribute featuring their idea in a weekly senior staff meeting will improve morale and ownership of the process. Having them demonstrate a case study to share with the collect group may improve others willingness to contribute and improve.

Recommendation 9
Issue: There are ‘stove pipes’ in the communication between managers
Recommendation: Have an Employee of the Year, Month and Quarter Program
Rationale: When people are recognized for their achievements and contributions to their organization, morale can have meaningful empowering features, especially for the least paid member of the company’s staff. When people are contributing to the culture instead of avoiding it, something more profound happens in their ownership of the process. Creating incentives to allow the junior associate of the company (i.e. the clerk) to participate in performance related reviews the culture can explode with productivity. This requires support and implementation from management at all levels.

Recommendation 10
Issue: There are ‘stove pipes’ in the communication between managers
Recommendation: Decentralize informal management structures and delegate responsibility to the lowest level possible in the organization.
Rationale: When individual managers can make more decisions about the outcomes of the business and successful execute those functions they are a greater part of the solution to the problems facing the company. They are invested in the process, time and outcomes of operations, human resources, and financials of the business. Store managers need some autonomy to do their job effectively and mid-level managers need to provide that space and opportunity to do so.

Recommendation 11
Issue: Several Business Faces exist within the brand. This includes various groceries, farms, a carpet company and a furniture company.
Recommendation: After selling off non-core business assets restructure the face of the business to standardize the brand across the platform
Rationale: When people walk into any ASDA store they need to have a familiar feel to their shopping experience. Knowing where the toilet paper is in store ‘A’ should be the same in store ‘B’. This should include layout, design, and best practices. Individual areas within the store that cater to local sports teams or interests should be left to the individual store managers but the ASDA brands and how they are displayed should have similar features to create brand images.

Conclusions
These recommendations placed into a hypothetical context may improve the upward communication between management, staff, and the customers as ASDA. These leadership programs effectively describe how managers and staff would align themselves with their customer base and improve the outcomes of the brand. Furthermore, these 11 recommendations seek to mitigate the cultural failures of managers and their subordinates within the organization to improve moral and positivism within ASDA. Notably, Type-E change must precede Type-O change in order for things to improve and build trust within the organization.

References

ASDA Group Ltd. History. (2015). Finding Universe. Retrieved from http://www.fundinguniverse.com/company-histories/asda-group-ltd-history/

Asquith + Dairies = ASDA. (2015). Retrieved November 2, 2015, from http://nowthen.php5.truth.posiweb.net/collections/dewsbury-asda/asdas-history

Beer, M., & Weber, J. (1997). ASDA. Harvard Business Review, 498(005). Retrieved from http://www.hbs.edu/faculty/Pages/item.aspx?num=16843

Dennison, S. R. (1959). The British Restrictive Trade Practices Act of 1956. Journal of Law and Economics, 2, 64–83. Retrieved from http://www.jstor.org/stable/724929

DeVliet, A. van. (1995, December 1). UK: ASDA’S Open Plan. Management Today. Retrieved from http://www.managementtoday.co.uk/news/410110/UK-ASDAS-OPEN-PLAN/

Garrett, D. M., Burtis, M., & Howell, V. (2008). Economics of Antitrust: An Economic Analysis of Resale Price Maintenance. Global Competition Review, The Antitr. Retrieved from https://www.cornerstone.com/GetAttachment/9f4ecd37-bed2-4bb3-8da7-7caf4f58420a/Economics-of-Antitrust-An-Economic-Analysis-of-Res.pdf

“Get your people on board”: Archie Norman on Turnaround Success and The Importance of Staff Happiness. (2013, November 25). Startups. Retrieved from http://startups.co.uk/get-your-people-on-board-archie-norman-on-turnaround-success-and-the-importance-of-staff-happiness/

Jensen, A., & Consultancy, I. (2006, August). Insolvency, Employee Rights & Employee Buyouts. London, UK. Retrieved from http://www.efesonline.org/LIBRARY/2006/Insolvency, Employee Rights & Employee Buyouts.pdf

Nohria, N., & Beer, M. (2000, May). Cracking the Code of Change. Harvard Business Review. Retrieved from https://hbr.org/2000/05/cracking-the-code-of-change/ar/1

Norman, A. (2012, March 28). “Get your people on board”: Archie Norman on turnaround success and the importance of staff happiness. Startups. Retrieved from http://startups.co.uk/get-your-people-on-board-archie-norman-on-turnaround-success-and-the-importance-of-staff-happiness/

Rothstein, P. F. (1964). The New British Resale Prices Act. The American Journal of Comparative Law, 13(2), 249–268. Retrieved from http://doi.org/10.2307/838620

Schifferes, S. (2008, February 18). The lessons of nationalization. BBC News. London, UK. Retrieved

from http://news.bbc.co.uk/2/hi/business/7250252.stm

Spector, B. (2013). The ASDA Way of Working. In S. Yagan, B. Mickelson, & A. Santora (Eds.), Implementing Organizational Change: Theory into Practic (pp. 16–21). Boston, MA: Pearson.

Tugby, L. (2015, July 10). Asda at 50: A timeline of the supermarket giant’s five decades in retail. Retail Week. Retrieved from http://www.retail-week.com/sectors/grocery/asda-at-50-a-timeline-of-the-supermarket-giants-five-decades-in-retail/5076944.article

UK recessions since 1945: how they compare. (2010, January 26). The Telegraph UK. Retrieved from http://www.telegraph.co.uk/finance/recession/7073667/UK-recessions-since-1945-how-they-compare.html

Whysall, P. (2005). GEM, 1964–1966: Britain’s First Out-of-Town Retailer. The International Review of Retail, Distribution and Consumer Research, 15(2), 111–124. http://doi.org/10.1080/09593960500049183

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