Leadership teams often give customer focus and learning from measures lip-service. Woolworth’s learned the hard way that ignoring customer feedback, neglecting your performance measurement framework and blaming staff was costly. Leaders need to use the measurement system as a listening post, and measure what matters,
Over recent months there have been numerous articles about the mis-management of Woolworths (for example: AFR , SMH, or the ABC) – what are the core lessons for Australian management from this “embarrassing” farce…listen to your customers and measure what matters.
The focus on profit only
For quite a few years the management of Woolworths were focusing on profit, by reducing costs and increasing margins. Sound like a good plan right..? Management 101, decrease cost, increase margin, more profit. But they forgot that the revenue comes from customers, those people who pay for stuff.
(read more on where the value for businesses comes from here)
Customers were providing their feedback. Net Promoter Score (NPS) for Woolworths was going down, and yet management looked at the profit numbers and inferred, hey we are okay, the customer is wrong. Woolworths’s reaction was to ignore the customer dissatisfaction, expressed in-store-person, through social media, and through NPS surveys.
Management then looked to their internal metrics that indicated their prices were competitive with Coles and their measures of on-shelf availability suggested that in-stock levels were all good. They also looked at sales in the supermarkets in mid-2014, again management took confidence nothing was wrong. But it was, the customers (and many staff) knew it.
The cost of a poor performance measurement framework
Management actually blamed the internal metrics. Saying that how they “had been measuring prices, on-shelf availability and store labour for more than 10 years was wrong”. What..? They hadn’t checked the validity of their measures in ten years..? Measuring stock-outs incorrectly and cutting back on staff effort to measure meant only checking on-shelf availability in the morning or mid-week. And then by Sunday (the busiest shopping day of the week), the shelves were often low or empty, with specials and some brands not available.
Due to the single focus on profit and cost cutting, rather than the key set of performance results that drive awesome outcomes. Woolworth’s had lost the capability to respond. When they eventually realised things were bad they did not have enough staff to respond to stock outs. One report says that “Woolworths acknowledged what investors and analysts had been telling the retailer for years – it had taken its eyes off the ball and had put profit growth ahead of customers”.
Where to next
Now industry analysts are talking about a long-road to recovery, saying this started happening three-to-four years ago. Wow – all that needed to happen was to listen to the customer and have performance measures in place that provided feedback on their business results – not just profit.
Additionally, culture is one of the ‘problems’ referred to, Woolworths is said to be a ‘top down’, perhaps autocratic company. To me, blaming culture just seems to be another way of blaming the people in the business. Rather than recognising the problems in the thinking of the management team. Others than say that changing culture is too hard. Really..? If the leaders place an genuine intent on the customer and then a clear focus on listening to feedback (yes, customer feedback but mainly from the performance measures that matter), then culture will change. Because the people will see the change in the leaders (rather than being blamed). But with Woolworths, the message the Woolworths people got was that their voice was not important. The message received was: management know better, just do you job. Again culture created, not by accident.
Perhaps the management of Woolworths could take some advice from Bill Gates: “Your most unhappy customer are your greatest source of learning”.
You can read about the Woolworth’s management teams involvement with the Masters disaster here.
When it comes to applying a customer centric approach to business, there are nine imperatives for leaders.