Management Today article

August 2004: Cover story

Leading by Example: Roger Corbett's Formula

The CEO and Managing Director of Woolworths Limited, Roger Corbett, is a household name in Australian business. Woolworths is a major success story in a sector renowned for tight margins and lots of competition. Management Today talks to Roger Corbett about management and leadership and the right way to do business.

How important is culture to the success of Woolworths and why? Can you explain in a nutshell what drives the culture and how your staff and line managers react to it?

I think that in business and in life there are two poles - one pole is where cynicism lives and the other end is where integrity lives.

The closer you can get the business towards integrity and the further away from cynicism, then that is a really good measure of the effectiveness of your business.

I mean "integrity" in the broadest sense of the word. If a chief executive espouses one standard but lives another in his personal life and it is seen by the people in the business, then that moves the business further towards cynicism.

For instance, if the chief executive says we should have economies in the business and everyone should travel economy class, but he and those around him travel first class, then it moves people towards cynicism. It can't be one rule for you and another rule for them.

We are all employees of the business, we all need a job, and we are all dependent on the success of the business.

If a boss works harder than anyone else in the business, and sets an example in his own working life and the way he does things, then the more likely it is that his colleagues will do that and the more likely staff down the line will do that.

The less hierarchy that is associated with privilege, the more a boss can be related to and seen as part of the business, moving around the business with a grasp of what is happening.

For example, I have a badge on; I always have my badge on. I never allow a picture to be taken of me without my badge on, because everyone in our stores wears a badge. When they see me wear it, our staff are going to be more inclined to wear their badges and understand that this is the way we do things around here.

I can remember an organisation I worked for some years ago and we had a real problem getting people to wear badges. I said to the managing director of the day: "Well, I think we all should wear badges including yourself," and he said: "No, certainly not! I am the managing director and I am not going to wear a badge." That put that business, in my eyes, much closer to cynicism than it did to integrity. It created a disconnect.

I think the issues of integrity of purpose and example, of lifestyle and attitude, are probably the most important cultural contributions a leader can make to the business. And how we manage the issues and how we balance them requires a constant process of judgement. Many of the issues are small, but over time they accumulate to create a culture - people call it a culture, but I call it accumulative perception. And that's what creates a culture of business, brick by brick. In a successful culture there also has to be germane, an understanding that stretching oneself to achieve success, in every sense of the word, is absolutely vital to the business achieving profits; and profits are absolutely vital to a business remaining economically viable.

It is not unlike a sporting endeavour, there's got to be constant stretch. Just like an athlete pushes himself to the point where it hurts if he wants to be a winner. He has got to exert himself and stretch further than his competitors. Exactly the same principle applies in business.

If you're not stretching yourself and the business to a point where the effort actually hurts and creates demands at all levels, you can be sure that you are not stretching the business against your competitors. Because your competitor will be doing likewise. And of course this is the great beauty of the free enterprise system. Because that drives efficiencies of the operation at every level and it provides a much better deal for the customer.

You have said many times that you are a team player - do you believe this approach provides a better platform for delivering what customers want?

I think I would reword that to say it is the only platform that a company with about 150,000 plus employees and 1500 stores can operate.

I think one of the big delights in commercial life, and certainly for me in my business life, is collegiate. I spend all day interrelating with my colleagues. Most of my day is spent speaking to people about the business and about the business's opportunities, and so when you talk about "team" it's critical to the business. Team also implies that you have integrity in your relationships with the other members of the team, that they can trust you and you can trust them. There is also a really important aspect of team and that is you don't have the right to make a decision unless you have the right to make a mistake. So your team members have the right to make a mistake, just as you do.

Of course, it is also important not to make them again, and to learn from them, but equally important is that people feel free, knowing that they will make some mistakes and that is an inherent right of being a team member and a player.

Also vital in this issue of being a team player is the ability to delegate. For instance, in a cricket team you have a bowler and a wicket-keeper, someone may be a good spin bowler or a fast bowler who can swing the ball. Each has a place in the team and they each do their thing. The bowler can't say, 'Look I don't trust the wicket-keeper', in fact, he is dependent upon the wicket-keeper. So again, you have to be able to trust your colleagues and your fellow members of the team to do their jobs and pull their weight.

How important is a brand such as "The Fresh Food People" to Woolworths and why do you think it has delivered so successfully?

These types of brand names and slogans are relevant to our customers and help them identify with us.

"The Fresh Food People" really goes to describing what Woolworths is about. But, of course, if you have a slogan like that and don't deliver fresh food then that can become a business destroyer. In Woolworths, that fresh food offer is immensely important in its execution. In the case of Big W, we sell on both quality and price and when we say "the brands you know and trust at those famous everyday low prices" we deliver brands that represent quality. So a generic T-shirt in comparison with another generic

T-shirt is meaningless, but a Bonds T-shirt compared to a Bonds T-shirt - this gives you a base to compare prices.

Price in itself is immensely important but not all important. If the customer believes and trusts your prices and it's not the key fact that motivates them into your store, they'll be interested in other issues such as product safety, quality and freshness. But that will only be the case if the price is right and then these secondary things become the first line of importance. For instance, with Big W whenever we have researched the "everyday low price" proposition, the confidence the customer has in that slogan is quite overwhelming - it almost goes off the scale. And if that Big W slogan was to fail, for instance if a customer sees a cheaper price for an identical item in a competitor's store, then the credibility for that customer for that pricing slogan is lost. You can't afford that situation to occur. Similarly, the first time a customer gets a crook orange or tomato it damages that fresh food concept.

The banner and the brands have to stand for something in the marketplace. They have to live up to that promise and then that cumulatively reinforces the perception. It's immensely important.

Please tell us about the Woolworths Academy; what it will deliver for Woolworths and why it is needed.

This is immensely close to my heart. I started my career as a boy on the dock at Grace Bros., Chatswood, and in my 44 years in retailing there are not many jobs I haven't done. I have worked myself up from the bottom. In the process I got a commerce degree from the University of New South Wales and subsequently I was sent to Stanford. Both were immensely helpful in giving me a wider set of skills and an appreciation of business life.

The Academy incorporates all learning and development programs across the Woolworths businesses, and the partnership with Macquarie Graduate School of Management (MGSM), one of Australia's top business schools, completes our ability to offer nationally recognised, formally accredited, business related qualifications at all levels of our business from certificate through to masters.

At present there are 44 people completing Bachelors degrees, 60 doing postgraduate Certificates and Diplomas and 26 doing Masters.

Our training program starts from the simplest orientation training right through to a Master of Business. To have those upper-end courses approved by a university because we meet all the academic requirements for a world-class degree is a credit to the entire Woolworths training scheme. The accreditation really goes down through all the other diplomas and management certificates and other qualifications we have right through the organisation. I am immensely proud that Woolworths is one of the few Australian companies where a person can start at the lowest rung and achieve the position of CEO.

If anything, I would like to leave behind me a clear educational trail and opportunity that allows anyone with the will, the focus and the ability to achieve whatever they want when they work for Woolworths.

What, in your experience, are the key management skills needed to run any successful business and what skills do you prize most?

Well, I most prize integrity and genuineness. Second, the ability to work hard and apply oneself to the task. If you do those two things and you have basic ability and are prepared to work hard with enthusiasm, application and motivation, you will achieve. If you give us a young man or woman with those skills and attitudes then we can teach them, but genuineness, capacity and integrity are the keys.

We continually hear that people are the strength of any business - why is this true and how do you convince the staff that you really do believe it in an environment of change?

We completed a massive reorganisation in this business four or five years ago and moved hundreds of people around and we hardly retrenched anyone. The only people we retrenched were people where it was obviously a matter of fairness and equity in doing so; where they had been with us for 40 years and had a unique skill and could not be retained and were near the end of their working life… and the fair thing was to offer retrenchment. We only did that for a handful amongst hundreds of people.

Why? Because we are in the business of giving people jobs. Not everyone was happy with his or her new jobs and they subsequently had the opportunity to work into other jobs. So, while change is important, looking after our people is also important.

It is also important to make sure that you do not create surplus costs and surplus people in your business in good times. Otherwise, when the tough times come again in Australia, and they will, you may have to ruthlessly put people off.

In our business we control our human resource costs by percentage to sales at store level and at head count after that. I look at head count every month and no one employs beyond the agreed head count without my approval and; this is in a business of 150,000 plus. You need to ensure that you keep your costs down so you don't have to retrench people later on.

How do you define leadership as opposed to management?

In every case the word is "example". You lead by example - and with integrity. And when the going gets tough, then you need to identify with the people in the areas where it is tough.

Can you teach leadership? Or for that matter can you teach management?

You can teach many aspects of it and I think you can teach people skills that assist greatly in the process of leadership and management. But it also has a lot to do with the basic inclination of the person concerned. Some people want to lead and some don't … certainly, to have a feeling of leadership in one's veins is a great help. I suppose you could call it ambition - ambition and appropriate skills are very potent forces. When it comes to management, I think it's all about integrity, persistence and commitment.

As a CEO how do you grow and develop the management team? How do you develop a culture of success?

First of all, grow your own team. Second, by personal teaching and tutoring and by a range of other methods including formal training, external and internal to the company. Teach the team, then mentor them and, above all, support them when a mistake is made, as it inevitably will be.

For example, in our main strategy meetings the working papers are quite extensive, maybe 50 pages or more, I chair that meeting with all of my senior colleagues around me. Then outside that group is a whole host of younger men and women who aspire to this level and they hear the discussion on these critical issues.

I will often stop and explain why certain issues are more important than others and spend a lot of time not just talking about the technical issues, but also the cultural imperatives.

A great principle that probably should be underlined for management is something that was said by a remarkable person who walked on this earth 2000 years ago: 'Treat other people as you like to be treated yourself'. There is no greater premise to life and the practice of management.

 

"Team" is Critical

Woolworths CEO Roger Corbett is a team player who stresses the value of playing team sports at school to business success.

"I think sport at school is important for teaching young people about life and the importance of teams. And rowing is a really good example; if you're rowing in a racing eight, as I have done, you each need to pull a full puddle, you each need to pull at the same time, you each need to trust the other guy."

The Big Brand

Woolworths now has more than 1500 stores throughout Australia and employs more than 150,000 people. Its major brands are Woolworths/Safeway - 'The Fresh Food People' supermarkets; Dan Murphy's, First Estate and BWS Liquor Stores; Woolworths Petrol; Woolworths Ezy Banking; the Big W chain of general merchandise stores and in the electronics area; Dick Smith Electronics, PowerHouse and Tandy.

In last year's report to shareholders, Roger Corbett told the 320,000 shareholders that by world standard Woolworths had a relatively low share of the national food liquor and grocery markets (FLG) and, in particular, the fresh food business.

He also said that a large percentage of the Woolworths stores were in the early stage of their life, with significant potential for growth.

In the half-yearly results to January 2004 he said the company was aggressively pursuing cost savings. Project Refresh initiatives and improved operational efficiencies had so far delivered cost savings of 3.28 per cent ($1574 million) over the past five half years.

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