“Get your people on board”: Archie Norman on turnaround success and the importance of staff happiness
The ex-Asda boss on how he applied his business principles to return companies to profit
Archie Norman has had a stellar business career, but in the business world, his reputation was inked during his spell as the chief executive – and later chairman – of supermarket chain Asda. It was in 1991 that he was the sole applicant for the chief executive's role, with the company on the precipice of bankruptcy.
Together with another celebrated turnaround expert Allan Leighton, Norman returned the company to rude health and eight years on secured a £6.7bn sale to US supermarket giant Wal-Mart. Getting the people on board, he explains below, was key to the success of his plan. And his track record suggests his business principles are ones that any company facing a crossroads should take seriously.
Prior to his nine-year spell at Asda, Norman had trodden a well-worn path to turnaround success. First there was a stint at McKinsey & Company upon graduating from Cambridge University and then Harvard Business School with an MBA. Despite his youth – he was 37 when he took over the running of Asda – he'd already held directorships at Railtrack and Geest, as well as the finance director's position at Kingfisher Plc.
Since Asda, he has held the chairmanship of ITV, which he took on in January 2010 with the broadcaster struggling in a rapidly changing commercial landscape. He is a director of Coles Group, chairman of HSS Hire and a senior adviser to the investment bank Lazard. He was also a Conservative Member of Parliament between 1997 and 2005 and part of the Tory shadow cabinet between 1997 to 2005, before he returned to business.
Here, in the latest of a series of articles published in association with Piper Private Equity, Norman shares his insights from those first few months at Asda:
My career has been about taking organisations that have lost their way and creating great places to work for colleagues and value for shareholders.
The starting point is to tell it how it is. The more negative the situation, the more important that is, because your people are on the front line. They know what is really happening and they are looking for the leadership to reflect what they feel, the unvarnished truth. At the same time, you need to point a way forward.
People who think they can turn a company on its head in a year are kidding themselves because the root of most business difficulty is in the organisation and culture. So you need to buy the time and space with your shareholders and customers to deliver fundamental change. To set out the journey and recognise what to do when: a sense of time and place.
When I first arrived at Asda, I used to spend a lot of time going around the stores on my own. One conversation will always stick with me. It was with the manager of the Wakefield store. He told me his Regional Manager had been in that week. I asked him how it went and he said: ‘Well, I had a foul-mouthed tongue lashing.' You just can't have that. Whatever people's competence, whatever their failings, people need to be treated with respect. Foul language just creates fear and secrecy. Management legitimacy is no longer automatically defined by hierarchy – it has to be earned.
The culture is probably even more important in retail than other companies because the colleagues come face-to-face with customers every day. These are not investment bankers, the people that join have often just left school or they are part-time working mums.
Often they come in the door with a sense of low self-esteem as it is the only job they can get. I once asked a check-out operator in Lancashire how she enjoyed the job and she told me ‘not very much.' She said: ‘You've got to realise when I was at school and didn't do my homework, my teacher used to say I'd end up as a check-out girl at Asda, and here I am.' Service comes from the heart and the job of the employer is to create self-esteem and a belief in what they are doing, the sense of self worth.
Having a recruitment policy that makes it harder to get a job is a good idea. People need to believe in their workplace and its values, it needs to be something they can describe proudly to their family. All any of us want is to go home with the sense that we're achieving something.
The advantage of being part of a failing or challenged company is there is a mandate for change, a burning platform; harnessed in the right way, that can create real energy for people. But it's up to management to plan the journey: this year, the year after, until you come out the other side. People will follow you anywhere and through any hardship if they get a sense that the difficult times are going to be followed by success.
Once you have come out on the sunnier uplands, the danger is that everyone will say: ‘OK, we've done that', and then go back to the status quo. I've seen that mentality with chief executives too. Once they've improved the business, they are quite keen to tell the world how well they're doing. Success requires continuous renewal of energy, an organisation that's constantly arguing with itself, that is driving forward and never satisfied.
This is even more relevant in today's world where technology is changing the game all the time. Organisations that have that culture – the rolling energy that comes from having a perpetual burning platform – will always be ahead of the curve.
I'm not suggesting that you've got to be pessimistic but recognising the threats and the urgency of change will keep you, and the business, sharp. That comes from being optimistic but having a fear of failure at the same time. The five-year plan has to become the next five-year plan. Never sit back.
This is an extract from '25 Years, 25 Insights', published by Piper Private Equity to mark its 25th anniversary. A specialist in consumer brands, Piper founded Pitcher & Piano and has helped grow businesses such as Boden, Las Iguanas and Maximuscle. To order a free copy of the book go to www.piperprivateequity.com