Posted: May 25th, 2022

ASDA Way of Working Case Study

ASDA Way of Working

Archie Norman’s approach to “renewal” of the ASDA stores was very much in alignment with that of any consultant group. Because Norman did not have direct experience with retail grocery stores, he needed to come up to speed quickly and he approached his challenges as he would any consultant assignment. Whether this was prudent is perhaps a moot point — it was what Norman knew how to do. Further, Norman brought his colleagues from McKinsey & Company into the fray, basically setting up a frontline campaign as if he were in a war zone.

The First Steps

Norman established three pillars as he assumed leadership of Asda: (1) An immediate fiscal and operational revamping; (2) a strategic plan for recovering market share; and (3) a comprehensive culture change. These changes happened against a background of communication issues best described as chimneys or silos. The departments of the organization more or less kept to themselves, failed to share critical information, and lacked any cohesive vision that would cause the corporate efforts to “pull together.”

Communicating the problem. One of Norman’s early tactics was to shake the company out of its complacency and use a “tough love” approach to facing the realities of their fiscal situation. It seems that communication in Asda was sufficiently fragmented that Asda associates across the organization were not clear about the dire straits the company had created for itself. Norman tackled this head-on with the same sort of straight talk that he might have provided a client in his McKinsey & Company days in an effort to convince the client of the need for his services and justify the costs of the changes recommended. Norman basically ignored any attempts to soft-pedal his discussion of the problems. They were exigencies and Norman needed the associates at the company, the Board of Directors, and the stockholders to understand that the matter was urgent and deep. One of his goals was to buy time to fix the problem, methodically and systematically, considering all the implications and developing a comprehensive plan — just as he would have done countless times for clients while he was employed as a consultant at McKinsey & Company.

Communicating the strategy. It is understandable that Norman would consider the entire organization dysfunctional — he had no stake in the previous operations and he had a consultant’s mentality, which basically dictates that you find every possible thing wrong with an organization that you can as that is the way to a comprehensive consulting engagement. However, this approach is not necessarily the avenue that change agents — in the softer organization development use of the term — would employ. The stakeholders in the company don’t go away like the CEO who was fired and the chief officers who were replaced. The stakeholders remain in place and they are ultimately responsible for the effectively executing the change orders (Heracleous, 2001). It is difficult to get the stakeholders from the place where they have all been informed that they are completely stupid and ruining the company, to the place where they embrace the new culture that is being overlaid on their previously misguided orientation.

One very astute move that Norman made — which made transparent his understanding of change processes — was the decision to empower associates in the organization. While Norman might have experienced deep resistance to change and resentment at being identified as part of the problem that the “boys” from McKinsey & Company were trying to fix, Norman smartly told the associates that they would experience a new level of control over their work and the corporation’s success. Although Norman pole-vaulted over the customary strategic planning processes designed to elicit buy-in from employees — no collectively developed vision, no collective assertion of value, no mission statement exhibiting the collective wisdom of the workers — he did convey that this was the best plan he could imagine at this time, and that he had gotten the best help that he could afford and arrange to bring to the workers this strategic plan for the future (Cadwell, 2005). Its successful implementation was in their hands — and this last point was underscored by the ready-made Statement of Values that was to become the aim star for the company. It is interesting, though predictable, that Norman did not feel he had sufficient expertise in the organization to rely on for the high level strategic planning that commenced.

Conducting the operational change. Norman was not a stranger to revamping operational change and he went about it with the enthusiasm and deep-cutting scalpel of a managing director in a private equity firm that has just infused a company with a huge corpus of investment fund dollars. There were going to be immediate changes and they were going to impact the bottom line. Replacing existing leadership is a common strategy, and private equity firms know that, well-placed, this can be very effective (Berry-Whelan, 2003). The main consideration is that the new people understand that their energies must be directed toward profitability — this was precisely what was needed for the first pillar of the renewal strategy: An immediate fiscal and operational revamping. Norman replaced key personnel that he was confident would understand the game plan and not act as resistors to change in critical functional areas of the company. Further, fiscal steps including selling off non-food operations or shutting them down, reducing the headcount at the corporate headquarters by 30%, cutting by 10% in-store middle manager positions, and establishing an 18-month pay freeze for all employees that would prevent raises or bonuses. For in-store employees, the loss of headcount at headquarters would be viewed as a favorable change, and the loss of some middle manager positions could be offset by granting new levels of autonomy and responsibility to store managers (Mishra, et al., 2007).

Orchestrating the cultural change. The primary focus of Norman and his officers over the next 18 months will need to be focused on the long-term efforts required of sustainable culture change. Naturally, if the operational changes and the structural changes made by Norman have resulted in an improved profit margin, then Asda associates will look on other required changes with more favor. The urgency of turning around Asda’s fiscal situation would have been recognized at this point in time — six months into the renewal — and associates would be actively engaged in bringing about much of the needed changes. A useful heuristic is to think of the change efforts at Asda as a U-shaped curve. There had to be immediate and steep changes made to operations and the finances. This is the first pillar. As those steps accomplished increased stability for the company, the organization must gather momentum (the resting point of the curves) and then work diligently to change the culture. This is the third pillar: A comprehensive culture change. And it began with the first announcements by Norman, continued with the release and implementation of the statement of values, and continues as the in-store changes occur.

Asda underwent huge shifts in position, first during the declining years when it attempted to become an upscale grocery chain through the corrections when it returned to its original focus — an everyday store for an everyday working person. This is the realm of the second pillar: A strategic plan for recovering market share. Going forward, Asda can contemplate any changes that it might wish to make, do the requisite market research, and test changes in single stores at select locations. And Asda will need to bring about the physical plant changes required by years of neglect. It may be that the company continues in its present niche, or it may decide that it actually does want to capture some of the market share of the more upscale grocery stores. In the same way that McDonalds competes with Starbuck through the careful installation and trenchant marketing of its coffee bar, Asda can incorporate some of Trader Joe’s. Just as Target has moved into groceries — effectively competing for market share with Fred Meyer — Asda can evaluate whether changes can be made effectively and determine the scope of change that the market will bear.

Conclusion

Norman’s success as a change agent will depend largely on his ability to execute the requisite culture change at Asda. He made an excellent choice when he recruited Allen Leighton as VP of Marketing, who appears to be the sort of individual that associates will look to for confirmation that they are moving in the right direction. Norman’s credibility will rest in the financial success of the company that is a result of the cost-cutting and structural changes he implemented early, and the backdrop of the softer attributes of the renewal effort. The shifts that are necessary for robust culture change include coordination of the change efforts in each of the stores, taking down the communication and functional silos, and establishing a rigorous training and development plan for internal managers. Some of this effort will be directed toward back-filling where spots of resistance to change have sprung up and where associates identify areas with which they would like more involvement — this is the work of the mutual engagement of the core, and it will not be unfamiliar to a former McKinsey & Company consultant.

References

Berry-Whelan, K.S., Gordon, J.R., and Hinings, C.R. (2003, June). Strengthening organizational change processes: Recommendations and implications from a multilevel analysis. The Journal of Applied Behavioral Science, 39, 186-207

Cadwell, R. (2005, January). Things fall apart? Discourses on agency and change in organizations, Human Relations, 58, 83-114

Heracleous, L. (2001, December). An ethnographic study of culture in the context of organizational change, The Journal of Applied Behavioral Science, 37, 426-446

Mishra, B.A., Bhaskar, A. U, and Khurana, A. (2007, February). Development of organizational change questionnaire, Global Business Review, 8, 87-97

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