Roadblock: Internal Resistance

By Mel Duvall  |  Posted 2004-02-05 Print this article Print

Trying to energize your company? Don't overpay yourself.

The Obstacle

Albertson's chief executive officer Larry Johnston recognizes that he can't win the battle against Wal-Mart unless he can rally his frontline troops to the cause. Not long after joining the company, he made "energized associates" a strategic imperative for Albertson's, and hired a motivational expert. But at the same time Johnston is trying to energize associates, he is laying off thousands and attempting to hold the line on salaries and benefits. A bitter strike of workers in California has ensued since October. Various technology initiatives, including the planned rollout of 4,500 self-checkout registers, may only inflame an already tense management-employee relationship.

The Response:

Take a pay cut: For starters, according to experts in corporate compensation, Johnston needs to set an example by cutting back his own pay package. To his credit, Johnston took a 57% pay cut to $12.2 million in the company's fiscal year ended Jan. 31, 2003, from $28.2 million the previous year. Still, Stever Robbins, an executive coach with Boston-based Leadership Decisionworks, and a co-developer of a Harvard Business School leadership program, says it is unconscionable for Johnston to ask California workers to sacrifice some basic health-care benefits when his own pay package is so rich. In comparison, CEOs at Kroger and Safeway took home $1.9 million and $1.3 million in 2002, respectively, although Safeway CEO Steven Burd also capitalized on $11 million in stock options. (That's OK: Johnston's $12.2 million was in addition to such fringe benefits as $68,000 for the use of the company aircraft and $28,000 for financial planning.) Robbins thinks Johnston needs to tighten his belt a lot more to have credibility with employees. "Johnston has said numerous times, there are no sacred cows—well, he should start at the top and look at executive compensation," says Robbins.

Be honest: It's critical that the rank and file believe they're all in the same shopping cart. That means laying the facts on the line, as to where Albertson's is winning and losing the battles and being honest about how Wal-Mart is using its cheap labor and systems to lower prices. Wal-Mart employees make an average of about $8.50 an hour and pay a health premium while Albertson's California workers earn a salary, pension, and benefits package worth about $24 an hour. Robbins says that unless Albertson's employees are confident they're getting the whole truth, even after a settlement, achieving business objectives will be subject to resistance—assuming the lack of confidence doesn't scuttle the talks in the first place.

Be visible: If employees are going to agree to make sacrifices, they need to feel a personal connection to their leader. That means he has to be seen on the frontlines, and take time to hear their concerns. That can be as simple as spending time in the stores helping bag customers' groceries, or stopping in at the employee lunchroom to chat with workers. The goal is to tap the emotional connection people have with their company.

Enlist the troops: There are other ways to compete against Wal-Mart than just on price. Johnston has to get employees involved in finding creative ways to retain and grow the customer base. And when employees do come up with good ideas, they should be rewarded in meaningful ways, such as cash rewards or bonuses. Other companies reward employees based on a percentage of the savings generated, such as 5%, or a flat reward, such as $500 for every idea implemented.

Educate: Don't simply roll out a new technology like self-checkout registers—which take away jobs—without properly conveying the reasons behind the decision. Share information related to consumer trends, the competitive landscape and the return on investment it will provide the company.

Contributing Editor
Mel Duvall is a veteran business and technology journalist, having written for a variety of daily newspapers and magazines for 17 years. Most recently he was the Business Commerce Editor for Interactive Week, and previously served as a senior business writer for The Financial Post.


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