Mercadona
Values
Taking care of customers and employees
Universal truths according to Juan
Customer is the center of company decisions
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Reciprocity: To satisfy oneself one must satisfy others
No one is born knowing: Customer needs to be correctly informed and workers need to be trained correctly
How you measure me is how I behave: If company trained workers to be money making machines they would behave as such. But if it promoted initiative, involvement and commitment employees would offer better customer service
Mercadona's response to 1990's competition from international retailers
TQM - total quality management
Strategic switch to Always Low Prices
Culture of continuous improvement
Resulted in double digit growth in sales and profit
Competition
Local food stores
Carrefour
Basque company Eroski
High quality home-brand products
Principles of TQM
5 classifications:
Process owner, instructor, executor, coordinator and assistant coordinator
Everyone is reliable
Policies cannot be implemented successfully by forcing an idea or task on others. Convince colleagues rather than defeat them.
Responsibility to prescribe to customers and suppliers alike
Any company effectively acts as an assembly line
5 components of TQM
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1. Boss (customer)
2. Employees - treated like human beings with hearts and minds
3. Supplier
4. Society
5. Capital
Keep prices low and stable as possible
Innovation> Mercadona was the first retailer in Spain to use barcode scanners
Dividing the store into 6 ambience store sections - butcher/fish/bakery/fruits and vegetables/ cosmetics/ deli
Prescription by in-house specialists
Time and convenience
Ample parking facilities
Clear signage in the isles
Multiple entrances with cash registers
Intuitive product locations
Customisation of assortment into local tastes
Contact: Specialists know customers by name and stores have toll free number that customers can call
Stable employment and hours - 6.6 hours for 6 days a week/ 85% on permanent basis by 2008/ alternating night day shifts with month advance notice
Advancement- promotion was internal/ selecting people who they know want to work with the company for long
Working conditions - Don't make a person do what a machine can do/ company also closed stores that did not have good working conditions for employees
Recruitment and training - only employ staff that fit into culture/ role play interviews/ heavy investment in training/ 'From parents to children' training by specialist employees who did this for free in exchange for a weekend off/ Additional training in new products and processes such as leadership, information technology and english
Transparency - performance (goals and accomplishments) and targets plus changes in processes, products or price
Compensation - Higher salaries than industry average/ 30 days leave/ maternity leave and daycare benefits/ equal pay and equal benefits for same responsibilities/ all employees except store coordinator and assistant coordinator paid same amount/ annual bonus if company meets targets
Quality of life - live close to work/ stores closed on Sundays (this also lovers operating expenses)
Long-term win-win contracts
co-creation/innovation of products
Environmental productivity - making concentrated liquid detergents/ trucks loaded minimum 95% capacity/ working with suppliers to eliminate direct-store deliveries from suppliers such as coca cola and rerouting them to its logistics block to reduce traffic congestion and noise at its stores
Social impact - reduced disturbance to neighbourhood through quiet and quick offloading / same drivers for same stores/ paying attention to traffic and appropriate delivery times for each area to make sure deliveries are fast and quiet
Neighbourhood development - contributing to market renovations in places where they had stores/
Focus on long term profitability/ continuous improvement in productivity and reinvestments in profits to increase equity (90% reinvestment)/
Process Standardization and Improvement
Process owners designed store processes/ Instructors train and inform employees/
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5 processes: 1. Management of store ops 2.Transportation from supplier to logistics block 3.Analysis of needs 4.Supply of raw materials and products 5.Transportation of logistics block to the store
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Managing store network
Prescription instructors introduced in 2006 - increased accountability for both customers and specialists
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Managing the store
Store coordinator
Employees
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Morninf shift assistant
Afternoon shift assistant
Ambience specialists
Non-ambience isle specialists
Cleaners
Cashiers
Maintenance specialists
The 2008 economic crisis
Customers leaving because Mercadona was expensive in certain categories such as fruits & vegetables
Sales increasing
Mercadona's response
Eliminate 1000 products from assortment
Reduce 2009 profit target by half
Reduce prices (17%) to save the customer money
My take
Should Mercadona pay the 2008 bonus?
Yes they should but then use this as an opportunity to change the policy on bonus temporarily. Recessions are not permanent so the policy change should reflect the eventuality of financial unpredictability. Why - The company has been performing well and still is. Their margins have been high and they have managed to keep their costs down. Most of the employees are in this for the long haul.
What benefits does Mercadona reap from investing in its people and processes?
• Commitment to the company success
• Efficiency in processes
• Staff retention and low turnover
• Efficiency in recruitment
• reduced waste
How do they make this strategy work?
• Making their staff to be in charge of how the company is run
• Co-creating and collaboration with suppliers and customers in improving processes and products
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Do we have a different set of responsibilities to employees during a crisis?
• Yes but this should be anticipated in any business and planned for but not reacted to
• protecting the livelihoods of employees sometimes impacts the employees in ways that they might not feel great about in the moment
Way forward
You can change the rules but you need to give people a headsup