Their Toughest Nut - The Spotlight Story

In 1986 Morry Fraid, co-managing director of Spotlight Stores, was convinced to send his ‘toughest nut’ to a program called Money & You. That tough nut was their operations manager, Peter Dixon, who ruled the business in an autocratic, iron fisted manner.

At the time the textile retailer had 12 stores in Melbourne and was turning over annually about $35 million. Not shabby by anyone’s estimate. Yet they had a staff turnover that was hovering around the 85% figure and productivity was low. In short no one wanted to work there – and that was caused in part by Peter.

By Peter’s own admission the organisation was very top heavy with head office ruling how and what was to be sold, and how their customers would be treated. Their file of customer complaints bulged – unattended by a staff that didn’t know how to handle it – and furthermore – didn’t really care. Morale was low, profits were flat and the goals to expand the company were on hold.

Peter returned from the Money & You Program different. He had a huge change in attitude and quickly convinced Morry and his brother Ruben Fried to attend – along with some of their senior managers. (They were ultimately to send 80 team members to the program)

What happened next has gone down in business history as an extraordinary story of growth and innovation.

As Morry said “We took a step back and took a deep breath in. WE started looking at the relationships between people within the organisation. It seemed that an inevitable by-product of the hierarchical structure was the creation of a division between worker and manager. It had created an ‘us and them’ attitude which was counterproductive and limiting” ……in other words there was no alignment in order to move forward.

Peter Dixon added, “Many people go to work and see it as a 38-hour jail sentence which they need to serve week in and week out so they can be free on the weekends. That’s certainly not my idea of what a job should be. We wanted to develop the jobs people did by giving them responsibility and making them accountable for their actions. We wanted to give them a sense of meaning and challenge in their jobs. We also recognised that rewarding these actions was an integral component of reinforcing this process.

Spotlight’s senior managers began to brainstorm the various ways in which many of their ‘new’ philosophies could be effectively implemented. They seriously assessed the ‘obstacles for alignment’ or the visible distinctions between management and workers. Within 2 years of adopting this strategy, they were well on their way …

Some of these included, executive parking was removed and a ‘first in first served’ system was implemented; all team and their families received the same level of staff discount; the clock card system was removed increasing the level of ‘trust’; a communication system was encouraged called ‘talk back to the boss’ and managers were given additional listening skills and an open door policy was strictly adhered to. The organisational structure was radically changed – the entire hierarchy was inverted and the whole organisation became completely focused on customer needs; a Spotlight Customer Service Award was introduced the effect of which was to reverse downward spiralling morale; training of all staff became a major commitment; all staff were engaged in building and recommending simpler, more effective and streamlined systems; Rules and Regulations were renamed Staff Agreements increasing compliance and accountability; each team member was encouraged to ‘use their own best judgement’ when dealing with difficult customer situations including refunds.

The staff turnover rate dropped to about 20% - well below the industry average (65%) and when staff had been with the organisation for more than a year it dropped to less than 10%.

The company rapidly expanded to not only becoming a national company with close to 50 stores nation wide, it moved off shore to New Zealand, Singapore and most recently Hong Kong. Its annual turnover is now in the vicinity of $4 billion per year.

(This story has based on a Melbourne School of Management Study of the Management Practices of Spotlight Stores – as well as personal observation by Jane Jordan)