The Value of People Creating Organizational Change through People
“We will create an e-enabled, customer focused company, capable of delivering sustained, rapid profitable growth.” This is the mission statement for Acklands-Grainger (AGI). AGI is Canada’s leading MRO distributor, with over 200 branches throughout Canada, a product offering of over 500,000 SKU’s, 2,600 employees, and annual revenues of $600 million. In May 2001, AGI successfully completed and launched a B2B e-commerce site that includes an electronic catalogue, personalized order-taking engine, addressed shipping, and local branch fulfillment. The site supports both ADI and XML transactions.
The company’s vision included a web site and series of complementary channels that would share information within AGI, and with its customers and suppliers, thus simplifying the communication and order-taking process. Initially the task was a programming challenge. It was soon realized that the organization needed to change a number of its processes and its business model. Achieving a successful launch that included the needed process changes was a testament to the drive and determination of our staff. We realized that in order to prosper in the rapidly changing business environment, we had to undergo some fundamental changes and re-evaluate our business strategy. It required a strong desire to succeed and an organization-wide commitment to change to implement the strategic steps required to get there.
Acklands was founded in 1889 in Winnipeg and was purchased by W.W. Grainger in 1996. W.W. Grainger is the largest industrial distributor in the US, and is a publicly traded company (NYSE) with sales of $5B US annually. When I joined AGI as President in August 1999, we had a number of new “key” hires, a tenured work force, a broad product line, very strong sales growth, and a company-wide desire for success. The company was rich with history and possessed a strong technical knowledge of their products, but we faced a number of challenges.
AGI had a strong presence in Western Canada. Our main marketing vehicle, the AGI catalogue, published once every two years, possessed a considerable variety and depth of product line. AGI distributed well known products from such manufacturers as Stanley Works, Kimberly Clark, Norton, Lennox, J. Walters, and 3M. The company’s business model however, was becoming obsolete. For example, whereas our parent company, Grainger possessed one of the top ten web sites in the U.S. (www.grainger.com), AGI had no Internet presence. In addition, all products for AGI’s customers were shipped through one of its 230 branches, rather than using direct shipment from distribution centers for larger customers.
From a human resources standpoint, there were numerous layers throughout the organization which caused concerns about accountability and empowerment. Firstly, with only two exceptions, all of the executive were new to the company within the last eighteen months. In contrast, most of the general managers reporting to the team had been with the company for a considerable time, up to 25 years in some cases. AGI was facing margin and cost pressures. With my appointment the company was also facing new leadership. Not only did I have to assess the strategy and business model, I also had to gain the trust of fellow senior managers and staff, to ensure we were working towards the same goal. Given that AGI was the industry leader, and was achieving record sales results, we needed to determine a “burning platform” so our people could understand the need for change. Their support was critical to any success.
Change. It’s a core component of today’s business environment. Yet, the process of preparing an organization for change is perhaps one of the greatest leadership challenges. The work of Harvard Professor John P. Kotter in “Leading Change” can assist a company in defining its change management approach. Kotter summarizes the change process in eight distinct stages:
1) Establish a sense of urgency;
2) Create the guiding coalition;
3) Develop a vision and strategy;
4) Communicate the change vision;
5) Empower employees for broad-based action;
6) Create short term wins;
7) Consolidate gains and produce more change;
8) Anchor new approaches in the culture.
The process of change is ongoing, yet the first four months are the most critical in establishing a firm foundation and determining the strategic direction. In those first four months I toured 70 branches, plus all of our distribution centers and administration facilities. I met with over 1,600 employees and with all our major suppliers and customers. I listened, asked questions, and came to understand the AGI culture. This visibility within the company and with our customers and suppliers gave me the credibility I needed while I gained an understanding of their concerns and demonstrated the value that I placed on their input.
| Acklands–Grainger’s e-Procurement Solution
Because the distribution business is constantly evolving, in May 2001 Acklands-Grainger introduced a transactional web site www.acklandsgrainger.com. The web site offers an innovative way for new and existing customers to do business with Acklands–Grainger. The easy-to-use online catalogue has over 45,000 listed items and is available 24 hours a day, 7 days a week. Free to existing customers, the site is tailored to each customer’s needs for maximum flexibility and efficiency. Online ordering allows for a streamlining of the order and delivery process. The added convenience and efficiencies are passed down to Acklands–Grainger’s customers. A significant portion of the cost of procurement of MRO (maintenance, repair and operating supplies) within a customer’s organization lies in the processing cost of a requisition. AGI’s e-business solution allows customers to procure supplies efficiently over the Internet. A customer can log onto the site using a secure and unique password to access their product preferences, and they can search for products by category, keyword, manufacturer number, or AGI catalogue number. The web site includes detailed product descriptions and product photos and allows customers to find the product they need, get access to contract pricing, and purchase the product online. It includes personalized shipping and local branch order fulfillment and servicing. The site was launched as a complementary channel for business transactions and it has given Acklands-Grainger a new opportunity for two-way transaction and communications between the company and its customers. Through the web site, information can be shared electronically within the company, with customers and suppliers. |
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The urgency and need for change had become clear through my meetings and site visits. It was now necessary to bring everyone on board. Our executive team held its first meeting in December 1999. We had conducted a number of pre-meeting interviews using outside resources before this meeting. We began to access the organization’s capacity, capability and willingness to change, and its current strategy. Then we looked at our business strategy and where we wanted to be over the next five years. From there we developed our mission and vision statements, key performance indicators and our key enablers. All of these elements were used to determine our “burning platform,” and to ensure that we leveraged these discussions to provide an opportunity to build teamwork, agreement, and focus.
We established a vision. With revenues in excess of $1 billion and corresponding profitability, AGI will be Canada’s leading MRO supplier, recognized for our ability to anticipate and satisfy the needs of our customers through:
• Customer-focused delivery channels supported by superior service, processes and technologies;
• Becoming known as a great place to work, by creating a winning atmosphere that attracts, retains and rewards employees who contribute to our success;
• Leveraging our strong relationships with WW Grainger and our key partners; and,
• Being recognized as a valued member of all communities in which we do business.
We are working hard to achieve these goals and have had incredible early success in meeting our goals. I’m a firm believer in the importance of communication in helping to achieve this. It was crucial to be able to communicate this vision to AGI employees. Active communication is a key factor in the change process and it must be a two way process.
One of the best ways AGI had to communicate this vision to our employees was the new AGI Executive & Strategy Team. We worked together to assess the organization and effectively prepare AGI for the implementation of new processes, a business strategy and the eventual development of a new culture. It was through the Executive & Strategy Team that I fully appreciated that AGI had a talented reservoir of employees on which to base future growth. We involved over 300 employees by appointing them to teams focused on certain elements of our strategy.
I firmly believe that Human Capital is the most important resource of any organization; however, they are also the most resistant to change. In order to maintain employee morale and have employees not resist the change process, selection became a key element and retention of employees was critical while operating within the appropriate culture. In order to guide employees, consistency was required in our actions, leadership, goals and rewards. A leader had to empower and motivate their employees to be leaders of change.
The ‘value of people’ was instrumental in every stage of the change process. It continues to be instrumental as we move beyond our short-term launch goals to customer adoption of our new e-commerce technology.
I’m excited about the future and the early success of our initiatives. The ongoing learning curve will help us to continually refine our plans and achieve our goals. Our approach to introducing organizational change, within our strategic framework and with an emphasis on the importance of two-way communication, will hold us in good stead as the business environment continues to both challenge and provide new opportunities.