Bagging profits: freshly picked from GE, Albertson's top boss Larry Johnston is pushing new ideas. Time will tell if this super marketer's initiatives ring up. (Profile).Inside the staff lounge of a recently opened Albertson's supermarket in the San Francisco San Francisco (săn frănsĭs`kō), city (1990 pop. 723,959), coextensive with San Francisco co., W Calif., on the tip of a peninsula between the Pacific Ocean and San Francisco Bay, which are connected by the strait known as the Golden suburb of Hayward, Calif., CEO (1) (Chief Executive Officer) The highest individual in command of an organization. Typically the president of the company, the CEO reports to the Chairman of the Board. Larry Johnston Larry Johnston was a Manitoba politician and activist. In 1977, he was a leading figure in the province's Revolutionary Workers League, a Trotskyist organization aligned with the national party of the same name. is giving about three dozen employees of the grocery and drugstore giant a piece of his mind. "We are in a turnaround," he says pointedly. "We want leaders who think that change is an opportunity, not a threat. We want a culture that values the ideas of every associate. It's the people closest to the customer who have the best ideas." He outlines the five "strategic imperatives" that have become the thrust of his young administration. Designed to boost sales, reduce expenses and improve operating margins, they include: aggressive cost and process control; maximized return on invested capital; customer-based approach to growth; company-wide focus on technology; and energized employees. "An organization's attitude determines its altitude," Johnston tells the workers, invoking a favorite motivational maxim, one of many upbeat sayings he frequently quotes. "Don't you feel better when you come to work every day and have leaders who are positive?" Murmurs of assent circle the room. Encouraged, he adds, "When we get up in the morning, we can either have a terrible day or a terrific day. Who decides?" "We do," echoes a chorus of voices. "You're going to hear a lot about this," Johnston promises. "We're going to teach positive thinking--how to have a good day not just at work but at home. And if you don't have a leader who emulates these values," he adds, sharpening his tone, "he or she won't be your leader very long." People nod appreciatively. The store director beams. They've never met Johnston before, but they welcome his evangelistic and inclusive message. Clearly he had more on his agenda this day than cuffing the huge blue-and-white frosted sheet cake that's been baked to celebrate the store's grand opening. Johnston's mission is to spread the message to all 225,000 employees -- along with vendors and shareholders--that Albertson's can become a dynamic meritocracy mer·i·toc·ra·cy n. pl. mer·i·toc·ra·cies 1. A system in which advancement is based on individual ability or achievement. 2. a. that rewards innovation and ideas. "There's an infinite capacity to improve everything," Johnston says. "Productivity is never ending." Neither, it seems, is Johnston. A driven yet easygoing eas·y·go·ing also eas·y-go·ing adj. 1. a. Living without undue worry or concern; calm. b. Lax or negligent; careless. c. 6' 7" bear of a man who has spent 170 days on the road since he started a year ago -- and who never strays far from his Blackberry wireless email Wireless Email or Push E-mail for enterprises is an email solution for small handheld platforms that is secure and managed centrally by enterprise server. Wireless technology adoption has seen a dramatic increase over the past few years. device -- Johnston probably would have met every Albertson's employee already if it were possible. As it is, he constantly whisks electronic missives to staff and customers -- his email address See Internet address. is made public -- singing praises and responding to problems. One irate i·rate adj. 1. Extremely angry; enraged. See Synonyms at angry. 2. Characterized or occasioned by anger: an irate phone call. customer messaged Johnston about being rudely treated in an Albertson's store and vowed never to return. Johnston sent a message to the store's director with instructions to try to win back the business. Soon after, Johnston received another message from the angry shopper, this time expressing amazement that the store director had come to his house to apologize. "Our job," says Johnston, "is the maintenance and acquisition of customers." Needed: Leader to unite rivals Johnston, a corporate turnaround veteran, came to Albertson's from General Electric in April 2001 with zero experience in the food industry and a mandate from Albertson's board of directors to be a catalyst for change. The board's unorthodox choice rankled more than a few insiders; since legendary grocer J.A. "Joe" Albertson opened his First store in 1939, Albertson's had never even looked outside its Boise, Idaho “Boise” redirects here. For other uses, see Boise (disambiguation). Boise is the capital and most populous city of the U.S. state of Idaho. It is the county seat of Ada County and the principal city of the Boise metropolitan area. , headquarters for a top leader. But Albertson's needed a cleanup. It had merged with American Stores American Stores was the name of a United States chain of supermarkets. It was formed in 1917 when Acme Markets merged with four other Philadelphia area grocery chains into American Stores. American Stores would grow to 1,700 stores in 40 states with $15 billion in sales. in 1999 in a huge transaction that put more than 2,500 stores and 235,000 employees behind a single cash register. The combination of homegrown home·grown adj. 1. Raised or grown at home. 2. Originating in or characteristic of a locality: "Rock is homegrown music in the United States, evolved from blues and country and Tin Pan Alley" regional supermarkets including Albertson's, Jewel Food Stores Jewel Food Stores could refer to:
The merger also forced rivals set in their ways to get chummy chum·my adj. chum·mi·er, chum·mi·est Intimate; friendly. chum  mi·ly adv. with
each other. No sale. This marriage of strong-willed equals quickly
deteriorated into an "us versus them" culture clash Culture Clash is the name of:
tr.v. de·mor·al·ized, de·mor·al·iz·ing, de·mor·al·iz·es 1. To undermine the confidence or morale of; dishearten: an inconsistent policy that demoralized the staff. staff and miring progress. Albertson's ended its fiscal year in February 2001 with revenues essentially flat over the previous two years, increasing administrative expenses, declining earnings per share and shrinking operating margins. "We had a company that needed to be pulled together," says Albertson's director Gary Ames, who was instrumental in hiring Johnston. "The two cultures needed an outside third party to bridge them." Graduates of the Jack Welch For the illustrator named Jack Welch, see Jack Welch (illustrator) John Francis "Jack" Welch, Jr. (born on November 19 1935 School of Management are a kind of gold standard for Fortune 500 companies wanting a face-lift, such as The Home Depot's Bob Nardelli, 3M's James McNerney Walter James "Jim" McNerney, Jr., is an American businessman. On June 30, 2005 he was named the CEO of The Boeing Company. Prior to that, McNerney was the Chairman and Chief Executive of 3M. He had been a member of the Boeing board of directors since 2001. and Honeywell's David Cote David Cote may refer to:
What Jack Welch taught Johnston "They knew there would be a lot of tough calls that had to be made," Johnston says of the Albertson's directors. "There wouldn't be any sacred cows. We would do whatever it took to increase shareholder value and move very quickly." Johnston, 53, had made several game-saving plays over a distinguished 29-year career at GE, where he steeped himself in Welch's mantra to embrace change and best practices and to crush the bureaucracy that stifles a company's development. Johnston honed his sales and management talent in GE'S appliances division, except for two years in Paris, where he headed GE Medical Systems' operation in Europe, the Middle East and Africa Europe, the Middle East and Africa, usually abbreviated to EMEA, is a regional designation used for government, marketing and business purposes. It is particularly common amongst North American based companies, who often divide their international operations into the . There, he showcased an ability to succeed where others had failed, turning a money-losing unit into a moneymaker after only one year. He did it by removing roadblocks while motivating employees to achieve--and exceed -- goals. He closed several unproductive factories in Western Europe Western Europe The countries of western Europe, especially those that are allied with the United States and Canada in the North Atlantic Treaty Organization (established 1949 and usually known as NATO). and moved them to lower-cost regions including Mexico. He introduced the quality measurement system Six Sigma Not to be confused with Sigma 6. Six Sigma is a set of practices originally developed by Motorola to systematically improve processes by eliminating defects.[1] A defect is defined as nonconformity of a product or service to its specifications. , and hired a motivational speaker A motivational speaker is a professional speaker, facilitator or trainer who speaks to audiences, usually for a fee. The keynote speech generally takes place either at the beginning of the event, or the close of the event. from Texas to give European staff a course on the power of positive thinking. Johnston held Medical Systems sales meetings in Germany--the home base of chief rival Siemens--after which GE salespeople would call on local German hospitals. "That's just fresh thinking," says Welch. Today, Johnston notes, GE Medical Systems has passed Siemens and dominates its marketplace in Europe, the Middle East and Africa. Impressed, Welch brought Johnston back to appliances m 1999, this time as president and CEO of the Louisville, Ky.-based group. Welch still lauds Lauds is one of the two "major hours" in the Roman Catholic Liturgy of the Hours. It is to be recited in the early morning hours, preferably near dawn. Structure of the hour Johnston's European campaign. "We had all kinds of people--guys with better technology backgrounds, seemingly better resumes," Welch says. "Then Larry came and found the magic formula, giving them self-confidence, bringing the best out of them rather than having them keep their heads down heads down - [Sun] Concentrating, usually so heavily and for so long that everything outside the focus area is missed. See also hack mode and larval stage, although this mode is hardly confined to fledgling hackers. , always losing. Larry proved beyond a doubt that he had the leadership characteristics to run any business." But can Johnston deliver manna manna (măn`ə), in the Bible, edible substance provided by God for the people of Israel in the wilderness. In the Book of Exodus it is compared to coriander seed and described as fine, white, and flaky, with the taste of honey and wafer. to the grocery business? "There's a huge amount of work to be done," says Lehman Brothers Lehman Brothers Holdings Inc. (NYSE: LEH), founded in 1850, is a diversified, global financial services firm. It is a participant in investment banking, equity and fixed income sales, research and trading, investment management, private equity, and private banking. analyst Meredith Adler, who in late February rated Albertson's shares "market perform." While Adler believes Johnston can streamline the organization, she points out that internal change alone doesn't solve the company's problems. Change takes time, and, she adds, "the industry's quite competitive. Nobody's sitting around waiting for Albertson's to get its act together." Least of all Johnston. The squeaky wheel The squeaky wheel is the central concept in the bon mot "It is the squeaky wheel that gets the oil." or "...gets the grease."[1] The "squeaky wheel" may be any problem, irritant, or other attention-getter. of change has begun to turn, starting with the CEO's using his considerable communication skills to negotiate a truce between Albertson's and American Stores loyalists. "What Larry says is 'It's neither culture -- it's the new culture.' That's doable," asserts Peter Van Hoeden, a 23-year Albertson's veteran who oversees the Midwest division. "Larry's done a nice job of saying, 'What's good for our business? Don't align yourself with where an idea came from. Align yourself with what's best for the company. Cutting administration, upping tech spending Before Johnston had completed his first 90 days on the job, every one knew what that meant. "There was too much bureaucracy," he recalls, "too much management, too many assets that were destroying shareholder value." Albertson's launched its five strategic imperatives and announced a broad restructuring that has included cutting up to 20 percent of administration and management above store-level, closing 165 underperforming stores, and consolidating operating divisions to 15 from 19. Johnston says he expects these and other steps to trim $250 million in costs by the end of the company's fiscal 2003 second quarter in August. Much of these savings will be spent on technology--bringing greater efficiency to ordering, distribution and online shopping. Albertson's has been testing an Internet-based home shopping Home Shopping commonly refers to the electronic retailing / home shopping channels industry, which includes such billion dollar companies as HSN, QVC, eBay, ShopNBC, Buy.com, and Amazon.com. service in Southern California Southern California, also colloquially known as SoCal, is the southern portion of the U.S. state of California. Centered on the cities of Los Angeles and San Diego, Southern California is home to nearly 24 million people and is the nation's second most populated region, and Seattle where online orders are filled and delivered for a nominal fee. Unlike failed dot-coin grocer Webvan, which needed expensive warehouses and kitchens to fill orders, Albertson's is leveraging existing stores and employees to provide customers with another convenience. Look for self-checkout aisles in stores, too. Leverage is an important part of Johnston's plan. Non-strategic assets are being sold, including 80 Osco drugstores in the Northeast that fetched $240 million--capital that can be used to remodel re·mod·el tr.v. re·mod·eled also re·mod·elled, re·mod·el·ing also re·mod·el·ling, re·mod·els also re·mod·els To make over in structure or style; reconstruct. stores and open new locations in battleground markets such as California and Florida, which offer the potential for a higher return on investment. Even the number of directors has been downsized to 14 from 20. Says Johnston, "In the short term we may have to shrink a little bit to be more profitable." Employee "bullet trains" boost revenues Running leaner would position Albertson's nicely for the long term--and that is at once the goal and the obstacle in its fight for market share against formidable food and drug rivals like Safeway, Kroger and Walgreen's. Fiscal 2002's third-quarter sales of $9.4 billion rose 4.1 percent from $9 billion a year prior, while operating profit Operating profit (or loss) Revenue from a firm's regular activities less costs and expenses and before income deductions. operating profit See operating income. increased to $419 million from $384 million. Cash flow from operations Cash flow from operations A firm's net cash inflow resulting directly from its regular operations (disregarding extraordinary items such as the sale of fixed assets or transaction costs associated with issuing securities), calculated as the sum of net income plus noncash expenses totaled $442 million in the third quarter, ended Nov. 1, up 37 percent from $322 million a year earlier. Though he welcomes the healthier balance sheet, Johnston concedes, "Many times it's frustrating when things don't move faster." He's assigned executives to small teams he calls "bullet trains" because they're "fast and efficient." Among their roles: drive savings and develop non-traditional, in-store revenues. Johnston also implemented Quick Market Intelligence -- a best practice that GE gleaned from Wal-Mart--linking each of Albertson's 15 operating divisions to headquarters every Tuesday morning. In the four-hour management jam session that ensues, best practices are swapped like trading cards. "I know exactly what's happening in the business and what a competitor is doing," says Johnston. "More importantly, so do all the division presidents. We can pick up and transfer best practices much quicker without having to go through a bunch of layers." The result at Albertson's, as with many large grocery retailers, has been to transform the neighborhood supermarket into a mini-mall. Albertson's new look features Starbucks kiosks and Krispy Kreme Krispy Kreme is a chain of doughnut stores. Its parent company is Krispy Kreme Doughnuts, Inc. (NYSE: KKD), based in Winston-Salem, North Carolina, United States. donut displays, and services including a pharmacy, video rental, fresh flowers, photo developing and retail banking. Shelves are stocked with Adj. 1. stocked with - furnished with more than enough; "rivers well stocked with fish"; "a well-stocked store" stocked furnished, equipped - provided with whatever is necessary for a purpose (as furniture or equipment or authority); "a furnished apartment"; items that reflect the ethnic and eclectic tastes of an individual neighborhood, such as the catfish, collard greens Noun 1. collard greens - kale that has smooth leaves collards cole, kail, kale - coarse curly-leafed cabbage and specialized hair care products sold in predominantly African-American communities. The company also operates more than 200 branded automobile fueling centers -- a solid grower. Targeted for improvement are Albertson's private-label items, which represent 17 percent of sales. Johnston says best-practice peers generate 25 percent of sales from private-label goods and the figure is growing. New stock options for thousands of employees When Johnston discovered early on that store managers' compensation did not include options on Albertson's stock, he saw a tremendous opportunity. "That shocked me," Johnston admits. "If you were to ask me who is the most important person in the company, I would say the store director. Those people determine our success." Within months, about 3,000 store directors' and pharmacy managers salaries included stock options. Lately Johnston has been tearing down other walls -- this time literally. Chicago's Jewel-Osco stores introduced an innovative idea to combine a supermarket with a drug store. The Chicago subsidiary removed the common wall between adjacent Jewel and Osco stores, marketing the space as two stores under one roof. "The turn on invested capital and the margins in those stores are much higher than the industry average," Johnston observes. Albertson's is rolling out combined stores in Reno, Tucson and Omaha, with plans for other cities. Many of Johnston's directives seem to have come from GE'S operations manual--bottom-line initiatives intended to rally the troops, spend capital wisely, and grow market share and earnings. "The GE DNA DNA: see nucleic acid. DNA or deoxyribonucleic acid One of two types of nucleic acid (the other is RNA); a complex organic compound found in all living cells and many viruses. It is the chemical substance of genes. grabs tight control over the financials and the financial metrics," observes University of Michigan (body, education) University of Michigan - A large cosmopolitan university in the Midwest USA. Over 50000 students are enrolled at the University of Michigan's three campuses. The students come from 50 states and over 100 foreign countries. professor Noel Tichy, a GE alumnus ALUMNUS, civil law. A child which one has nursed; a foster child. Dig. 40, 2, 14. who has known Johnston for many years. "But it ends up being a people game. How you run those stores is critical. You'll see Larry put leadership development emphasis on both the store level and executive ranks." Indeed, Johnston intends to instill in·still v. To pour in drop by drop. in  stil·lation n. Albertson's executives with the kind of continuing education continuing education: see adult education. continuing education or adult education Any form of learning provided for adults. In the U.S. the University of Wisconsin was the first academic institution to offer such programs (1904). that he received at GE. Leaving the Hayward store, Johnston settles into the back seat of a black SUV which is soon crawling through San Francisco, where Albertson's is challenging market leader Safeway. Behind schedule, he scraps a helicopter tour of potential Bay Area building sites for new Albertson's stores. "'Where's next?" Johnston asks a colleague as the huge vehicle pulls away from a stoplight. You get the sense that he's already thought of a few destinations. Send comments to CE at features@chiefexecutive.net.
The Great CEO Incubator
Jack Welch School of Management Alumni have been hired to increase
shareholder value for companies worldwide--with mixed results.
Name Age Title Company Sales
Stephen M. Bennett 47 President, Intuit $1.4
CEO & billion
Director (2001)
Norman R Blake Jr. 59 Chairman & Comdisco $2.7
CEO billion
(2001)
John B. Blystone 47 Chairman, SPX Corp. $4.1
President & billion
CEO (2001)
David M. Cote 48 President, Honeywell $23.6
CEO & Intl. billion
Director (2001)
Glen H. Hiner 66 Chairman & Owens $4.8
CEO (retiring Corning billion
in April) (2001)
Larry Johnston 53 Chairman & Albertson's $36
CEO billion
(FY '02)
W. James 51 Chairman & 3M $16.1
McNerney Jr. CEO billion
(2001)
Robert Nardelli 52 Chairman & The Home $53.5
CEO Depot billion
(2001)
Thomas S. Rogers 46 Chairman & Primedia $1.7
CEO billion
(2001)
Gary C. Wendt 59 Chairman & Conseco $8.1
CEO billion
(2001)
Name Last GE Title Stock Price
Arrival
Stephen M. Bennett Exec. Vice-Pres. & board Jan. 2001
member, GE Capital $39.50
Norman R Blake Jr. Exec. Vice-Pres. of Financing Oct. 2000
Operations, GE Credit Corp. $12.24
John B. Blystone Pres. & CEO, Nuovo Pignone Dec. 1995
(italy) acquired by GE in $15.38
1994; pres. & CEO, Europe
Plus Pole of GE Power Systems
David M. Cote Senior Vice-Pres., GE Co., & Feb. 2002
Pres. & CEO, GE Appliances $37.93
Glen H. Hiner President, GE Plastics Jan. 1992
$25.20
Larry Johnston Pres. & CEO, GE Appliances Apr. 2001
Division $32.64
W. James Pres. & CEO, GE Aircraft Jan. 2001
McNerney Jr. Engines $110.65
Robert Nardelli Pres. & CEO, GE Power Systems Jan. 2001
$48.03
Thomas S. Rogers Pres., NBC Cable, & Exec. Sept. 1999
Vice-Pres. & Chief $14
Strategist, NBC
Gary C. Wendt Pres., Chairman & CEO, GE June 2000
Capital Services $9.70
Name Stock Price Percent
Now Change
Stephen M. Bennett Feb. 2002 -4%
$37.89
Norman R Blake Jr. Feb. 2002 -97%
$.37
John B. Blystone Feb. 2002 +723%
$126.51
David M. Cote Feb. 2002 N/A
$37.93
Glen H. Hiner Feb. 2002 -91%
$2.30
Larry Johnston Feb. 2002 -7%
$30.26
W. James Feb. 2002 +6%
McNerney Jr. $117.31
Robert Nardelli Feb. 2002 +4%
$50
Thomas S. Rogers Feb. 2002 -80%
$2.74
Gary C. Wendt Feb. 2002 -61%
$3.75
RELATED ARTICLE: The GE playbook for year one * Cut administration and management by up to 20 percent. * Sell off non-strategic assets, use capital to remodel existing stores and to open new ones. * Downsize Downsize Reducing the size of a company by eliminating workers and/or divisions within the company. Notes: When a company downsizes, it is attempting to find ways to improve efficiency and increase profitability. It is sometimes referred to as trimming the fat. overpopulated o·ver·pop·u·late v. o·ver·pop·u·lat·ed, o·ver·pop·u·lat·ing, o·ver·pop·u·lates v.tr. To fill (an area, for example) with excessive population to the detriment of the inhabitants, resources, or environment. board of directors from 20 to 14. * Implement Quick Market Intelligence--a best practice of GE and Wal-Mart that links Albertson's 15 operating divisions to headquarters weekly for four hours. * Offer store managers stock options. |
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