Wesfarmers keen to make the break

When Coles CEO John Fletcher famously told the media that he had barely been in a supermarket for 25 years, it passed largely unnoticed that this could be a problem as he took the helm of Melbourne-based retailers Coles Myer Ltd, as it was then known.

In fact, the supermarkets were the star performer for a group struggling on the clothing and department store side of the business, and the biggest news at the time was that the appointment of Mr Fletcher had added $1 billion to Coles’ market capitalisation.

There was no such gaff by Wesfarmers Ltd chief Richard Goyder, who has made sure he’s comfortable talking about retailing, right down to the amount of lighting used in a shop.

And Mr Goyder is keen to underline that he’s switched his shopping allegiance to Coles, even though a Woolworths Ltd supermarket is much closer to his home.

It might seem like the lighter side of the pre-merger publicity, but the Wesfarmers chief knows the biggest hurdle he has to face is to convince 160,000 Coles employees – especially a core band of 200 to 300 key managers – that they are going to be better off under his administration.

Of course, it wasn’t just a badly placed sound bite that that has led Mr Fletcher and Coles into trouble over the past six years.

The business he came out of retirement to turn around was already damaged from a period of destabilisation in the 1990s, with renegade shareholders, a deeply divided board and a CEO who’d ended up in prison on a fraud conviction.

Some of that bad news has extended until almost the present day.

Late last year, for instance, Coles had to sack a senior manager for secret deals it claimed were being done with a supplier; there were other, similar allegations at the time.

These are at the heart of cultural issues Mr Goyder has to change if he is to succeed at one of the most challenging tasks in Australian business.

The Wesfarmers chief acknowledges that some of Coles’ problems go “way back” but he is firm believer that the national retailer can be refocused.

“It needs a change of ownership, not just a change of management,” Mr Goyder told WA Business News this week.

He is reticent to blame the outgoing CEO and believes Mr Fletcher was hamstrung from the beginning with a divided board.

“That is very debilitating,” Mr Goyder said.

He also says he is not “CEO-centric” when you look at the performance of the company but that, ultimately, leadership does matter.

For management aficionados, Mr Goyder believes Wesfarmers has the processes right and knows how to imbed culture.

It certainly has experience at retail level, albeit on a smaller scale.

The Wesfarmers takeover of Howard Smith Ltd six years ago resulted in the merger of Bunnings and BBC Hardware.

That was a big transition by anyone’s standards, and came with many cultural issues – not the least of which was many of the BBC staff believing their employer had taken over Bunnings.

That merger took longer in some places than others, and Mr Goyder is prepared for that.

Initially, he said, it’s about building the right structure at the top and then focusing on getting the job done.

“I am confident we’ll have the right senior team in place,” he said.

“Then you get the layers right.”

Mr Goyder believes good store management is critical and then you have to build incentives to achieve what you want.

“It is only after a while, when you start reinforcing behaviour that you want, that it starts to take shape. It takes time,” he told WA Business News.

Mr Goyder has built himself some time protection with a four-year price protected share for Coles shareholders, but he is also aware that he needs to keep the right people on board.

He acknowledged there were rumours Coles’ competitors were trying to poach staff, which is hardly unexpected given the uncertainty many would feel and the transient nature of retail work.

Perhaps with these people in mind, Mr Goyder again reaches beyond the corporate audience in discussing the need for more recognition for front-line managers, and promotion of this role as a bigger career move.

“The store manager has to be more important, that’s a fantastic training ground for management.”