Pick n Pay might be about to face an even sterner test than righting its finances: getting 22,000 of its 30,000 staff to buy into a new labour model for its stores. The retailer — still wading through a monstrously tough turnaround — is buckling under practices that it says have become costly and “increasingly inflexible”. These, it says, are out of step with those of its competitors against whom the company is in a game of desperate catch-up. The FM spoke to Pick n Pay CEO Sean Summers.
Section 189 consultations can be horrendous, with major antagonism — often fanned by the labour mediators. How do you prevent it from turning nasty?
A lot of that comes back to how credible the leadership is in the company; the relationship we’ve developed with the unions and also our labour leadership. Since I returned, we’ve worked on developing that understanding and on having respect for the role that they perform. Hopefully that will introduce an element of better consideration as we step through this.
Is there potential for upset? Absolutely. But the situation is material and, for Pick n Pay’s ongoing success, this is a critical element of our expenses that needs to be addressed. It was an issue that was already flagged when I returned to the company — that one of the cost blocks Pick n Pay had was its overly generous terms and conditions of employment. The market [said] then that unless this was dealt with, Pick n Pay’s future would remain under pressure. We’ve been discussing this with our labour leadership over the past two years, but now we have to get some urgency into finding a solution.
How accepting are the staff? Especially considering that Pick n Pay has had a very fractious staff-management relationship in the past?
There is a realisation that these processes have to be dealt with. We’re empathetic to the fact that there are many mouths that live off Pick n Pay pay packets, but it doesn’t change the fact that if we are to maintain employment within the company and make sure we don’t have further retrenchments, we need to deal with this. If we don’t, Pick n Pay will not fully return to the level of profitability it needs to, and that’s going to place more jobs at risk.
Why had no-one changed the labour model before now?
If you go back over the past 10-12 years, over many wage negotiations, there (were) concessions granted by prior management that ... were not appropriate. And it’s clear that Pick n Pay granted far too many concessions, and the opposition and the rest of the market didn’t.
Monday to Friday, the full-timers work. But with the change in shopping patterns, more people are in the shop on Fridays or weekends, where we now have to have casuals. So you have your less experienced people in store when most of the customers are doing their shopping, and at the start of the week you just have way too many staff. And because we didn’t have the flexibility, we couldn’t deal with it.
On a Saturday we pay 1.5 times, and nobody else does. On a Sunday we pay double; the rest of the industry pays 1.5. Understand that sacrifices have been made in this company: I started in the support office first because otherwise one is then accused by your very important people at store level who might say: ‘Sean, we understand the company is suffering but why are you picking on the stores?’
At head office we’ve had a salary freeze for two years and there’s been a realignment of headcount. We’ve reconfigured our supply chain, got more positive on the marketing front, invested in the Springboks, in infrastructure, so now is the time to deal with this.
You said Pick n Pay made far more concessions than your peers: how did they get it right?
I think the culture of Pick n Pay was to be more accommodative. But some of these things are just totally uneconomical.
Does Pick n Pay have a staff profit share that makes people feel invested in the business? Certainly, South African gold producers have never got this right, and it seems few corporates have. Have you any thoughts why not?
Those very broad-based share schemes have been found, in the main, not to be successful. They are incredibly complex to manage, very costly, and you will find that the bulk of the participants cash in as soon as they can. It doesn’t work in most countries. John Lewis (in the UK) and Migros in Switzerland are probably the only two co-op schemes I can think of.
Is the turnaround filtering down to the shop floor?
Look, when I go around, I know I’m the CEO and people say: ‘Sean’s here’ ... [but] we had our first store managers’ conference in 14 years recently, and there’s growing momentum in the business. When companies are hollowed out from inside because various waves of leadership in the company have different goals and agendas, and if you’re just purely working to the bottom line, then the company loses what it stands for.
Our people in the stores lost faith in the organisation. There were no leadership structures in the company and we’ve put a lot of that back to get the momentum to rebuild. And I don’t care what business you’re in, momentum is your friend. To rebuild that takes time. We’re almost like a start-up business again and we’re [now] in the investment phase.
