As Dreams CEO Mike Logue knows, delivering a successful turnaround is hard.
When the former Mothercare, ASDA and M&S exec was appointed as CEO in 2013 the business had just been brought out of administration by Sun European Partners and profits were flat.
He set about implementing a back to basics approach involving the rejig of the company’s stores and marketing (with an emphasis on promoting sleep over sales), the replacement of the entire product portfolio as well as a significant investment in data. For some context, read this article.
Five years later, the business is a shadow of its former self. Profits have grown steadily for the fourth year in a row, hitting over £30 million for the year ending December 2017.
But Logue says one of the most effective - and often overlooked - changes has been through the creation of a more cohesive company culture.
Dreams in Brief
HQ: High Wycombe
Turnover: £290.3 million (2017)
‘I've learned that when building new companies - or in this case a turnaround - the answers are often with the people,’ says Logue.
His first three weeks at the company were spent ‘getting to know the business’, travelling the country meeting with some of the factory workers, store assistants and delivery staff that made up the company’s integrated supply chain.
From his observations it was clear that there was a clear disconnect between the management and its employees. The company’s High Wycombe ‘Bedquarters’ had a directors only car park, there was no internal system to track employee sentiment and the employees he spoke to generally felt uncertain about the direction the business was heading.
So alongside the programme of more practical reforms to the brand’s wider internal operations, investment in technology and e-commerce, Logue introduced a programme of cohesive cultural reform based on listening to what employees - and through them ultimately the customers - wanted.
Aside from abolishing the aforementioned directors only car park, this involved the introduction of quarterly ‘roadshows’ (staff conferences) and an internal employee engagement system, Our Voice, that from 2014 has enabled staff at all levels to provide feedback about what they want from the business. Logue says this has to work both ways, and posts weekly video briefings to update staff on the company performance.
Within the first year 51% of employees completed the feedback survey; in 2017 it was 97%. Several policy changes and new product ranges have been introduced directly on the staff feedback.
‘It sounds overly simplistic, but the only way that management can get to the customer is by having a great relationship with our employees because they are the ones that deal with them on a daily basis,’ says Logue.
Of course it helps that Dreams have private equity backers that were prepared to support the business. Private equity - particularly in retail - can have a bad reputation (‘asset strippers’ being a common slur), but Sun European Partners has certainly put its money where its mouth is, so far investing £35 million in capex.
Money can fix most things, but Logue says that unless you change the culture of a business, a turnaround will never be successful.
‘If people don't care, if people aren't bothered, you might as well give up,’ says Logue. ‘You have to care about what you're doing in a turnaround because it is going to take everything.’
With Dreams now on track for its fifth successive year of profit growth, Logue is targeting £43 million EBITDA by the end of 2018. There have been rumours that the company was preparing for an IPO, something that Logue denies, although he won’t rule out consolidation or acquisitions further down the line.
For now the company’s focus is on ensuring that it continues to ‘listen’ to its staff and customers in its 192 UK based stores, where he says there are still improvements to be made.
Image credits: Courtesy of Dreams