UK: HELLER ON MANAGEMENT - LOOKING FOR THAT NEW INGREDIENT. - Once canonised as a 'halo brand', J Sainsbury is now consistently outshone by its major rivals in terms of trust, customer loyalty and satisfaction, says Robert Heller.

Last Updated: 31 Aug 2010

Once canonised as a 'halo brand', J Sainsbury is now consistently outshone by its major rivals in terms of trust, customer loyalty and satisfaction, says Robert Heller.

Halo brands are rare and wonderful. J Sainsbury has long been such a rarity - associated with the saintliest standards of produce, products and service, and adored by chattering classes and mass market alike. The old gibe that 'nobody shops at Sainsbury's because of the crowds' was a back-handed tribute. Today it rings a trifle hollow.

Not only is Sainsbury being outperformed by Tesco, Asda and other rivals, but it is lapsing behind its own best standards. Both halo and profitability have slipped, and management seems powerless to reverse the slide. Even if the new Reward scheme proves an effective riposte (though belated, reluctant and unimaginative) to Tesco's loyalty card, it won't rectify the loss of relative strengths.

By and large, in stores, product range and quality, and advertising spend, the rivals are neck and neck. Yet Tesco comfortably beats Sainsbury on loyalty, satisfaction, transactions, trust and awareness, according to MORI research. Both are surpassed by the holiest halo brand, Marks & Spencer: St Michael, indeed.

M&S has almost total customer trust and awareness, despite negligible advertising.

Whatever explains such a divergence, ingredient X is plainly hyper-potent.

It can't be the cultural sustenance drawn from family businesses: that's how all three originated. Although the family management presence has lingered longer in Sainsbury, the company has, like Tesco, been managed by long-service professionals. Chairman David Sainsbury joined in 1963, only four years after his nemesis, Sir Ian MacLaurin, entered a Tesco which at the time lagged far behind Sainsbury in sophistication and repute.

MacLaurin joined straight from National Service as a trainee and developed into a brilliant supermarketeer. David Sainsbury, with his immense inherited wealth, took a Columbia MBA and had 19 years of senior experience in the finance function. But riches, business education and financial orientation are no necessary barrier to commercial success - far from it. After all, you can afford to surround yourself with brilliant supermarketeers.

The recent record, however, suggests either that the Sainsbury chairman's entourage is short on brilliance, or their brilliance somehow doesn't work through the system. Casual experience at any Sainsbury store confirms that blockages do exist. It took three women to sell six bottles of wine the other day: number one at the till, number two to find unmarked prices, and number three to organise the 5% discount - a special offer, advertised dead opposite, of which number one knew nothing.

One bad bungle doesn't make bad supermarkets (although that one is unmistakable evidence of inadequate systems). No doubt, Tesco shoppers also have horror tales to tell, for achieving flaw-less customer service is impossibly difficult. However, too many retailers make a hard task harder by two linked failings. First, they understandably concentrate on defending sales margins, but have a tendency to think of reducing employment levels ahead of reforming processes.

This inevitably impacts on service and thus on the customers. The second failing, though, is that the effect on over-strained staff and under-served customers is hidden from head office by a formidable version of those clever one-way windows. This one-way barrier seals off the stores, their managers and their staffs from head office. It doesn't prevent head office from pouring down streams of orders, counter-orders, initiatives (bright and not so bright) and generally from interfering.

Too little comes back up from the other staff. Head-office management drifts into managing only itself, rather than the real-life business.

Adverse external and internal signals alike are ignored. The deterioration in Sainsbury's customer ratings against Tesco's preceded the similar relative under-performance in profits, and one was bound to flow from the other.

Either Sainsbury wasn't tracking intangibles like loyalty and satisfaction with sufficient care and attention (deeply culpable), or didn't take the widening gap seriously (ditto), or couldn't find the right reactions at the right time (ditto). The third possibility is the likeliest.

The Sainsbury mindset remains fixated on the glory days when its halo shone most brightly. In its heyday, under Alan and John Sainsbury, a wonderfully run regional chain went national without sacrificing its values. This encouraged the natural belief in only two ways of running supermarkets: the Sainsbury way and the wrong way. But somewhere along the line, management views and those of staff and customers parted company.

Look no further for ingredient X. Out there, far from head office, are legions of experts in the business - the staff and the customers. The former are the key to the latter. Shatter the one-way barrier, and even a slipped halo like Sainsbury's can be swiftly righted.

An enlightened chief executive once boasted that his 100,000 front-line workers had all become 'consultants' in improving the company. Every management team should be able to make a similar boast: and it must never be an idle one.

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