The Case of the Lettuce Head: Linking Strategy to Execution: Getting Employees and Customers on the Same Page
A large retail grocery store chain in Central America chose the Big Picture framework as their Business Planning tool. Having identified a core-competence of agro sourcing and operations, the company developed a strategy focused on freshness as its positioning variable. The company also developed an operational plan to deliver on its positioning variable. The company’s first implementation plan developed for this strategy described sales goals, the category plans, operational metrics, and new store look and feel to align to the new positioning. As a result of its new strategy, both sales and net income experienced substantial increases.
However, the plan did not go deep enough to include the requisite operational metrics, employee incentives and financial benchmarks required for successful implementation.
Store managers and all employees were informed of the new strategy in company-wide events and as part of a training program. However, the store manager incentive program weighed financial costs due to “out-of-stocks” and product spoilage very heavily, creating an incentive for managers and employees to save heads of lettuce and risk losing customers. As a result of Big Picture implementation, the incentive system was changed. Customer freshness perceptions were introduced as a priority component of the incentive compensation package for store managers, de-emphasizing the weight of stock outs. Since then, the retail chain has seen top-line sales growth in excess of 20% per annum and bottom line growth in excess of 10% per annum over a three-year period.
The Case of the Lettuce Head is fairly typical of a legacy incentive program, a program which recommends employees do A, but reward them for B. It illustrates the need to implement strategy deeply, aligning the firms’ metrics, incentives, and investment priorities with the chosen strategic course.