Dave Penrod and his management team at Belk had an order as tall as a homemade lemonade: change the company manta from “If it ain’t broke, don’t fix it” to “Modern. Southern. Style.”
“Our customers viewed us as old fashioned and one-dimensional, so we decided that it was time to modernize our approach to the business while retaining our traditional Southern values,” says Penrod, who oversees 100 stores in the heart of the South — Georgia, Florida, Alabama and South Carolina as chairman of Belk’s Southern Division.
Belk has had just three CEOs since its founding in 1888 — that is until 2010, when the heretofore low-key department store chain launched a makeover with the goal of reaching annual revenues of $6 billion within five years.
Historically, Belk has catered to shoppers who patronize its 301 brick and mortar stores located in small- to mid-size cities throughout the Southern U.S. But recently, it’s been ceding sales to savvy city slickers like Macy’s and Nordstrom, who use the Internet and mobile apps to infiltrate rural markets. Admittedly, the company has fallen behind in the e-commerce and social media arena, and many of its stores could use a facelift.
The company wants to leverage its strength, which is appealing to the tastes, culture and buying habits of Southern shoppers, while improving in lagging areas.
To that end, management adopted a new logo and the new tagline. The company is investing $270 million in store improvements, $210 million in information technology, $53 million in e-commerce and $4.5 million for a new e-commerce fulfillment center in Jonesville, S.C.
Penrod is charged with implementing the company’s strategic plan in his division, and as every executive knows, change is difficult — especially for tenured employees. In fact, a survey of 3,199 global executives by consulting giant McKinsey found that only one change transformation in three succeeds. Here is Penrod’s approach to instilling change and yet keeping Southern values at Belk.
Penrod is creating line-of-sight between the company’s objectives and his employees’ daily activities as part of his plan to achieve long-term structural and cultural transformation. Now, workers can see how going the extra mile to satisfy a customer can propel Belk’s sales and profits.
“The way we communicate our brand to consumers is by being friendly and hospitable because that reflects traditional Southern values,” he says. “We need to go out of our way to smile and greet shoppers the minute they enter the store so they experience our Southern hospitality.”
And since employees often need a compelling story to change their behaviors, Penrod is using a structured communications program to breathe life into Belk’s new brand and encourage his team’s evolution.
Employees in Penrod’s division review results from the day before and set daily goals during a 10-minute morning huddle with their manager. The short sessions reinforce change and build mindshare toward the company’s strategy.
“You can’t broadcast a list of goals and think that everyone gets it,” Penrod says. “You need frequent reminders to create a shared vision and buy-in for your strategy.”
He’s also increasing his team’s chances of success by building their skills and capabilities.
After only 75 percent of customers said they were satisfied with their shopping experience in a recent survey, Belk launched a new customer service training program for its 23,000 associates. But Penrod took training and development to the next level in his division, by launching a formal succession planning regimen and development program for high-potential employees.
The program boosts morale and productivity by giving employees a career path and improves retention by providing new hires with the necessary skills to execute Belk’s strategic plan. Plus, promoting from within helps preserve the company’s unique Southern culture.
Finally, Penrod’s fostering accountability and continuous improvement through the introduction of monthly performance reviews. Employees receive feedback and share ideas during one-on-one sessions with their area manager. Although the sessions take a fair amount of time, Penrod says they’re jumpstarting productivity and fostering innovation.
Since every employee looks at organizational change from the stand point of how he or she will be personally affected and self-preservation can take precedent, Penrod is allaying their concerns by offering them knowledge and opportunities.
“Failing to invest in your people is shortsighted because they drive customer satisfaction,” he says. “We came out of the recession with a renewed commitment to development and innovation and now, it’s paying off.”
Support your local community
Belk plans to continue it’s commitment of giving 2.5 percent of annual pretax income back to the communities it serves and for good reason. The $19 million in donated last year not only exhibits Southern values it distinguishes Belk from impersonal e-tailers.
Plus, employees can spread the company’s “Southern State of Mind” philosophy while rubbing elbows with members of the community as they paint classrooms, build bookcases, beautify school grounds and install educational murals as part of the company’s 125th birthday celebration.
“We call ourselves community partners but what does that mean?” Penrod says. “It’s the way we support local education and healthcare, but it’s also the way we treat our customers and our associates.”
For example, Belk had just acquired the Proffitt's and McRae's chain from Saks Fifth Avenue in 2005 when Hurricane Katrina hit Biloxi, Miss. Penrod says the company could have taken the insurance money and closed the store, but instead, they raised $1 million for local employees and continued to pay them until they got back on their feet.
CEO Tim Belk called the company’s decision to stay in Biloxi a defining moment as other companies abandoned the devastated region.
“Unlike other companies, we don’t measure the return from our donations, we do it because we believe that supporting the communities we serve is the right thing to do,” Penrod says. “Community support exemplifies our Southern culture and values, it’s an intangible asset that can’ be measured.”
Cater to customers
Belk store sizes are tailored toward the needs of the local markets they serve. Stores range in size from 40,000 to 300,000 square feet of space, with an average size of approximately 92,000 square feet.
While management is introducing new lines of private label fashions by designer Cynthia Rowley and Carolina Panthers quarterback, Cam Newton, the merchandise selection in each store addresses the preferences of local customers.
Customized merchandizing is one reason why Belk is surpassing the competition in a key measurement for brick and mortar retailers. The 11 retailers tracked by Thomson Reuters posted just 1.1 percent growth at stores open more than a year in March. In contrast, Belk has had 12 consecutive quarters of comparable store sales growth and its comparable sales growth rate for fiscal 2013 was 6.3 percent.
“We use demographics like income, age and population size to adjust the assortment of merchandise in each store,” Penrod says. “But we refine that data based on our knowledge of the local community and by listening to our customers. Our growth in same store sales reflects our connection to the community”
For instance, the stores in South Florida offer a slightly different selection of merchandise when the snow birds arrive from Northern states. And some stores extend Southern hospitality to local shoppers by hosting evening parties that include refreshments, a fashion show and music by a local disc jockey.
Like many companies, Belk uses formal pulse surveys to gauge overall customer satisfaction. But customers can weigh-in at any time by completing an online survey or “Tell Us What You Think” card, and their feedback serves as a call to action for executives like Penrod.
“We adhere to something called the sunset rule,” he says. “When a customer expresses a concern, it’s referred to an executive and must be resolved by the end of that business day.”
But Belk’s management team doesn’t stop there; they use customer feedback to review underlying business practices and initiate adjustments to faulty policies and procedures.
For instance, the company is committed to giving shoppers the seamless omnichannel experience they crave, that reaches across stores, belk.com, mobile devices and social media.
It wasn’t until 2008 that Belk’s online offerings expanded beyond home goods and wedding registries to include clothing and other merchandise. Furthermore, the company estimates that only about 25 percent of online sales come from outside Belk’s sixteen-state footprint and customers can’t order a product online and pick it up in a local store — at least not yet.
The initial phase of improvements includes a new systems platform and functionality enhancements to make shopping online at belk.com easier and it’s developing a mobile app so customers can shop on-the-go from their favorite device.
Employees are charged with promoting the company’s improved website since multichannel shoppers spent 15 percent to 30 percent more than those who visit brick and mortar stores according to surveys by IDC’s Global Retail Insights research unit.
Although the firm didn’t embrace the social media craze until 2010 it now has a blog, a solid presence on Twitter and 789,988 “likes” on Facebook.
While net sales for the 53-week period ended Feb. 2, 2013 increased 7 percent to $3.96 billion, the company is banking on the growth of Internet sales and it’s Southern charm to reach $6 billion by 2015.
“When I visit our stores with members of the Belk family and talk to customers and associates, I get a true sense of what Southern means,” says Penrod. “As a guy who’s originally from Michigan, I’ve learned a whole lot about Southern style and hospitality.”
The Penrod File
Name: Dave Penrod
Title: Chairman, Southern Division
Education: Bachelor’s degree in business management, Oakland University in Rochester, Mich.
What was your very first job? I was a caddy at a local golf course, where I learned a lot about human nature. Golf is a game where honesty, integrity and sportsmanship are paramount because it’s not monitored by referees, so it’s easy to cheat. I observed that some people are inherently honest and some people aren’t. What I learned as a caddy prepared me for life as well as my career.
Who do you admire most and why? I admire politicians like Hillary Clinton and John McCain because they’re truly business people who have to build consensus and balance disparate points of view to get anything done. It’s not easy to do that and I admire anyone who can overcome tremendous obstacles, relentlessly pursue a resolution and foster a spirit of collaboration.
What is your definition of business success? Sales and profits are important but you can’t achieve them by yourself. Your success as a manager hinges on the growth and development of your people. When they flourish and grow, the financial metrics take care of themselves.
What are the keys to leading organizational change? You’ll get some connectivity at a high level, but to truly inspire change, you need to take your message down to the individual level. Give your employees the opportunity to shape the direction of the organization by sharing feedback, especially from customers. Some folks won’t agree with your plan but most of them will engage if you employ a regimented communications strategy that is supported by performance management, training and career development.