Building a culture of opportunity, DG promotes advancement goals
Bob Ravener, EVP and chief people officer, Dollar General
If any U.S. retail company understands the importance of selling not just its product, but also the experience of consuming that product in its stores, that company is Starbucks. The Seattle-based king of coffee excels at hiring friendly, motivated and upbeat sales people to help create the relaxed, refuge-from-the-world atmosphere that sets Starbucks apart and keeps customers coming back.
(Click here to download the full special report.)
So whom did Dollar General turn to when filling the key post of SVP and chief people officer during the management change launched in 2008? Veteran Starbucks executive Bob Ravener. That choice speaks volumes about the cultural transformation that continues to resonate at the Tennessee-based discount chain.
Ravener, who has since been promoted to executive VP at Dollar General, oversaw all aspects of human resources activity as SVP of U.S. partner resources at Starbucks prior to joining Dollar General. He also worked as VP of human resources for The Home Depot and gained prior executive experience at PepsiCo and Footstar. And one thing common to all those companies, he told DSN, was the need to foster a culture that can “nurture growth and development” of their employees.
“You’ve got to create the right environment so that they’ll get up every morning feeling that ‘This is the place I want to go to work everyday,’” Ravener asserted. “You can have all the great policies and procedures in the world, but if you don’t have great people, you’re not going to succeed.”
Despite the obvious differences in retail channels, said the HR executive, “People are people. They have the same goals, ambitions and desires.”
Very high on that list of goals is the desire to succeed and advance, “from the entry level sales associate all the way up to the executive recruiting that we do,” said Ravener. “We know that people have choices. So we’ve tried to create a career culture. If someone can start anywhere in our organization and feel like they can have their own career goals and aspirations met here, that’s success for us.”
With that in mind, Dollar General established a formal program of internal placement goals in 2010. “We really made it a priority to establish metrics for internal growth,” Ravener explained. To develop new store managers from its own ranks, for instance, “We historically had low internal placements and set a stretch goal of 50% in 2010, and now over 60% of our store managers are promoted from within, which has helped us nurture that career culture mindset.”
That compares with just 20% of store managers promoted from within in 2008, when CEO Rick Dreiling took the management reins and began a companywide overhaul. The same goes for Dollar General’s district managers, more than 60% of whom are drawn directly from store management.
Said Ravener, “You create the right environment, develop them to excel, and give them room to grow.”
To that end, Dollar General has invested heavily in training, including the creation of leadership development programs to foster employee motivation and advancement. “We established what we call training development centers, or assessment centers, just a few years ago,” said Ravener. “Anybody who gets promoted to district manager today has to go through this assessment center. It’s the same thing for district managers. Before they get promoted to regional director, they have to go through that assessment center.”
That deliberate and detailed process, said Ravener, both gauges the readiness of the candidate and helps his human resources team “build development plans to help the participants accelerate their growth and development.”
The development process also encourages mentoring relationships between district managers, store managers and store employees interested in promotion.
Ravener credits “the cultural shift with Rick’s leadership” for the change. “In the past, people were hired to do the job. But we’ve always brought people into the organization with an eye on what they can do next, and how we can help them get there. It’s about building a very robust succession plan process.”
The company also presents itself to prospective entry-level employees as a starting point to begin employment. “For people entering the work force for the first time, Dollar General stores provide an ideal foundation of basic work skills along with competitive wages and benefits,” the company noted on its website.
What qualities does Dollar General now look for in new employees? Beyond hiring honest people with a good work ethic, much of the search for store staff revolves around attitude and people skills. “There’s no substitute for ‘happy,’” said Ravener. “It has always been part of the Starbucks strategy. If you think about it, the Starbucks product is good, but what people remember about the experience is the people serving in that environment. So overall, attitude is number one. Then it comes down to a few other core attributes. If people are honest, work hard, are dependable, and have great attitudes … they can go as far as their aspirations take them.”
For Dollar General, establishing a clear, goal-oriented track for advancement isn’t just a feel-good exercise to motivate employees or improve the corporate culture. With the company opening an average of nearly two new stores every day somewhere in the United States, the need for a steady stream of new, capable store managers is critical.
The advancement opportunities are obvious. “I think retailing in general is one of the last places where people don’t need advanced degrees and all this specialized training to move up — where they can bring their core set of skills and start from the bottom and work their way to the top,” said Ravener. “For people in our organization, if you start at a junior-level sales associate, you can be a … store manager in two or three years. So, with the desire and right skills, you can be running a million-plus-dollar business in a very short period of time.”
“We’re a performance-driven culture,” he added. “We communicate that we are always looking for people to take that next step and the company has now developed a pipeline that is helping sustain growth well into the future.”
Building a smarter supply chain system
John Flanigan, EVP global supply chain, Dollar General
"We no longer ship hummingbird feeders to Florida.”
That’s one example of how Dollar General has smartened up its store replenishment and supply-chain processes in recent years, said John Flanigan, EVP global supply chain. There aren’t enough hummingbirds in the Sunshine State to trigger demand for feeders, he pointed out. Flanigan, who joined the company in May 2008 after managing distribution and logistics for Longs Drug Stores, Safeway and other companies, described the steady evolution of Dollar General’s supply-chain management capabilities as it improves its ability to track and forecast sales by region, store clusters and individual stores.
(Click here to download the full special report.)
To improve its supply chain management and replenishment processes, Dollar General has created a regional store clustering system for items not considered part of its core mix of planogrammed shelf stock. Using that system, stores are organized into eight clusters, or “bands” in Dollar General parlance, with each band representing historical sales and demand levels for particular classes of products.
“For non-core [inventory], we tend to cluster the stores,” Flanigan explained. “We have eight bands where we segregate the stores based on individual class and department [item movement] levels.”
Under that store grouping system, he added, “we have more than 600 individual classes of merchandise” organized department by department and cluster by cluster, with Band Eight representing the cluster with the highest level of sales for a particular category, and Band One representing the lowest.
That means any store can be grouped into different bands for different product categories in order to facilitate the reorder and distribution process. “A store can be in any one of those bands for [different classes of] items,” Flanigan said. “So it could be in Band Eight for lawn and garden, but in Band Three for outdoor holiday [decorations]. We aggregate those, and we will allocate based on … what’s being serviced for those stores.”
Flanigan and his team constantly seek ways to make the handling, warehousing and weekly shipping of millions of items as seamless and low-cost as possible. “We’re constantly optimizing our effort,” he said. “But as we do that, we want to make sure we have the right products in those stores to meet demand.”
“Over the last five years, we’ve become much more sophisticated in how we break this down,” Flanigan told DSN. For instance, he said, “when I came here, Halloween was all just one class [as] a seasonal department. But … we don’t sell all those items evenly across the country. So now we take the Halloween category and break it down into four different classes” like costumes and spooky lawn decorations.
Clustering stores by sales patterns has been critical, “because today we can’t physically manage product assortment individually for 11,000-plus stores or 660 product classes,” said Flanigan. However, he added, the company will soon leap forward in its ability to forecast product demand at the item-by-item level, eventually bypassing many of its current reorder processes with more immediate product movement tracking, better sales trending analysis and more responsive replenishment capabilities.
“We’re converting our legacy system to a new system we call Supply Chain Solution,” Flanigan said. He called SCS “a much more robust system” with “a really strong forecasting engine” that can accommodate Dollar General’s rapid growth.
“We’ve been implementing SCS … very methodically, so that nothing would jeopardize our ability to serve the stores. When you’re growing at such a rapid rate as we are, if you mess up, you really impact the business. So we’ve run parallel systems very carefully.”
Under the new system, said Flanigan, “everything begins in the stores,” with reorders and replenishment forecasting triggered by point-of-sale data. “We have the capability of looking forward, while maintaining two years of [sales] history, so we understand what takes place on a particular day, and will forecast based on that,” he explained.
“With SCS, we’ll be able to project our sales. The algorithms are so much better. We’ll continue to aggregate the stores by these bands initially, but when we drill down and actually process the data, … we will be much more store-specific. We’re moving in that direction,” he added.
Staying ‘ahead of the distribution curve’
Also moving forward is the physical side of the distribution effort as new inventory storage and replenishment capacity comes on line. To that end, Dollar General’s growth in store count to more than 11,500 units is reflected in its ongoing construction of huge warehouses from which to aggregate and ship product. The company’s next distribution center will open in San Antonio, bringing to 13 the number of company-owned and operated warehouses around the country.
“As a general rule, we say that for every 1,000 stores we have we need another DC,” said Flanigan. “When you’re building 700 new stores a year, you have to be well ahead of the curve.”
Determining where to locate those new DCs, he said, “is all based on where the real-estate plans are, so we look at a five- and 10-year horizon primarily … where you will meet demand.
Most stores — about 95% of the total — are replenished with weekly truckload shipments from those distribution centers, delivered by contracted carriers. The other 5% of stores, including the highest-volume standard Dollar General stores and the larger Dollar General Market stores, receive at least two deliveries each week, according to Flanigan.
Either way, the company strives to make the supply chain as efficient as possible by managing inventory levels, adhering to just-in-time delivery goals and boosting turns on store shelves. “Inventory productivity is important, and we have targets for that,” said Flanigan. “But at the same time, we’re not so driven by turns that it impacts making good business decisions. So if we have an opportunity to purchase something [like a truckload of overstock merchandise at a steep discount], the financial opportunity is more important than the turn.”
Striving for seamless store execution
Greg Sparks, EVP Store Operations, Dollar General
How does Dollar General maintain a consistent quality presentation and high standards for product display, merchandising execution, customer service and store appearance across thousands of locations throughout the United States?
(Click here to download the full special report.)
It takes close collaboration between the merchants and store operations groups, clear guidance for store managers on executing merchandising programs, and open lines of communication between the store support center and regional, district and store management, said Greg Sparks, EVP store operations.
“With 11,000-plus stores, you have to have a pretty seamless process,” Sparks noted. That’s why “we have a very well organized monthly activity guide from the merchants to every store, where every square foot of the store is mapped out regardless of store size, format size, shelf size, market demographics, etc.”
“It’s pretty seamless for the store managers and their teams to execute … [with] a lot of clear direction from the merchants,” said Dollar General’s top operations manager. “We try very hard to keep store managers and their teams focused on execution.”
One clear advantage for the huge discount chain is that many of its store support center decision-makers have experience in both merchandising and store operations, Sparks said. “It’s a very collaborative effort, and we understand each other’s perspective,” he added. “The operators let the merchants know what’s working well and what’s not, and vice versa. That’s been very helpful for us.”
Although purchasing and planogramming of store sets is handled by departments at the company headquarters, “we do have some regional plannograms” to accommodate local purchasing patterns and conditions, said the head of store operations. “For example, our beach stores have an extended line of beach products in spring and summer, and we give them more flexibility to work with their local vendors to add more items. So if our store or district managers out in the field identify an opportunity, we have a process where the field can work with the merchants to try something locally.”
Buying, however, is done by groups at the store support center, even for items that may be locally sourced for a single cluster of stores in one geographic area, like a hypothetical special cookie that appeals to Alabama consumers. “If we negotiate that here, we get a much better deal,” Sparks explained.
“We communicate. That’s the real key,” he added.
Extending that collaborative approach is a mock store in the company’s DDC, or Design Development Center, where merchants, store operations managers and even vendors can meet to view actual mock-ups of new planograms and merchandising ideas.
Under Dollar General’s current management structure, two operations executives at the SVP level report to Sparks. Those SVP operations leaders oversee the activities of seven divisional VPs, each of whom is responsible for as many as 1,800 stores. Reporting to the divisional VPs are 69 regional store directors, each in charge of 10 to 12 districts. Each district manager within those districts oversees a dozen or more Dollar General stores.
Despite the clear command structure, decision-making at store level is a collaborative process and dialogue is encouraged. “On many of our store visits, our operators and merchants visit at the same time,” said Sparks. “We all compare notes when we look at opportunities.”
In addition, executives in operations, merchandising, supply chain management and other disciplines assemble on most Mondays for lengthy meetings to coordinate merchandising/ marketing strategy and store-level execution.