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 / Autumn 2013 / Issue 72(originally published by Booz & Company)


Changing Structures and Behaviors at Walgreens

Our fundamental goal was to build a high-performance culture at every level of our field operations. With that in mind, we decided on a few priorities for the redesign. First, we’d make structural changes to free up the leaders’ time and better support them. Second, we had to change decision rights so that the right approvals were happening in the right places. Next came incentives; we had to change the way that we motivated and rewarded people, to emphasize employee engagement and customer satisfaction. Finally, we had to develop mechanisms that could change long-established mind-sets and norms—not just changing operational details but putting in place coaching, support networks, and a new performance management model. It was a big undertaking, especially with 240,000 employees.

A More Supportive Structure

Another goal was to provide extra support for our district managers, so they could focus on improving engagement with employees and customers. Given that each district manager oversees almost 1,000 people, managing, developing, and operating the business can be a challenge. Those managers were the main intermediary between the corporate office and our retail locations.

We had recognized years before that although Walgreens had centralized processes for functions including HR, IT, employee relations, and finance, we couldn’t make all those decisions at the corporate level. We didn’t understand local environments enough, and one-size-fits-all policies just didn’t work well sometimes. But as we increased local decision making, district managers found themselves taking on more of that work at their level, without sufficient support. Those responsibilities pulled them away from the stores, which is where they most needed to be. Providing those managers with the critical support they needed became crucial to our success.

So we put two new roles into the organization hierarchy. First, for each of our 30 U.S. markets, we created a position called vice president for markets, located in the field (the local geography). We did this to move corporate-level leadership closer to the customer. These individuals represent the main link between corporate headquarters and field operations. To support them, and to bring market-level resources closer to the customer’s experience, we also moved functions such as HR, IT, real estate, employee relations, and finance to the field. Along with these departments, we gave every market its own profit and loss responsibility. This really drove accountability at the local level.

The second role we added was community leader. These people serve as mentors to less experienced store managers; they offer training and help them implement new service offerings. We had tried to improve customer service in the past. Some of those programs had been fantastic, but without the right framework and leadership to sustain them, they didn’t last. With this effort, community leaders are really driving the changes.

Elevated Decision Rights

For the new strategy to succeed, store managers needed to focus less on operational activities, such as HR and vendor relationships, and more on employee engagement: coaching their people and helping them engage with customers. So we moved some decisions that had been located within the field management structure higher up. Merchandising, for example, had formerly been handled at a store-by-store level, but now it’s handled at headquarters. With this adjustment, managers have more time to work on the company’s new priorities—employee engagement and improving the customer experience.

Another goal was to develop management skills at the store level, so those people could make solid decisions that were right for their community. Every store is unique. Some are swamped in the morning, for example, and some don’t have their first customer until 11 o’clock. Store managers are more equipped and supported to meet their community’s needs.

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