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


Changing Structures and Behaviors at Walgreens

Norms of Engagement

In the past, we had really strong policies and procedures, but our model didn’t allow for innovation or empowered customer service. Store employees simply executed preset tasks. Now, the way we do things is different. At the store level, we don’t want employees to simply complete tasks. We want them to come up with new ideas, and new ways of helping the customers.

This requires a big shift in leadership. Our model of the ideal executive has gone from an authoritative leader who could get new stores up and running fast, to an engaged leader who can hold people accountable, develop them, and manage them. That shift changes the way every employee comes to work each day.

Motivators for Accountability

A big part of the redesign was to help employees understand how this was different from what they did before, what they would be expected to do going forward, and how they would be evaluated and rewarded. In the past, everything was simple. We based our bonus and advancement system purely on financial performance—meaning how sales and profit numbers matched expectations. Leadership skills were not a priority; if your numbers were up, we considered you a hero.

With this shift, we set up a true pay-for-performance system, including incentives to drive the behaviors we wanted. Leadership at Walgreens today carries a different expectation and is rewarded accordingly. Under the new system, leaders are evaluated and bonuses are set according to three key critical areas: financial results, team member engagement, and customer service. There’s also a percentage that accounts for community engagement and events. We think that’s crucial for building ties to local markets, which is why we make it part of the bonus system. In each of the past two years, our stores have participated in almost 16,000 community events, totaling a little over a million volunteer hours.

There’s another component to accountability: managing underperformers. When we looked at other chains with strong customer service, we saw a very highly engaged workforce, but we also saw HR processes that allowed the company to identify employees who weren’t doing well, address that performance, and, if necessary, move them out quickly. We hadn’t had those policies in place before. We’ve now addressed these issues. We’re clear about the new expectations regarding the treatment of customers, and we’re training employees to meet those standards.

Networks to Drive Change

Today we have stronger networks designed to drive change from the ground up. We recognize how valuable it is for our folks to collaborate and communicate closely on a daily basis. So we designed some network-enhancing activities to drive the change, share best practices, and build ties to the community. For instance, we instituted five-minute meetings every day, in every store. These are opportunities for the staff to talk about where the store is winning and where it needs help. What are the big ideas, and what are the expectations for the day? If we provide the right training and leadership, the store managers and employees will come up with the answers they need on their own—the right solution for their location and market.

We also implemented “store walks,” in which market vice presidents and district managers visit stores in their markets and determine what’s working well and what’s not. They share ideas that have worked well elsewhere. There are more formal elements—we have market leadership meetings every other month, where people can share ideas—but walk-throughs at the store level are where the field transformation really happens.

We also want store employees to talk to one another more. One of the questions in our employee engagement survey is “Do you have a best friend at work?” We want that kind of social connection, because it’s a big part of how our employees grow and remain engaged, which translates to a better experience for our customers, and for them.

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