Top of the food chain

Cohesion: Woolworths chief Michael Luscombe leads a dedicated team

Michael Luscombe and Richard Goyder have much the same job – they both want to operate the biggest and most profitable retail business in Australia. Luscombe has the advantage – his Woolworths group has for the past 10 years made few mistakes, while Goyder’s Coles Group has had to rebuild the business and brand since Wesfarmers bought the shattered outfit in 2007.

Luscombe is a career Woolworths man, having spent 30 years with the group. The past three have been as chief executive, and with that job came a larger profile in the business community. He took on the role from Roger Corbett, a bit of a legend in the retail world who gave Luscombe big shoes to fill when he stepped into the role.

It’s a challenge he has adapted to his own style. Luscombe is a team player. His executives are all in the loop and take part in strategic direction. His team has stayed cohesive without, surprisingly, any defections to Coles in the past couple of years.

While it’s nice to be on the leading team, there is always the attraction of joining the underdog and rebuilding a battered brand back to a top performer. Coles has done most of its senior recruiting overseas, but there is no doubt it would like to get its hands on a couple of senior Woolworths executives.

Woolworths appears to be a complex business. There are the 3000 retail outlets spread across Australia and brands vary from Woolworths fresh food stores to Dick Smith electronics, Woolworths liquor stores and petrol stations, the Thomas Dux deluxe range of grocery goods and stores and a credit card business in partnership with HSBC Bank.

But sitting at the top of the corporate ladder looking out across the business, Luscombe distils it into a straightforward model. “It’s a very simple business. On the top, we buy things and move them about and hopefully sell at a profit. Underneath, we have to understand what the customer wants and globally buy it at the best price,” he told BRW in a previous interview.

Luscombe says that for every dollar spent in a Woolworths store, 3¢ of profit is generated, of which 2¢ is returned to shareholders. In the petrol business it’s as low as 1.8¢ but the loyalty in customers it generates makes the business worth persevering with.

Luscombe is still being innovative with the local operations. He had faith in his managers when they wanted to start the Thomas Dux luxury grocery chain and provided the start-up funds as a bit of venture capital. It has been a success. He has reinvigorated the Dick Smith chain of stores and he has entered into a partnership with Lowe’s of the US to take on Wesfarmers’ highly successful Bunnings chain in the homeware renovations space. He also has his eye on Asia and is eager to expand there.

However, Woolworths’ success is not just about customer focus. Luscombe, and Corbett before him, spent a decade investing in the hidden parts of the company to make it efficient. It meant big expenditure on back-end systems from logistics to handling processes, global sourcing, human resources and IT.

Luscombe also invests a lot of time in his staff, and meets all new recruits at the group’s 3000-strong head office at Norwest Business Park, 30 minutes from Sydney’s CBD. He tells them he wants them to be the best person both at work and home: “Be healthy and happy and try to be the best person you can be – the best team member, best husband or wife or scout leader – whatever it is, do that and the rest will follow.”

The book Good to Great by American business consultant Jim Collins details how companies have made the jump from well-run organisations to exceptional entities, and includes the likes of Coca-Cola, Intel, General Electric and Merck.

Caliburn chief executive Simon Mordant has been struck by how companies in the book are similar to Woolworths. Some key points for a great company that relate to Woolworths include the appointment of an internal candidate as chief executive; a chief executive who talks about the team; and a culture of discipline and ensuring the right people are “on the bus”.

This latter point means that Woolworths staff who have issues that cannot be resolved are expected to find new work. Unhappy workers cannot deliver their best.

BRW

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