Woolworths helps business culture evolve

By Sam Ngumeni Time of article published Oct 16, 2014

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TRANSFORMATION and broad-based black economic empowerment (BBBEE) are hugely important concerns for Woolworths and, indeed, for corporate South Africa. But before I discuss the specifics of the Woolworths transformation journey, let us first explore what we mean when we talk about transformation.

First, we acknowledge the enormous benefits transformation has had for our business over the past 20 years, and we embrace it for the opportunities it presents for our future. Currently, more than half of our customers are black, which we attribute, in part, to the success of the transformation agenda in South Africa.

When we consider transformation I acknowledge that it should never be a blunt instrument or catch-all phrase. I recognise the critical roles of individuals in a country as fractured yet as inspiring as South Africa. We need to ask ourselves: how should I transform myself as an individual? We can be the change we want to see.

Next we must interrogate what our companies or organisations can do by choosing principles aligned to our organisational values in an effort to institutionalise the transformation intent.

For some in South Africa, transformation is simply a tick box exercise imposed by BBBEE codes – to be resented if it threatens you and to be embraced if it promises advancement. For those of us charged with making transformation live in our organisations, it is something much more varied and profound. Transformation is about managing the successful evolution of a business culture.

Yes, it is about race and ensuring far greater representation at all levels in the workplace, but it is also about gender, religion, experience, perspective and many other aspects of diversity. It is about creating a winning culture in which all South Africans can advance and express themselves professionally.

Transformation is about economic inclusion, particularly for black South Africans. Partly this is about ownership but it is also about ensuring there are no “walled gardens” in a company’s network of suppliers and customers. There are commercial and creative imperatives too. Business leaders must ask themselves: who is it that we deliver products and services to?

If our market is changing, evolving and demanding new experiences, then must business not constantly transform its own assumptions too? Again, some of this will be about race and culture but it is also about language, youth, fashion and technology. For me, transformation is about redress and social justice. At the same time, it is about creative evolution within business.

My own corporate journey started at Woolworths over 13 years ago. I joined the executive team in 2012 and became a board member in 2014. But many of my most important transformation lessons were not learnt in the boardroom, but in lower-level positions, such as the call centre where I started my career, or at school and university, where I saw how hard work and dedication could deliver an education and, with it, economic freedom.

Today, I am directly responsible for transformation at Woolworths and have the opportunity to put some of these lessons into practice and turn the commitment of my colleagues into reality.

Woolworths believes in transformation that works and that is sustainable. As it stands, 75 percent of our executive directors are black. Our view is that in a growing business such as ours, identifying top talent early in their careers and developing that raw talent over a number of years brings true sustainability to transformation. That is why so many of our top black executives have grown with the business for years.

We have both skills and employment shortages in South Africa. Business has a key role to play in providing training and development to employees. So we work with the government and academic institutions to develop curricula in areas such as design and retail studies to create the next generation of employable graduates.

But we also believe, as a player in a larger global economy, that there is an opportunity to import some skills to supplement local skills shortages while we develop South African skills. This will help grow the economy, and when the economy grows it creates far more opportunities for black South Africans – indeed, all South Africans – than if it stagnates.

The retail sector is often criticised for being slow to transform, but at Woolworths we have achieved a level 3 BBBEE status. We have an overarching strategy, the Woolworths Good Business Journey, which integrates our transformation strategy into the heart of everything we do.

Let me take an example from Woolworths Enterprise Development Programme. We’ve looked at the challenges faced by small black-owned businesses and are helping them grow by focusing on financial assistance (including shorter payment terms), guaranteed business, a package of support and mentorship, targeted up-skilling and access to experts.

In December 2011 we launched a pilot project with Elukwatini tomato farmers, Technoserve (Woolworths’s enterprise development business partners) and Qutom (Woolworths’s tomato supplier). The project included training, mentoring, technical assistance and establishing essential links to both finance and retail markets. It started with 13 one-hectare crops of tomatoes. By 2013, the top Elukwatini farmers generated net profits of more than R75 000 from just 1.5ha.

During the nine-month tomato production period these farmers create employment for between 80 and 90 people. We have brought these farmers into the Woolworths supply chain and will continue supporting them as they emerge from being “small” farmers to becoming profitable, commercial farmers.

We have also brought dozens of other small black enterprises into our supply chain, with many more still to come. Chic Shoes is another case in point. When their previous employer shut its doors in 2004, three of the managers took over the machinery and started Chic Footwear. But they struggled to get raw materials and were desperately short of funds.

When they approached Woolworths we saw their potential but realised changes were needed before they could supply world-class leather products at a competitive price. With help from our buying and design teams, our procurement team, and a R19 million loan, we helped get their production line operating more efficiently.

Their raw material suppliers came on board and by November 2011 they delivered their first order of 5 000 pairs of leather pumps to Woolworths. Today they have 250 employees and have produced more than 400 000 pairs of leather pumps for Woolworths.

We are conscious that we can’t simply procure our way to a transformed company. Therefore we are also creating equity for our employees. The Woolworths Black Economic Empowerment Employee Share-Ownership Schemes, initiated in 2007, has already paid dividends of more than R241m to our employees. In June next year the scheme vests and will provide a material payout benefiting 6 000 employees.

Just as business can make a difference in its own sphere it must also contribute to the debate about what South Africa can do. Woolworths is committed to being part of a constructive dialogue with the government and other key stakeholders to find and implement sustainable solutions to South Africa’s most pressing challenges: greater transformation, more jobs, a more equitable society and a stronger economy.

Sam Ngumeni is chief operating officer at Woolworths.

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