Organisational Culture of J. Sainsbury: Analysis & Strategy

Introduction to Organisational Culture and Sainsbury's

During the past two decades, the concept of organisational culture has gained broad acceptance as a way to understand human systems (Deal and Kennedy, 2000). From an "open-systems" perspective, each aspect of organisational culture is perceived as an important environmental condition that affects the system and its subsystems. Nowadays, companies are defined by their organisational cultures, and for many, culture is something that can make or break the company.

This perception of organisations is rooted in anthropology and sociology and uses many of those disciplines' terms to define the building blocks of culture (Deal and Kennedy, 2000). Edgar Schein, a prominent theorist of organisational culture, offered the following definition: "The culture of a group can now be defined as: a pattern of shared basic assumptions that the group learned as it solved its problems of external adaptation and internal integration, that has worked well enough to be considered valid and, therefore, to be taught to new members as the correct way to perceive, think, and feel in relation to those problems" (Schein, pp. 373–374).

This implies that, as companies change, they face two basic challenges: integrating individuals into a workable whole, and adapting to the external environment in order to survive in a competitive atmosphere (Deal and Kennedy, 2000). As companies find solutions to these problems over time, they develop a collective learning environment that creates the set of shared assumptions and beliefs known as culture.

According to Gareth Morgan, culture is "an active living phenomenon through which people jointly create and recreate the worlds in which they live" (Deal and Kennedy, 2000). Morgan holds that the three basic questions for cultural analysts are: What are the shared frames of reference that make organisation possible? Where do they come from? And how are they created, communicated, and sustained? (Morgan, p. 141).

Some elements of organisational culture include the following (Deal and Kennedy, 2000): stated and unstated values; overt and implicit expectations for member behaviour; customs and rituals; stories and myths about the history of the group; common language; organisational climate; and metaphors and symbols.

This paper examines the organisational culture of J. Sainsbury plc (Sainsbury's), a leading United Kingdom food retailer with interests in financial services. J. Sainsbury plc is the parent company of Sainsbury's Supermarkets, Bells Stores, Jackson's Stores, and Sainsbury's Bank (J. Sainsbury website, 2004). Its main goal is to "ensure that we get maximum benefit from our investments while concentrating on giving customers the best quality, service and price."

This paper aims to determine what Sainsbury's business environment is like, how its human resources department operates, and what its organisational culture looks like. It will also provide a series of recommendations and tactics to help the organisation's leaders improve the company.

J. Sainsbury's key business strategy is to ensure that it meets customers' needs by providing the best quality and choice to meet their shopping needs (J. Sainsbury website, 2004). The company focuses primarily on its UK business, building upon recent investments to reclaim its market position in the supermarket industry. According to the corporate website, Sainsbury's business priorities centre on three core, interrelated areas: outstanding quality and choice; delivering great service; and competitive costs.

Sainsbury's was established in 1869, when John James Sainsbury and his wife Mary Ann opened a store in Drury Lane in Holborn, London (Investors in People, 2004). Until 1973, the company was wholly owned by the Sainsbury family, when it was floated on the London Stock Exchange, with the family retaining approximately 30 percent of shares. In 1987, Sainsbury's acquired Shaw's Supermarkets, an American supermarket chain, which it sold to Albertson's in 2004 for $2.5 billion.

For several decades, Sainsbury's was the premier supermarket in the United Kingdom, but it lost its leadership position in the 1990s to Tesco, which remains the largest British supermarket, with over 2,000 stores (Investors in People, 2004). By 2003, Sainsbury's had slipped to third place, behind Walmart-backed Asda. Despite various efforts, including changes in organisational culture, the chain had yet to recover, with profits and sales growth consistently below those of its competitors.

Literature Review: Theoretical Foundations and Company History

In 2000, Sainsbury's appointed Sir Peter Davis as Chief Executive Officer in an attempt to regain its former market position (Investors in People, 2004). During his tenure, Sainsbury's was demoted to third in the UK grocery market, though it should be noted that in his first two years Davis increased profits above targets and oversaw a £2 billion upgrade of stores, distribution infrastructure, and technical equipment.

In 2003, Wm Morrison Supermarkets made an offer for the Safeway supermarket group, triggering a bidding war between the major supermarkets (Investors in People, 2004). The Trade and Industry Secretary referred the bids to the Competition Commission, which determined that all bids except Morrison's would "operate against the public interest." Morrison's was ordered to dispose of 53 stores from the combined group, and Sainsbury's subsequently acquired 14 of these — 13 Safeway stores and one Morrison outlet — with the first opening in August 2004.

In March 2004, Sir Peter Davis was promoted to Chairman and Justin King was appointed CEO (Investors in People, 2004). Three months later, however, Davis was forced to quit following a shareholder revolt over his salary and bonus plan. Investors were infuriated by a bonus share award of over £2 million despite poor company performance. Davis was replaced by Philip Hampton. All of these changes had a significant impact on Sainsbury's organisational culture.

Organisational culture is essentially the personality of an organisation (McNamara, 1999). It is made up of the assumptions, values, norms, and tangible signs of a company's employees and their behaviours. While organisational culture is difficult to explain precisely, it is keenly felt by a company's workforce. The culture of a large, for-profit corporation, for instance, is very different from that of a hospital, and can be sensed through the arrangement of furniture, what employees take pride in, and how people dress.

Corporate culture can be examined as a system (McNamara, 1999). Inputs include feedback from society, professions, laws, stories, and values regarding competition or service. The process is based on human assumptions, values, and norms. Outputs include organisational behaviours, technologies, strategies, image, products, services, and appearance.

The concept of culture is of particular importance when attempting to manage company-wide change (McNamara, 1999). Practitioners now recognise that, despite well-laid plans, organisational change must include not only changing structures and processes, but also changing the company culture. There has been a great deal of literature over the past decade on this topic, and organisational change efforts tend to fail in the vast majority of cases. In most instances, this failure is attributed to a lack of understanding of culture's powerful role. That is one reason many strategic planners now place equal emphasis on identifying strategic values and defining mission and vision.

There are various types of culture, just as there are various types of personality. Researcher Jeffrey Sonnenfeld identified four types of organisational cultures (McNamara, 1999):

1. Academy Culture: Employees are highly skilled and tend to remain in the organisation, working their way up the ranks. The organisation provides a stable environment in which employees can develop and exercise their skills. Examples include universities, hospitals, and large corporations.

2. Baseball Team Culture: Employees are "free agents" with highly prized skills who are in high demand and can readily find jobs elsewhere. This culture exists in fast-paced, high-risk organisations such as investment banking and advertising.

3. Club Culture: The most important requirement for employees is to fit into the group. Employees typically start at the bottom and remain with the organisation, which promotes from within and highly values seniority. Examples include the military and some law firms.

4. Fortress Culture: Employees are uncertain about job security. These organisations often undergo massive reorganisation. There are many opportunities for those with timely, specialised skills. Examples include savings and loan institutions and large car companies.

Based on research, Sainsbury's appears to be a fortress organisation, as it has struggled to find the right strategy and culture for its business.

Edgar Schein has contributed extensively to the literature on aspects of organisations that seem irrational, frustrating, and intractable (Deal and Kennedy, 2000). As Schein notes (p. 375): "The bottom line for leaders is that if they do not become conscious of the cultures in which they are embedded, those cultures will manage them." Because Schein uses open-systems concepts, it is understood that members of a group culture may also belong to subcultures within a company. Since organisations share a history, there will typically be at least a few values or assumptions common to the system as a whole, while subcultures — having had different experiences — produce various sets of basic assumptions.

Organisational culture is a form of organisational analysis rooted in the field of anthropology (Knopp, 2002). It was first described as an organisational area of concern in 1979. While no single universally accepted definition exists, the term is understood to refer to the shared meanings, beliefs, and understandings held by a specific group or organisation about its problems, practices, and goals.

The concept of organisational culture is frequently confused with the related concepts of climate, ideology, and style. Culture can best be defined in terms of open organisational behaviour; organisational ideology and philosophy; group and organisational norms; espoused organisational values; policies, procedures, and rules of socialisation; and company climate (Knopp, 2002).

When considered alongside employees' interaction patterns, language, themes of daily conversation, and daily routines, these terms appear to reflect elements of organisational culture (Knopp, 2002). However, culture is less conscious; it exists at a deeper level. The essence of culture consists of the basic assumptions and beliefs invented, discovered, or developed by all members of a group as it deals with its problems of external adaptation and internal integration, and that are taught to new members as the correct way to perceive, think, and feel in relation to those problems.

Thorough evaluations of an organisation's culture generally require the combined efforts of those who are inside the culture on a daily basis and the more objective perceptions of someone outside it (Miller, 2004). Outsiders are more likely to observe things insiders take for granted, looking for patterns in behaviour and noting unexpected events. Insiders, in turn, can help outsiders interpret what those events mean.

Organisational culture is intangible yet powerful (Miller, 2004). Good leaders do not underestimate the power of culture to support or hinder the implementation of strategy. Although cultural assessment is not easy, with the right combination of inside and outside assessors and a clear purpose and method, the process can yield information that charts a path for the success of any organisational change effort.

Organisational cultures emerge from the social practices of members of organisations and are, therefore, socially created realities that live in the heads and minds of an organisation's members, as well as in the formal rules, policies, and procedures of organisational structures (Knopp, 2002). Culture is a constant process of reality construction, providing a pattern of understanding that helps members interpret events and give meaning to their working worlds.

Culture is therefore an evolutionary and dynamic process that involves changing values, beliefs, and underlying assumptions regarding: the nature of the relationship between organisation and environment; the nature of reality and truth; the nature of human nature; the nature of human activity; and the nature of human relationships (Knopp, 2002). Organisational cultures are typically developed by founders and subsequently maintained by the founders' leadership teams.

Founders build organisations based on personal beliefs about how to interact with the environment and about the natures of reality, people, activities, and relationships (Knopp, 2002). Their goals, assumptions, and visions of reality are eventually shared by others in their organisations, particularly leaders. Over time, shared realities transform into validated organisational cultures that become the "correct" ways of resolving organisational problems — the "norm" that enables people to derive meaning from their work and to focus on key organisational goals.

Today's successful organisations understand that learning and constant change are at the heart of organisational survival (McCartney, 2002). The problem is that too much training is disconnected from the real needs of managers and their organisations. Companies must embrace a more strategic approach to learning and recognise that the organisational culture must change for the business to change. This includes the recognition that the best learning takes place in live work situations and that formal training is at best a support for such learning.

By the mid-1990s, it was painfully clear that Sainsbury's could no longer keep up with the competition. A well-established fixture for UK value-conscious shoppers, the grocery giant had been overtaken by Tesco and other competitors (Remedy, 2004). The organisation's 11 million customers were looking for more product choice, higher quality, greater freshness, wider availability, better and more customised service — all at better prices. Suppliers wanted better demand signals and more predictable order flow. And shareholders had already seen a 30 percent drop in earnings in a sector notorious for its paper-thin margins.

Executives at J. Sainsbury quickly identified where the problem lay. Behind the supermarket storefronts was an outdated supply chain infrastructure that was no longer effective for a company handling more than 2,000 suppliers, 35,000 product SKUs, and 800 million cases of product each year (Remedy, 2004). Warehouse pick lists were provided on paper. Inventory visibility was unclear both in warehouses and in stores, making basic replenishment an ineffective process. Management had little real-time data, and performance pressures meant that the company had to turn inventories faster every year.

At the time, J. Sainsbury was using a 30-year-old mainframe-based warehouse management system (Remedy, 2004). Its typical distribution centre was equally outdated. Compared to the average Tesco depot — less than seven years old — Sainsbury's depots were reaching the end of their useful life. At the server level, utilisation rates were as low as one percent. Many of the IT systems were proprietary, with the bulk of the software created and implemented in-house. As recently as 2000, the company operated with as many as 400 different supply chain software applications.

The consequences were severe: stock shortages were common, and on one occasion all depot systems crashed when the company tried to order goods in a different way, according to Andy Banks, director of supply chain development (Remedy, 2004). A great deal of the technology budget was consumed maintaining the complex, ageing IT infrastructure, and it was especially difficult to launch new business initiatives. Sweeping changes were clearly needed.

Sainsbury's has a long-standing reputation as a high-quality grocery chain in the United Kingdom (Remedy, 2004). Until Tesco assumed market supremacy, Sainsbury's was the largest in its segment, with annual revenues of more than $27 billion from over 450 stores supplied by 19 depots and 12 primary consolidation centres.

"The UK retail environment is extremely competitive, forcing retailers to constantly develop and enhance both their offerings and their formats," according to Bevan and Murphy (2001). "Probably the most significant changes taking place are coming not from the products being sold themselves, but rather from when, how, and where they are being sold." It was clear that Sainsbury's needed a transformation.

The company's transformation began in the late 1990s with the adoption of Manhattan Associates' advanced warehouse management system (Remedy, 2004). However, wholesale change came in 2000, after Sir Peter Davis joined as CEO. Realising that many of his planned business initiatives were hindered by Sainsbury's IT systems, Davis authorised an end-to-end overhaul leading to the outsourcing of the entire IT function to Accenture. The main goals were to cut IT operating costs in half and introduce powerful new applications that would simplify crucial new business initiatives — such as loyalty programmes — while producing accurate and timely business intelligence for senior management.

According to Remedy (2004), Sainsbury's supply chain transformation mandated an integrated end-to-end approach, and that mandate extended to data integration. Accenture's best-of-breed strategy placed the emphasis on effective integration of applications. It was important that the IT system could integrate easily with both earlier and current technology investments and retain the flexibility to change quickly as the retailer's business needs evolved. The company's new system worked to reduce cost and complexity while accelerating business solutions for employees, customers, and partners.

J. Sainsbury, after more than a century of operation, realised it needed to move from a bureaucratic to a strategic approach in its personnel function (McCartney, 2002). This shift was in line with the broader need within the company to become less bureaucratic and to develop a more learning-oriented organisational culture. The company undertook a business process re-engineering project that required the personnel function to operate in a multi-functional mode, with personnel professionals acting more like internal consultants and less like narrow specialist administrators.

Judith Evans, the company's Director of Personnel Policy, described the change in Sainsbury's organisational culture (McCartney, 2002): "We decided to use a Self Managed Learning approach. In this way people would have to take responsibility for what they learnt and how they learnt it. After an introductory workshop, individuals worked in learning groups of around six people. From a 360-degree assessment, they developed a learning contract covering their objectives for the next six months. This was agreed with their colleagues in the learning group and with their manager. Each group had a group adviser — a personnel manager who was simultaneously a member of their own learning group."

According to Evans, in the learning group in which she served as adviser, initial assessments were open and honest, and people were able to identify the areas they wanted to develop (McCartney, 2002). Early learning came from sharing experiences and ideas. What one person found difficult, another found easy, allowing members to learn from one another.

Evans further noted (McCartney, 2002): "But there were bigger issues people were struggling with: 'Why am I here?' 'What am I supposed to be doing?' 'What do I really want out of life?' There was some deeper self-analysis and struggling with personal choices — for example, 'Do I want to move location to further my career, or do I want to stay here and spend more time with my family?' Everyone has discovered more about themselves — what they want out of life, what their strengths and limitations are, and who they can call on for support. Self Managed Learning has given us much more than a traditional training course. As well as people with more skills, it has given us more confident and able individuals who have the courage to tackle the many tough issues brought about by a changing organisation."

In Sainsbury's case, the learning was strategic for both the individual and the organisation (McCartney, 2002). People often say that Self Managed Learning helps them become more strategic in their careers by exploring fundamental questions in depth and over time. The development was also holistic — Judith Evans commented that people became more courageous, for instance, and that "developing courage," while not typically part of a business school curriculum, is undoubtedly essential in changing environments.

For Sainsbury's to become a strategic organisation, it had to incorporate the following eleven elements into its organisational culture (McCartney, 2002):

1. Organisation-wide commitment. Learning must be high-profile, centrally resourced, and across the board — not treated as a marginal extra. Sainsbury's conducted its programme across all 700 personnel professionals.

2. Top management demonstrable support. CEOs and managers needed to demonstrate that they are continually learning. This was a key element for Sainsbury's.

3. Linkage to strategic direction and cultural change. A learning approach needed to be directly integrated into the change process at all levels.

4. Large-scale development. Rather than selecting a few managers for an off-site course, Sainsbury's pursued an integrated, strategic initiative involving everyone.

5. Development of organisational capability. Developing coaches and mentors was identified as an effective starting point for company-wide capability building. Peer group support for learning was viewed as a high priority.

6. Multi-functional development. Bringing together people from diverse functions to address learning issues fosters an integrated approach through networking and shared information.

7. Long-term commitment. Self Managed Learning programmes require adequate time to show real, significant benefits. Sainsbury's encourages long-term learning for its employees.

8. Cascading down the organisation. Sainsbury's Strategic Learning programme aimed to involve everyone in appropriate learning, beginning with management and extending across the entire organisation.

9. Part of competitive advantage. Strategic Learning emerged as a key component of Sainsbury's competitive advantage. Unless an organisation is learning better and faster than ever before, it will be at a disadvantage.

10. Visibility. Strategic Learning is made visible both inside and outside the organisation and is recognised as part of its strategic direction.

11. Integrating strategy and tactics. Strategic visions and missions are of little use without a link to tactical action. Long-term and short-term goals must be synchronised, with short-term pay-offs motivating commitment to longer-term objectives.

The traditional management style of Sainsbury's is autocratic, as it is a large and well-known organisation (McCartney, 2002). In an autocratic style, managers set the objectives, assign tasks, and demand obedience. The group becomes dependent on the manager, and the leadership often leaves the team dissatisfied — resulting in little unity, a high need for supervision, and poor motivation among employees.

Methodology and Research Questions

In recent years, Sainsbury's initiated several management changes (McCartney, 2002). The company recognised that improving service levels to store employees and making their jobs easier would ultimately improve interactions with external customers. Under the traditional management model, store employees had to call any one of 56 disparate help desk operations to reach the right team. As a result, time and resources were being wasted on a large scale.

Sainsbury's decided to establish a consolidated help desk with a single point of contact for all calls (McCartney, 2002). Its vision was a "One Stop Shop" that would enable store staff — its internal customers — to better serve their customers. The new solution allows managers to prioritise areas requiring improvement, provides sophisticated analysis of queries, and helps managers quickly determine whether calls reflect isolated issues or more widespread problems. Help desk staff were able to measure each call based on how successfully it was handled, feeding these details into daily reports and weekly summaries to benchmark efficiency and determine Service Level Agreements.

According to Marcus Bulbeck, Technology Manager of Sainsbury's One Stop Shop (McCartney, 2002): "Having made the decision to centralise internal support, our objective was to enable store management to focus on serving the customer, rather than spending time solving internal challenges." The One Stop Shop, which has been operating for more than three years, also supported the introduction of Nectar, the company's loyalty card, which generated a major increase in the number of internal queries.

The body of literature on organisational culture has become substantial over the past two decades and is rapidly expanding. Included in this paper are books, articles, and websites. Materials read for this project include accounts of original or primary studies on organisational culture — in which authors went into the field and studied businesses — and secondary analyses in which authors review and interpret primary studies conducted by other researchers. Government reports, documents, and informational pamphlets collected from various sources were also taken into account.

The methodology for this paper centres largely on finding answers to the following research questions and analysing how those answers can be used to improve the organisational culture of Sainsbury's: How has Sainsbury's organisational culture changed over the past several years, and what are the causes of those changes? What is Sainsbury's marketing strategy, business strategy, financial position, and future plan? What is the company environment like in terms of employees and the human resources department? And what elements of organisational culture literature can be used to improve Sainsbury's strategy?

Qualitative research uses methods such as participant observation or case studies that result in a narrative, descriptive account of that which is being studied, rather than a numerical account. Qualitative research is used in this paper as a way of understanding much of what was described during the literature review. The researchers systematically reviewed the literature for evidence addressing the above questions, searched online databases, libraries, and periodical indexes, and then analysed the data to present a results section and a series of recommendations.

Conclusion and Recommendations

Morgan proposed four essential strengths of the organisational culture approach (Deal and Kennedy, 2000). First, it focuses attention on the human side of organisational life, finding significance and learning even in the simplest activities. Second, it clarifies the importance of creating appropriate systems of shared meaning to help people work together toward desired outcomes. Third, it requires members — particularly leaders — to acknowledge the impact of their behaviour on the organisation's culture; Morgan proposes that employees ask themselves: "What impact am I having on the social construction of reality in my organisation? What can I do to have a different and more positive impact?" Fourth, it promotes the view that the perceived relationship between a company and its environment is also shaped by the organisation's basic assumptions. As Morgan notes (p. 149): "We choose and operate in environmental domains according to how we construct conceptions of who we are and what we are trying to do."

To truly understand culture, leaders must dig deep to the level of assumptions and beliefs, drawing on perspectives from both employees and customers (Miller, 2004). According to Schein, underlying assumptions grow out of values until they become taken for granted or fall out of awareness. Sometimes people may be unable to articulate the beliefs and assumptions forming this important level of culture. Recognising the relevant cultural unit — a company may have many subcultures or even no dominant culture at the organisational level — is crucial to identifying and understanding the culture.

Organisational cultures are created, maintained, or transformed by human beings (Miller, 2004). Leaders at the executive level are the main source for generating and reinforcing an organisation's ideology, articulating core values, and specifying company norms. Values express preferences for certain behaviours or outcomes; norms express culturally acceptable ways to pursue goals. Together, values and norms establish the roots of the organisation's culture.

Often, leadership is the key to a successful organisational culture, and Sainsbury's new CEO Justin King appears to be a promising leader. King has shown confidence in his belief that a new path can be found for the supermarket chain, allowing it to reclaim market share from rivals Asda and Tesco (Law, 2004). In a radical overhaul that undoes much of the work done in previous years, King is reducing the dividend payable to shareholders by half, reducing approximately 25 percent of head office staff, and hiring 3,000 people to work on the shop floor.

In King's first strategy statement, he announced that he was taking the group back to basics under the banner "Making Sainsbury's Great Again" (Law, 2004). He acknowledged it would not be an easy task and would take time and money — up to three years and £550 million — but that Sainsbury's could be saved. "We have had our eye off the ball for a number of years and it will not be a quick fix," he said. "But we still have 14 million customers visiting us each week and they still feel Sainsbury's is special. They want us to succeed."

Back in 1995, when Sainsbury's was Britain's leading food retailer, profits were at £800 million (Law, 2004). In 2004, second-half profits were expected to come in at approximately £125 million to £135 million — about 60 percent lower than originally forecast. Sainsbury's main rival Tesco was expected to make £2 billion. King's strategy is to generate sales growth by resolving supply problems and spending more than £400 million on improving customer service and food quality, targeting an additional £2.5 billion in turnover over the next three years.

According to retail analysts, King also needs to move away from an exclusive focus on food (Law, 2004). One pound in every eight spent in the UK today is spent in Tesco, whose dominance is driven in part by non-food sales, especially clothing and home entertainment. However, King's position is clear: "We have to be seen as a mainstream grocer. I believe that our business must start with food — outstanding food. We need to restore our reputation for quality. Non-food ranges will be complementary to the grocery shopping trip rather than a specific destination."

Tesco now dominates the UK supermarket sector with a market share of 28 percent, followed by Asda with 16.9 percent, with Sainsbury's trailing at 15.3 percent (BBC News, 2004). Sainsbury's has issued three profit warnings in 2004, and since the start of that year its shares have underperformed rival food retailers by 23 percent. Analysts have noted that the chain has also suffered from lack of investment over the last 15 years, particularly in supply chain infrastructure compared with Asda and Tesco.

According to Sainsbury's website (2004), the company's organisational culture is a distinctive one because it values people above all else. To achieve its goals, employees at Sainsbury's are taught and encouraged to work to six guiding principles: we are equipped to succeed; we develop and enjoy ourselves; we work together as a team; we respect and appreciate each other; we know how well we are doing; and we can always do better at what we do.

King plans to ensure that his employees are satisfied and motivated. Sainsbury's expects to have occasional employee grievances and has policies to deal with these fairly (J. Sainsbury website, 2004). Its Fair Treatment policy deals with all aspects of employees' treatment in the workplace and is published for colleagues on its intranet site. Every colleague is also given a booklet on the subject. The company funds an independently run confidential helpline operating 24 hours a day, 365 days a year — a concrete example of an organisational culture that, at least in principle, puts people first.