2012 Customer Care Leadership Forum
(Atlanta)
November 15, 2012
Session Transcript:
“Office Depot: Improving the In-Store Customer Experience”
John Mullen
Vice President, North American Retail Operations
Office Depot
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Session Transcript:
John Mullen, Vice President, North American Retail Operations, Office Depot
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[John Mullen]: Good morning. It is great to be here today. I enjoy these conferences much better
than the operational conferences that I also attend because in the hallway, as you’re passing people,
operations people, and there are probably some in the room, are a little dry, but you folks, the
professionals in this room, smile, happy, talk to people, get it, greet people.
So I’m going to convey to you a story about Office Depot. Office Depot is an over $10 billion
company. Office Depot is a multi-national company and an Omni channel retail company, so we
have customers in all different channels.
What I’m going to talk primarily about is the retail part of the Office Depot business. Office Depot is
over 25 years old and one of the issues that we faced is our own legacy. I’m not sure how you think
about your company, but legacy is good and legacy can be bad. As we go through here I think that
you’ll see that some of the things that really came out of this journey is that some of the things we did
were good, some of the things we did weren’t so good, and some of the things we had to do was to
change.
I will liken this journey to – has anybody ever climbed Mount Kilimanjaro? Just last week, great. I will
liken this journey to climbing a mountain. The higher you go, the less oxygen there is. When you
take a new road there always seems to be a point in time when you struggle for air because there’s
not a lot of history this way. You’re going against the grain, so to speak.
As we’ve continued to escalate this mountain I can tell you right now, we are nowhere near the top.
We are somewhere still establishing a base camp just off the base, having an infrastructure. So
that’s how I would liken our journey today.
So how did it start? Everyone’s seen Undercover Boss, right, the show? Everyone’s seen that,
correct? Well, this started kind of the same way. The vision president, Kevin Peters, in August of
2010 was getting customer complaints into his office from professionals like yourselves, filtering that
and conveying what the customers were saying. Our customer service scores didn’t match. Our
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customer service scores were in the 90s. That would tell you that if that’s right, that we were doing
pretty good. Well, the fact of the matter is we were not.
So in 2010, Kevin and other executives such as myself – and Kevin likes motorcycles, he puts on the
bandana, and I actually wish I had a picture of him doing that, and then his suit and tie – went out to
stores. Through the summer of 2010 we went unannounced to 80 buildings. At the end of that
journey we were pretty horrified at what we found. We found that our people were more comfortable
with their back to the customer and their face in front of the shelf. We found that some of our store
managers were very strong operationally but had no idea what customer care and customer service
was about.
So we knew that in an industry that has three primary players, that owns less than 10% share of the
market, we better think of a way to differentiate our retail experience. We started off by breaking it
down into three different elements. First, we had to build a new sales and service model. Second,
we had to lean out value activities that didn’t assist the customer. When I tell you that one of the
activities we did is we had one store manager in a months time collect all the feedback, information,
e-mails that were being sent to the store managers, the pile was – no exaggeration – this high.
So people were talking to store managers. We were giving our store managers activities that had no
value to the customer. It felt good, may have been in compliance, but it really had no value to the
customer. So we understood that we had to lean out our operational activities.
The most difficult part that we’re still at is making a change stick. I’m not sure about you, I’m not sure
how many folks in this room have been through change management activities, but most of them fail.
Most of them fail. They fail for multiple reasons. This is the hardest part that we’re finding, that you
think you have a good sales and service model, you think that you’re doing the right thing
operationally, you think you’re doing the right thing for the customer, but making it stick is one of the
hardest things to do.
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One of the most interesting things that we did was we took 12 people out of their daytime jobs and
put them on a team that reported to me. One of the things that we did is we went to the stores and
we just did an ethnography study. We followed customers through the store. We ended up doing
1,000 journeys – 1,000 – and we watched how our associates were interacting with customers and
how our customers were interacting with the shelf, the merchandise, the signs, and our associates.
That ethnography study horrified me because I thought we were better than we were. Someone
knew I was standing there, wasn’t in dress code. We weren’t really giving customer service. We
thought customer service was, “How are you today?” and it’s now 5:00.
The second part was we understood that there wasn’t enough people, associates, on the sales floor
during key times. I’m not sure about you, but anytime you want to go to your executive team and
say, “I need more payroll,” I don’t think that’s an easy thing to sell. What we knew we had to do was
sell [inaudible]. We used lean activities to minimize operational or make it more efficient to take time
out of what we were asking the stores to do operationally and reinvest that back into the customerfacing time.
One of the elements that we looked at when we did the study was how many customers were
actually being serviced at Office Depot. The number flashed up was accurate, 50%. Now, that 50%
was customers who either asked for help or we asked them if they needed help.
The scarier total became how many did we actually proactively assist as they walked through the
door? The 23% was from all those ethnography studies that we did. So 23% of the customers –
we’re a retailer. Retail is pretty simple. You put merchandise on a shelf, someone walks in, you help
them, you sell the product. Well, we were only actively engaging customers 23% of the time.
One of the things that we learned was that when we did proactively assist customers the conversion
went up 31%. Now, one of the slides that was first put up was “What technologies are you using
differently today? How are you thinking about your business today?” Most retail companies measure
transactions. Most retail companies don’t measure traffic. So we started to think a little differently
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about the business. We started to understand that the opportunity to sell was the amount of
customers walking through the door, not the transactions that occurred.
So we started talking about and started putting new language in place, which is conversion. The
conversion is we now have traffic counters in every one of our stores. We know how many
customers walk in the store and how many customers buy. We know it by hour. So we’re able to go
back and look at the different hours, the different stores, the different times and see how effective we
were in converting a shopper into a buyer.
This is a layout of a prototypical Office Depot store today. We have office equipment, printers,
computers, furniture, supplies, ink and toner, copy and print, and technology. The reason I put this
up there is we found conversion was not the same in all departments, that customers had different
needs when they came in a building. Customers who came into supplies were more of a self-serve
customers, so when you proactively help the customer there, the likelihood the conversion went up
wasn’t as high because customers knew exactly what they wanted.
However, we also found that in furniture and technology, when you proactively assisted a customer,
the conversion rate went up substantially. Furniture was the one that kind of surprised me because it
was the highest leap. Well, that makes sense because six years ago we’d taken all the hourly people
out of our furniture department. Now, to find out that customers really need service in furniture, that
was probably not the best decision we ever made.
There was more to furniture, though. Customers in furniture needed information. They needed
information about the product. You, like myself, probably when you buy technology do some online,
a friend tells you about the technology, someone has it, you touch it, you feel it, so when you walk
into a store to buy technology you have a reference point for that technology.
You know its
capabilities, you know what you want.
How many people, when you get an office that’s 14’ x 12’, 20’ x 20’, know how to set up an office with
furniture? What are the different layouts? Who are the manufacturers? I don’t know what I need; I
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just know I need a desk. Well, therefore, it was really important that we taught product knowledge to
associates, too. It wasn’t just engaging customers; it was providing and sharing knowledge.
So how did we fund it? We ended up doing spaghetti diagrams, operational terms. We did time
diaries with our associates. We asked our associates what they’re doing through the course of the
day and then we followed the associates, too. Then we ended up asking where associates are
spending their time.
So associates were multi-tasking. We thought that in our business our payroll model wasn’t rich
enough to have people doing specific things and to multi-task. I’m not sure about your business; I
don’t know how many of your people multi-task, but that was the direction we went.
I actually observed one associate who spent four hours on the floor. We asked him to put a cart of
freight away. We’re also asking him to help customers. It was 12:00 in the afternoon, the busiest
part of the day for us. He ended up putting one box away in three hours because of the customers.
So asking people to multi-task and asking people to do things at the wrong time was absolutely just a
really poor strategy for us.
Once we collected all these spaghetti diagrams and found out where we were spending our time, we
then went to those activities and said, “How can we lean out this process?” What we found was that
our freight process, putting inventory on the shelf, was taking up the largest amount of time. Also,
price changes and other operational things.
This learning led us to a couple things. It led us to doing unassisted deliveries of freight. In the past,
a store manager would have to leave the floor at 1:00 in the afternoon – again, the busiest part of the
day – go to the back and receive a truck. So the business was being set up. What you thought was
the right thing, because it was most efficient to send a truck there at 1:00, from the supply chain side
but what was being lost in the shuffle was the customer.
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The solution should have been right to left. If you start off right to left on a solution operationally,
customer backward, you tend to make the best decision. What gets in the way is all the graphs, the
charts, the Excel spreadsheets, the cost and the discussions. The opportunity costs lost have to be
included. The experience that one wants to give a customer must be there. The world’s diversifying.
It’s different. We have competitors not just in our space but Wal-Mart, Target. When someone walks
into our building they have to have a different experience.
So this was not an Excel spreadsheet anymore. Now we look at our business right to left. We start
with the customer and then we put process back through the organization all the way up to the
inception point of getting the product or whatever task it is.
We also understood that 23,000 associates at retail – 23,000 associates, some part-time, some fulltime. How do you talk to them? How do you communicate with them? How do you make sure that
they get a central message? That that central message is something they can believe in and is
something that they can wrap their head around?
So we simplified the message and we created what we called pillars of the business. The first pillar
is “What brings you to Office Depot today?” The open-ended question - instead of “Can I help you?”
- has the customer now answering the question instead of “Yes” or “No” with a discussion point.
The other thing that was interesting is we said “What brings you to Office Depot today?” was when
we were doing our ethnography study, most of the people didn’t know they were in Office Depot.
They didn’t know if they were in OfficeMax, Staples. Yes, enough said.
Second, focus completely on helping customers. We call it Depot Time. This is one of those ones
where legacy helps. Depot Time. One of the associates who worked on the team had been with the
company for 18 years. Now, we did have some consultants help us with this. This was a very
interesting conversation because Depot Time isn’t Depot Time, it’s drop everything, people over task.
I didn’t know it. No one knew it. We had lost it. That’s how we started the business.
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Climb over boxes, push stuff out of the way when a customer walks in the door; that’s the most
important thing. So sometimes legacy helps. When you lose your way, you have to get back on your
way. The key learning here for me was the listen to those veteran people, not dismiss what they
have to say, but embrace it and apply that learning forward, and celebrate the legacy of the
company, don’t dismiss it.
Arc three. Again, ask three questions, ask, recommend, close. Before this process we asked our
associates to ask seven to nine questions of the customer. I don’t know about you, but I don’t
remember seven to nine questions. You go to McDonald’s – I worked at McDonald’s when I was 20years-old – they ask the same five questions today that they did then, and I am not telling you how
old I am.
Keep it simple. Be consistent. Be repetitive. So that was one of the key learnings, too, to stop trying
to create and design these different selling techniques that you just can’t accomplish. They look
good in a room, they look good on a board, but you know, go out and live it real time. When you
have multiple customers around you, there are three customers and one person trying to help three
customers.
We also put a fundamental block. Ask three questions, recommend, close, but this is the architecture
that we tried to use with people. It became a visual aid.
How do you break down the operational components? I thought this was really silly in the beginning.
We actually went into every store – 1,100 stores – and that masking tape you see is a back room.
We actually did, in fact, put the masking tape down and then paint it in every single store. You know,
sometimes you think that’s silly, that shouldn’t be necessary, why do we do that? What you find is
when you play to a passing parade – and in retail you do have turnover – you need to be consistent,
you need to be simple, and you need to be spot on with your approach. Operational rigor comes
from consistency. So we, in fact, put masking tape on every part of the room.
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The other thing we did, if you go to three it’s hard to see, but we broke the product down by the
aisles. The carts were pushed out into the aisle now where the product went so it became more
efficient for the associates to put product on the shelf.
Fourth, we call this blueprint. Believe it or not, we didn’t have a way to [inaudible] the back room, so
anyone working the warehouse, you know that you probably have a spreadsheet that tells you what
slot number something’s in. We now have the ability to do that in a store, too.
This piece is a change model. I will tell you straight up this is McKenzie’s. I won’t try to take their
ideas as my own. Role modeling, fostering, developing talent and skills, reinforcing with formal
mechanisms are four distinct areas to making change stick. I will tell you, we’re still struggling in the
bottom right quadrant. The formal mechanisms are the hardest to change. Payroll models, incentive
plans, bonuses, reviews, who you hire.
All those formal mechanisms that were in place for 25 years, - that’s what I mean by sometimes the
legacy doesn’t help you – is struggle because now if you’re going to change something in an
organization you have to justify it. You have to get with many different elements and different people
that could be silo’d in an organization. This, in my opinion, the bottom right, anyone in a change
management role today or trying to get change through an organization, this is the one piece that
most people skip. This is the hardest one to do. It won’t get done in a day, it won’t get done in a
month, it won’t get done in a year; it gets done over a period of time.
If you tried to do that one first you could miss the mark. So if you do that first but you don’t test and
try something and you just want to change a compensation plan and you think it’s going to help
customers, it may not do what you think it’s going to do.
We had done that many times.
Commission, no commission. Premium pay. We tried all different things, but never had sustainable
results just through a compensation or commission program.
This is how we used to communicate to stores. This is a bulletin. We do it vis-à-vis the electronic
world, too, but this bulletin would sit in the break room of every store. I don’t’ know about you; I am
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not reading that. First of all, I can’t read it, I need glasses, but secondly, I’m not reading that. I have
60 minutes, 45 minutes, I’m on a break, I’m not reading that. Why would I pick that up? You know, I
have to work here. Don’t give me a headache by making me read some publication.
So we said you know what? We have a 30-second window to talk to people, get their attention. So
we ended up changing it to this. It was a cartoon. Every month the cartoon got updated, kind of like
the comic strips. So it may sound goofy, but it worked. It got people’s attention, it was color, it was
fun, and in here wasn’t us talking to associates anymore, it was associates talking to their peers.
Success stories, customer service stories. One customer actually wrote a poem about one of our
associates. They were so excited about the service they were provided they wrote a poem. We put
the poem in here.
So what people were looking for was really a way to convey what customers were saying and we
found that associates talking to associates and customers talking to other associates was the right
way to do this. Not me, not you talking to the associate.
We introduced new training and incentive models. We did do some things on a temporary basis. We
are testing some things and putting some things in pilot, but I will tell you, we’re nowhere near where
we need to be. The training materials have all been rewritten. The incentive pays and modeling for
that, we have a long way to go.
Where are we today? We went back and on the left, the customers helped. In March 2011 no help
was 50%. In August 2012 it went down to 31%. Proactive help went up to 43%. In reactive help, it
was 26%. Are we satisfied with those numbers? No. Our mantra is we win this journey one
customer at a time. One customer at a time. If you think about customers as far as a table group, a
room, then you’ve lost the individualism of these customer needs. Specialized service for customers
is what they’re really looking for today. That’s what you have to deliver. That’s what we’re trying to
deliver.
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When you look at the up sell numbers, again in March, no attempt, 73%. That went down to 39%.
Attempt to up sell or cross-sell a product, 27%, 61%. So we’re doing better. We’re nowhere where
we need to be. To me, customer service is kind of like a safety and an LP issue. One-hundred
percent is the total. When you start setting totals below that you accept mediocrity. It kind of blends
itself into the network. It weaves itself into the fabric of what a company really is.
So therefore, my opinion is that customer service goals should always be 100%. Is that achievable?
I don’t know. At the end of the day the mindset is more important than the total. If you have the right
mindset about helping customers like everyone in this room does, then you have a better chance of
doing at least above where you want to be.
Conversion, as I talked about, this is one of the metrics that we have every store, by day, by district,
by region. The one thing that I will say is that we have to be really careful that this doesn’t become a
KPI. KPIs, although good, can become bad. If you drive one metric then it’s like pop-up weasels.
Your conversion goes up, your AV goes down. Your conversion goes up because people are trying
to sell them a dollar lollipop or bottle of water instead of trying to help customers.
In essence, it’s a metric, but the overarching statement is that it’s about the customer experience.
That is fundamentally what has to be talked about in our world every single day, the customer
experience. The KPIs underneath it and the metrics underneath it are a flash to help people
understand, diagnose, repair their business. It can’t be, though, the overarching statement to helping
customers.
Look, district A and district B, these were our pilot districts. 2011, 56.5% conversion. That meant for
every 100 customers that came through the door, 56.5 bought. 2012, that same district is now at
59%. On the right hand side, district B, 56.6%. It’s now at 59.2%. We do find there’s some
seasonality in our conversion, meaning that our busiest time of the year is back-to-school. The group
size goes up, it’s harder to measure. It depends on if they want ad goods or not, so we did find that
there’s some seasonality here. We’re still learning as we go through this different technology.
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What I’ll say to you is that it’s not the number. It’s not the number. It’s what’s actually happening
inside the store that matters most.
What did we learn? The first thing we learned was you have to be honest with yourself. You have to
stop looking at a KPI scorecard that says you’re 95% of customer satisfaction. That takes humility
and leadership. I will tell you that if you look at the second bullet point – senior leadership – our CEO
and Kevin Peters believe in customer service. They understand that sometime there are soft costs,
soft benefits to this, but they believe that it is the right thing to do. Without that conviction from senior
leadership, I don’t know that anyone could have a customer service program that lasts or sticks. If
everything becomes a spreadsheet exercise, if everything becomes a cost analysis, it probably won’t
make it onto the docket to be executed against.
To be honest with yourselves was one of the things that I thought – I’m kind of a grizzled veteran of
retail. I’ve been in multiple companies and I thought I had a lot of answers. The most humbling thing
for me was I didn’t know anything. I didn’t know anything. All I knew was the further I got away from
the customer I felt really good about myself, as you’re moving through an organization, and then one
day I looked, took a look back, and I realized I didn’t know anything. I had to re-ground myself back
into the business, back to the associates, and back to the customers.
Having that viewpoint then enabled me and the organization, the people who were with me - they all
had the same learning – that we had to stop this charade that we had the answers. That was one of
the biggest things.
Evolve a vision. Any initiative, any company that’s successful has to have a vision. Why? Because
when times are tough, things are bad, people are alone and they have a choice between what to do
and what not to do, the vision helps them stay on a course. It anchors you to the future. If you don’t
have the vision then you potentially will yawl back and forth off course. If the vision is something
that’s accepted, if the vision is something that everyone understands, if the vision is something that
people can gravitate to, then they tend to move in that direction. So I would offer what we learned,
which was we must have a vision.
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If you look now, before, people were customers, numbers, they were [inaudible] rates. What was
your tax rate? They were human beings we were just talking about. Our business now is more
about people, customers and relationships that are built. We ask our associates and store managers
to know the 10 to 15 best customers that come in their store. Do you know their name? How many
kids they have? What business they own?
It’s funny. You walk through one of our stores and someone has a shopping cart. Our average
transaction, our average ticket, our average items per transaction is 3.6. So someone’s in a store
with a shopping cart and it’s over-filling. You look at it and go, “Someone is starting a business.”
When you think about it, it’s a great opportunity to introduce yourself and say, “What business have
you started? Let me introduce myself and give you my business card.” What we ask our people to
do now is we ask our folks to build relationships.
I’ll close and say this. This has been one of the most humbling experiences I’ve had. It’s been one
of the most enjoyable experiences I’ve had. From the organization standpoint, as I told you, we’re
climbing that mountain. We are nowhere even near the midpoint of this. All we’ve really done is put
an infrastructure in place to build off of. We put a vision in place for people to start thinking about
going to, but we are nowhere near where we have to be. This is something that I will tell you, we
stop calling it an initiative. Anytime you have an initiative, an initiative is time-bound. Customer
service and the customer experience is not time-bound.
Thank you.
There are a couple minutes for questions, if anybody has any.
[Man]: How do you think your associates would describe the difference between then and now?
[John Mullen]: It’s easier. We don’t ask them to multi-task. It’s enjoyable. Twenty-year veterans
have come up to me off the floor and said thank you. I didn’t think we were doing a lot, but it seems
pretty simple, some of the things we’ve done. I would tell you that our most tenured people say this
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is the way the company used to be, that this is what we need to do. People have passion in their
eyes. They have that fury in their eyes that they can believe in something. It’s not about a number
anymore; it’s about a person. People are something you can get real excited about. You’ve helped
somebody. You made their day.
I would tell you the conversation has moved from the tactical world to the personal world and our
associates are thankful for us changing the direction we were going in.
[Woman]: Hello. Can you speak to some of the tactics you used to force change or help drive
change through legacy systems, thoughts and perceptions?
[John Mullen]: Thank you for your question. We’re still learning, number one. I’m finding you can’t
force change. Change has to be an acceptance. Change has to be a decision. One of the things, if
you go through change management, they’ll say is in order to make change happen you have to find
people doing it right and reinforce that multiple times.
Too many times in our world – I don’t know about yours – exception reports are run. Exception
reports tell you all the things that weren’t executed right. How many times have you seen a report
that said, “Here are all the people who did it right”? We tend to run business that way, by the way.
We tend to look at the negatives. Change management for us has become about finding those
people who are doing it right, call them heroes. So we’ve created programs like hero program in the
store. We have rewarded people for their customer service scores that are really customer service
scores, but we’re still learning. You have to role model it, too.
If I walk into a store and if I ignore customers, that sends a loud message. You can’t. It doesn’t
matter what your title is. I would tell you that role modeling has been a big piece, too. We had
executives that would walk into a store before and ignore customers. You can’t, you know? You
have to role model that and you have to, yourself, believe in customer service.
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I’ll tell you, the other thing is we had people that didn’t believe in this. We still have some people that
don’t believe in it. They will self-select themselves out. That’s unfortunate, but the honesty that has
to happen on these things, that’s what you have to do, too, be very honest where the company’s
going.
The last thing I’ll say around change is that we change too often. So what I’ve learned in a company
with a 25-year legacy is that people were waiting you out.
[Man]: Speaking to the success that you’ve had, how do you explain the success to your CFO more
measureable results? For example, I’m sure that the programs you put in place may require more
staff to be this interactive and to do the stocking separately. You talked about the conversion rate
going up, but did the total number of sales go up as well? Are there other metrics that validate the
approach?
[John Mullen]: Thank you for the questions. You know, CFOs are great human beings. They have
responsibility. Their responsibility is the financial health and welfare of the company. So they’re
going to ask good questions. We made this program into not just a customer service program but a
measureable one. The interesting thing about conversion is when you live conversion 1% you can
put a dollar total to that. You can say that if you go up 250 basis points on a conversion you now
know the impact of what you’ve done.
As a public company I won’t answer your last question, but I will tell you that no one continues
anything that’s not having a difference in their business, so you do have to justify these. I’ve learned
that, too, that there are people with different roles in an organization. They come at it from different
viewpoints at the table. This is one that you have to explain to the CEO, CFO, president to say, “Is
this financially worth it?”
The other thing we measure is defection rate, too. We knew what the defection rate of our customers
were before we started. We know what it is today. If you have bad experiences, you’re going to
have people that don’t use your brand anymore. By measuring defection you also then put a value
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on this that is not qualitative anymore; it becomes quantitative.
So this became a blend of
quantitative and qualitative analysis, surveys. It’s not just customer satisfaction scores; it’s real data.
[Man]: I get what you’re saying about KPIs and the double edged sword nature of that. I’m curious,
did you look at Net Promoter score as one of those KPIs that you might use in some way or not?
[John Mullen]: I’m sorry, I didn’t hear the question.
[Man]: Net Promoter score. Did you look at that?
[John Mullen]: I don’t know what that is.
[Man]: Never mind then.
[John Mullen]: You can tell me what it is.
[Man]: I’ll tell you on a break.
[John Mullen]: What we did do is we changed the business into what we called driver metrics. We
measured the business on conversion, AOV and traffic. Traffic is the responsibility or at least an
accountability of the marketing team – am I driving footsteps in the door? AOV is a blend of the
merchandise that I buy and sell and how I sell it in the building. Then conversion is clearly on most of
the shoulders of the store operators.
By doing that it’s actually helped us look at the business through the customer lens to say if you’ve
impacted one of these metrics. If you run out of stock, that hurts conversion. That’s how we’ve
looked at our business over the last two years. We’ve changed it from more of a KPI to what are the
drivers of the business and then how can we help the customer experience by increasing conversion,
increasing AOV, increasing traffic?
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Well, I appreciate your attention. What I would offer to you is there are a lot of great speakers on the
docket. Your conversation, if you’re going to remove one filter, you may find that you learn a lot more
as you listen to these great folks later, the panel that is going to come up. If you take off that filter that
you have that you think of something five years ago, forget what you know. Thank you very much.
[End of Transcription]
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