Stocked up, as usual, for a hardy winter, Canadian Tire Corp. chief executive officer Stephen Wetmore was left feeling “a bit like the person who is all dressed up and nowhere to go” when the snow didn’t show.
“We were so well prepared across all our lines of business to meet a need that never materialized,” Mr. Wetmore said in his fourth-quarter conference call to shareholders.
Vagaries of the weather notwithstanding, Canadian Tire delivered “solid” financial results due to strong sales in other categories. But the company also benefited from a drive to make its operation more lean and efficient, Mr. Wetmore said.
“Important advancements were made in merchandise procurement, product transportation and store operations,” Canadian Tire said in its earnings release. “In 2012, the company will continue to introduce initiatives to maximize efficiencies and mitigate costs.”
Not as sexy as snow blower sales, perhaps, but Canadian Tire’s application of “lean thinking” is garnering considerable attention, with the retailer adopting process-improvement methodology more traditionally found in the manufacturing sector to boost productivity. And the concept is taking root throughout the organization.
In early February, as Mr. Wetmore prepared to meet the shareholders, Liza Provenzano, associate vice-president of human resources operations, was addressing an over-capacity crowd at the Human Resources Professionals Association’s annual convention.
Assigned in 2009 to centralize the company’s recruitment, Ms. Provenzano wondered whether the identification and elimination of waste – a process that had worked so well in Canadian Tire’s distribution centres – could be adapted for her HR role.
“We had a lot of ways of doing the staffing process, multiple ways of delivering the service. We had a heavy workload, we had a lot of variations in workload and it wasn’t easy for us as managers to move the work around the team,” she said.
With the help of management consultant Brian Ross of Organization Thoughtware International Inc., Ms. Provenzano and her team scrutinized every aspect of how they processed a recruitment request, from the time a manager at headquarters identified the need for a new hire to the time the recruit walked in the door. They found delays, duplication, unnecessary steps. “It was humbling,” she said.
Members of the recruitment team met and jotted ideas on flip charts and sticky notes, filling every available bit of wall space in a meeting room at the company’s Toronto headquarters. They asked hiring managers about their needs and set to work developing new standards that would save time and money and improve the selection process.
“The challenge for us was how do we apply the [lean]methodology, which was originally designed for the production of widgets, and convert it into a methodology that would be applied within a human resources framework, within an information-flow type of environment,” Mr. Ross said. “We are not producing widgets, but we are producing the right person, in the right seat on the right bus.”
Lean retailing, a relatively new concept, is emerging as a best practice, according to Ontario’s Institute for Competitiveness and Prosperity. “Based on the production methods developed by Toyota, but applicable beyond the automotive (and manufacturing) industry, lean achieves highly efficient operations through a relentless drive to reduce waste of time and resources,” the institute wrote in a working paper on retail management.
Borrowing a page from Toyota, the Canadian Tire team even adopted its own version of the shop floor huddle, meeting around a big whiteboard once a week, assessing how the new methods were working and writing down new ideas, Mr. Ross said.
The results were immediate and lasting, Ms. Provenzano said. While the time needed to fill positions depends on the complexity of the role, the average fell by 25 per cent. The number of steps in the hiring process was more than halved, which freed up time to devote to employee selection, she said. Turnover rates fell, with more recruits making it past the crucial first 90 days on the job, and the cost per hire dropped 34 per cent.
A bad hire is like a defective product coming off the production line, Mr. Ross noted. If you get it wrong, the work has to be redone, costing time and money.
Bill Greenhalgh, chief executive officer of the Human Resources Professionals Association, said Canadian Tire’s “modern HR” approach is a sign of the times. In today’s knowledge-based economy, “this is absolutely vital,” Mr. Greenhalgh said. “At the end of the day, people are the only sustainable differentiator competitively.”
The thing about lean methodology is that “you can never take your eye off the ball,” Ms. Provenzano said. In her own HR operations, “we started small, but we still have a long way to go.
“We’re early in our lean journey,” she said, but the culture is taking hold.