March 29, 2012

New Metro CEO Olaf Koch offers culture change

Olaf Koch, Metro CEO (photo: Metro Group)
Olaf Koch: "We don't want a top-down culture anymore"
Can it be that we now have a down to earth, non-arrogant boss at Metro Group? New CEO Olaf Koch certainly wants to revolutionise corporate ethos.
 
The 41-year-old former IT expert will need to act fast though if Germany's largest retailer/wholesaler by sales is not to be pushed down the ranking ladder by rival Schwarz-Gruppe (Schwarz Group) this year.

Already in 2011, Dusseldorf-based Metro Group posted annual revenues of €66.7bn compared with around €64bn at Schwarz Group.

This is surprising because Metro holds a number of trump cards. As a plc it is able to tap the capital markets more easily; the group can diversify risk and seize chances across a broad store portfolio; and its main cash & carry division is not highly capital-intensive and spans both stable western European markets and higher-growth ones in eastern Europe and Asia.

Regrettably, however, Metro has been embroiled in family squabbles among shareholders and top management, resulting in a 40 per cent decline in the share price last year.

Don't worry, no analysts

The colossus seems to have lost strategic direction, announcing that its "real,-" hypermarket and "Kaufhof" department store divisions were up for sale only not to sell them.

Meanwhile, Dieter Schwarz, the taciturn owner of Schwarz Group, has never had to worry about analysts and minority shareholders or even about group synergies. The 72-year-old billionaire has always run "Kaufland" hypermarkets and "Lidl" hard discount stores as separate entities.

The thrifty Swabian is also said to have reinvested nearly all annual profit in the business – profit which is believed to have always been higher than at Metro whose ebit came in at €2.1bn last year.

Dieter Schwarz's holding, based on ultra-efficient buying and logistics structures, has also been able to grow the store base via cash flow and loans from literally hundreds of local banks.

Aldi Süd and Aldi Nord (Aldi South & North), totalling 4,306 discount outlets and net annual revenues of €22.4bn, are larger in Germany than Lidl (3,277 outlets; €14.2bn), but Lidl has outpaced its arch-rival internationally.

Parallel to this, Kaufland has gone from strength to strength both at home and abroad (cf. separate blog).

At any rate, Kaufland (+2.4 per cent) and Lidl (+1.9 per cent) have clearly beaten real,- (-1.1 per cent) and Metro C&C (-4.4 per cent) on their home market during 2011 (cf. separate blog).

Koch's fine-tuneing and pruning
 
So what is new CEO Olaf Koch going to do about this? Clearly, he intends to keep finetuning Metro's organisational structures. This includes more centralised buying for decentrally-organised electronics entertainment subsidiary Media-Saturn as well as for group own label food programmes.

While taking a critical look at Shape 2012, the cost savings and efficiency plan initiated by his predecessor Eckhard Cordes (cf. separate blog), Koch wants to reduce future group costs by a further €150m p.a. He clearly also wishes to focus on boosting revenues rather than exclusively on optimising earnings.

Perhaps more significantly, Olaf Koch says he wishes to instigate a culture change at Metro: "We don't want a top-down culture based on mouth-honour and fear. We want open, bold and controversial discussion where people can call a spade a spade...and I must set an example..."

This is incredible stuff when one recalls the grim authoritarian culture that has prevailed in the past. Refreshingly, Koch goes even further in his criticism of the status quo:

"There are still people here who seem to think that employees are two hands rather than a brain...and that our culture is one of orders and obedience...In the past, even when people received an order that made no sense, many just clicked their heels and said 'Yes, sir!'"

For those who think this is too good to be true, it is worth remembering how Olaf Koch lists his leisure activities: "jogging, cooking, listening to hard rock, and playing the guitar". Given that one former CEO was happy to include "paramilitary" discipline in a description of his private life, it would seem that the world is beginning to change even in Dusseldorf.
 
 
Related article in German: Lebensmittel Zeitung, no. 12, 23.03.2012, by Christiane Ronke, Hans-Jürgen Schulz & Christiane Ronke


Comments for this article are closed.

  1. Created 30 March, 2012 12:30 | Permanent link

    I really hope that Olaf Koch sticks to his guns. In my previous work with Metro I can only agree to the top-down culture experienced by many, and I hope that honest, open and bold communication will be encouraged without it meaning organisational and political suicide. I know that the Metro Group in total can only benefit from it. Thank you for writing such an honest and transparent article.

  2. adam
    Created 21 July, 2015 12:56 | Permanent link

    Dear Herr Koch, Please contact me asap for the below issue. Could not find anyone to explain what happened in Shanghai Putou store of yours lately.
    Thanks,
    Adam




    --------------------

    Dear Jeroen,
    Thanks for the respond.
    If I found your contact details I wouldn’t disturb superiors.
    When I googled Metro AG, there were Germany Executives only, unable to find China HQ.
    Forgive my curiosity, where are you located in China?

    Actually before that, if I reached the store manager or the area manager I wouldn’t go higher.

    Here is the brief:
    I wrote that letter without reading and correcting any vocabulary.
    In my first time, I felt I had to write. I had to find Executives, reasonable people or professionals in Metro to tell what happened that day.
    After ten years China Metro experience (I have never had any problem in another Country’s Metro Stores.) what happened at the end was
    so humiliating and full of un-satisfaction. When I insist to see the store manager or Mr. F.J. I got the respond that they both had been having
    a meeting upstairs together (several different people confirmed that they were both upstairs), which took six hours.
    (I understood that because F.J. sent an sms that he was busy in meeting)

    Strange thing was FJ sent another sms around six pm which was 6 hours later, he was asking, “how can I help you?”
    I finally messaged him, “didn’t anybody tell you that what happened?”
    Funny that his last sms was telling that he is traveling outside of Shanghai !!!

    I felt that while I was suffering, people were acting naive or smart…
    All those message traffic is still in the phone, I wish I could see you one day to show them.

    Funnier thing was while I was insisting to see the executives in the area management reception, they were trying to get rid of me (they sent the security to reception)
    and afterwards they sent a thomas products specialist lady. I told the lady that she could not help me and the INCIDENT WAS BEYOND THE PAN…
    During 15 minutes suffer in that reception, the picture was like that: I was trying to reach someone with my phone, rec. girls were trying to find someone for me,
    my 9 yr old son was watching and carrying a paper glass of water for me…

    Visit and do home shoppings in a store more over than 10 years,
    at the end, because of a faulty pan, being photographed an video taped by an angry food manager in public, even in front of your son,
    try to reach an executive to report, and go visit area management office reception and being faced with a security man,
    even show area manager F.J’s name card, not recognized.
    Came back home, sit in front of computer to find other executives…
    Even decided to share the event with contacts in Wechat, with followers in Twitter and Facebook…

    Yes Sir, I am embarrassed too by applying and trying to explain to you guys for those kind of issues I experienced in Metro Putou.
    But, I have my principals and my honor. Very rare but if it was touched, I have to reject…
    The worst thing was I was humiliated an embarrassed in front of my son…
    “Don’t take your son to Metro…” :(

    Regards,
    Adam

  3. Anon
    Created 22 May, 2017 01:52 | Permanent link

    Save Metro Cash & Carry India

    Dear Mr Koch,

    You will be shocked to know the reality in India. MD Mr Arvind has already ruined the brand image of Metro Cash & Carry India. In the name of cost-cutting many employees have been forced to resign, irrespective of their performance. On the one hand, he is trying to show that he wants to expand the business by opening new stores; on the other hand, some stores are going to shut down because of leadership failure. He selects the leaders as he wishes, irrespective of knowledge and competency. Even the HR department kneels down and is not able to raise this concern with him. He is a dictator, and where such a culture prevails the business is always at stake. Many talented top performers from higher and middle management have been pressurised and falsely accused, so they have left the organization. A competitor's management visit Metro stores freely and collect data without any hindrance. This is all happening because the MD is hiring all new faces from Walmart India. Please check the personnel attrition rate and take necessary action to save the organisation. Hope you love Metro Cash & Carry India as much as I do.

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