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Three years ago, Connecticut grocer Bob LaBonne Jr. feared the end was near for his family-owned supermarkets. Having invested millions in a new store that failed to meet projections, and competing with a new Stop & Shop near the family's flagship store in Watertown, the company was on the brink of financial disaster. Sales had declined by 10 percent, cash flow was nil, and creditors were talking c.o.d. To say the least, the future of LaBonne's Epicure Markets appeared bleak.
Then came January 2000 and a former "razor-blade maker" turned consultant named Bob DiRosa. DiRosa, 55, was once an engineer with Gillette and Abbott Labs. He is the founder of Market-Edge Services, Inc., a Saugus, Mass. consulting firm that specializes in helping entrepreneurs drive profits, reduce stress, and make their businesses easier to manage.
"It was by chance that we connected with Market-Edge," says LaBonne, president of the family company. "I received in the mail the company's marketing brochure and in it was a success story about Scott's Corner Market, a store operating in Pound Ridge, N.Y. When I phoned one of the owners, Neil Hill, to find out more about Market-Edge and I explained our situation, he encouraged me to meet with Bob DiRosa right away."
According to DiRosa, the meeting could not have taken place soon enough. After completing a detailed survey of the company, he realized that "things were quite dismal" financially. The new store was draining the company and there was no accountability throughout the organization. "That was the bad news," he says. "The good news was that the problems were self-inflicted, which meant they could be controlled."
DiRosa, whose clients include retailers and manufacturers, feels that business owners are quick to blame the economy and new competition when struggling to make ends meet. Instead, he suggests they look into the mirror.
"Too often, owners aren't willing to hunker down to see what they can do internally to prevent themselves from being annihilated. And they're afraid to ask for help," he says. "The fact is, there's more to fear from our own inefficiencies than any outside or competitive factors."
With the clock ticking, the LaBonnes teamed with DiRosa and help was on the way. Upon his arrival, the no-frills consultant implemented a rigorous program that demanded 110-percent support from the owners and their associates. Not surprisingly, the plan included cutting the losses at the new location. The payback? Immediate and encouraging results.
Included in the plan were the following:
1. Inventory controls. Purchase limits, movement analysis, price checks, cutting tests, and improved buying systems were instituted to reduce the cost of goods. Department managers were assigned weekly purchase allowances based on projected sales and labor. Total inventory was reduced by $140,000.
2. Payroll and labor. All labor scheduling requires the use of an Excel-based software program designed specifically for the LaBonnes by DiRosa. The program measures productivity, payroll percentage, and average hourly wages. More accurate scheduling, cross-training, and the elimination of unnecessary overtime have resulted in labor savings of $250,000 per year.
3. Shrink control. Daily recording and monitoring of all shrink, losses, and product conversions has become the responsibility of all department managers. Shrink reports are reviewed at every weekly operations meeting.
4. Problem solving. Store management teams participate in weekly problem solving sessions. A control form is used to report findings at operations meetings. The goal is to share solutions to problems that are likely common to all stores.
5. Raise the bar. Poor performance is not accepted. "Associates who are struggling receive tremendous support," says LaBonne. "We expect improvement by requiring them to commit to the resources made available." As an incentive to improve performance, the company introduced a bonus program. Last quarter alone, LaBonne's presented $40,000 in bonuses to employees.
6. Feed off the bottom. Under constant review are line items not meeting the budget.
7. Questions. "Making bold statements to associates often puts them on the defensive," says LaBonne. "Bob taught us that employees respond better to management when we ask questions, like 'Can you tell me about the condition of the break room when you left the store last night?' While questions force our associates to look at the job they've done and determine how they can improve performance, they also force management to listen better."
Listening to DiRosa was indeed the saving grace for LaBonne's Markets. Last year, with sales down by $2 million, the company celebrated the most profitable year in its 41-year history.
"We've proven that today one can't afford to do business on a hope and a dream. You must do it mathematically," says DiRosa, adding, "Working with the LaBonnes has been especially rewarding. They've taught me that good people can win, too."
Independent Retailing editor Jane Olszeski Tortola can be reached at [email protected].