SEPARATION IS NOT ENOUGH: HOW TO ACHIEVE
E. Leclerc
Leclerc was founded in the late 1950s by Eduard Leclerc, who decided to give up a career as a Catholic priest and start a super- market dedicated to offering branded products at cheap prices.
The organization has been very successful and has grown to a chain of more than fi ve hundred hypermarkets. It is now expand- ing overseas.
This organization balances quite a few confl icting forces smoothly: it has achieved low cost and differentiation simultane- ously; it is very decentralized and yet centralized at the same time;
it is broken up into many small autonomous units but still enjoys the benefi ts of size; it is structured as a federation of independent stores yet behaves as an integrated network; it encourages continu- ous experimentation with new products and concepts yet survives the inevitable losses without pain; its employees feel and behave like owners of the organization, yet own no stock; the whole orga- nization behaves like one big family, yet it is a money-making machine. How could it possibly achieve all these things simultane- ously and how does it manage such variety?
The answer to this question has many angles. First of all, Leclerc is not a single company. Each store is owned and oper- ated by individuals who choose to trade under the Leclerc name.
But they are not franchisees either: they do not have to pay for the right to trade under the Leclerc name (indeed, they receive numerous other benefi ts from their Leclerc association, for which they do not have to pay anything). However, they have to agree to abide by certain norms and regulations—the primary one being
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that they will never be undersold by competitors. In addition, no one—not even a member of the Leclerc family—is allowed to own more than two stores.
Each store is given total autonomy over its affairs. For exam- ple, given its unique geographical location and consumer mix, each store is free to decide what products to sell, what prices to charge, what promotions to run, and so on. In addition, each store can fi nd its own suppliers and negotiate its own prices. All this decentralization and autonomy encourages experimenta- tion and achieves differentiation. But this differentiation is not achieved at the expense of low cost: for example, each region has its own regional warehouse (owned by the member stores).
The warehouse orders and stores those types of products that do not need to be sold fresh. This achieves purchasing economies.
In addition, a central purchasing department in Paris identifi es potential suppliers and negotiates prices with them. Individual stores do not have to agree to any supplier recommended by the center, but this method certainly achieves purchasing economies.
The use of the Leclerc name by all also achieves advertising and promotional benefi ts and cuts costs. Finally, new Leclerc stores are always started by current Leclerc employees who receive the fi nancial backing and guarantees of current Leclerc store owners.
The fi nancial backing of a prominent local businessperson has inevitable benefi ts in dealing with banks for start-up capital.
In addition to all this, every store owner is active in the management of the whole organization. They all attend monthly regional meetings as well as frequent national meetings where decisions are taken and experiences exchanged. Stores belong to regions and each region is run by a member for three years (on a voluntary basis, of course). Not only do the region presidents run the affairs of their regions, they also travel extensively to individ- ual stores to offer advice, monitor plans, and transfer best prac- tice. Furthermore, at the end of every year, the store owners each
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S E PA R AT I O N I S N OT E N O U G H 119
must distribute 25 percent of their store’s profi ts to their employ- ees. They also have the duty (not obligation) to act as a “godpar- ent” to one of their employees. The selected employee is someone who has been identifi ed as having high potential and being a pos- sible future Leclerc store owner. This individual receives contin- uous support and advice—and (when the time comes) fi nancial backing and moral support to start a new store. If that store fails, the “godparent” is fi nancially liable for any debts.
How is so much variety managed? Information systems are defi nitely used to monitor what is happening across the federation.
Frequent meetings also help exchange ideas and monitor progress.
However, the two primary mechanisms of control are a common and deeply felt vision that sets the parameters within which each member store operates, and a strong family culture where every- body is treated with fairness and openness and where everybody is equal. It is interesting that each store has its own unique cul- ture (created primarily by the personality of the store owner), yet a common Leclerc culture still permeates the whole organization.
This common culture sets the parameters, the accepted norms, the shared values, and the constraints within which individuals behave. It is this shared culture that allows so much autonomy and freedom without the fear that somebody, somewhere, will do some- thing nasty.
So, how did Leclerc achieve such ambidexterity? Part of the answer lies in its strong vision and culture. Part of it is in its strong shared values. A lot has to do with the kind of individuals being recruited and promoted in such a system. And some of it has to do with the structures and processes that have been put in place. In short, ambidexterity is achieved because the total “ orga- nizational environment ” of Leclerc has been designed to promote ambidextrous behaviors by everybody in the organization.
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Summary
Simply protecting the new business model in a separate unit, away from the main business, is not enough to ensure success. The company must still create ambidexterity , that is, it must fi nd ways to exploit synergies between the unit and the parent organization.
Such ambidexterity can only be achieved if the company puts in place the appropriate “ organizational environment ” (that is, culture, structure, incentives, and people) that pro- motes ambidextrous behaviors.
Whether the new business model is put in a separate unit or integrated into the existing structure, the company must treat the new way of competing as an opportunity rather than as a threat.
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