transformation final report

re

W&RSeta ILDP Assessment

Name

Emmanuel Jula, Oswald Abrahams, Thandi Mbatsane, Melvin

Thaver, Leon Pillay

Company TFG, Woolworths, JD Group, Bidvest, Spar

Assessment Title Transformation in Wholesale & Retail Sector – ALP Final Report

Date 22 January 2016

Facilitator L Claassen

Plagiarism Declaration

I declare that this coursework is entirely my own work and does not include any plagiarised

material. All sources that were consulted to compile this document have been referenced

appropriately.

Full name: Emmanuel Jula; Leon Pillay; Oswald Abrahams; Melvin Thaver;

Thandi Mbatsane

Signature: 1.

2.

3.

4.

5.

Date: 22 January 2016

Transformation in Wholesale & Retail Sector – ALP Final Report

2

TRANSFORMATION

Transformation in Wholesale & Retail

Sector – ALP Final Report

2015 “Change is as unsettling as it is painful. It cannot be any different because change is

movement…At times of momentous developments, when societies reach their high noon, everything else becomes uncertain except for the golden gate that must be reached – the goal

of freedom.” Former President Nelson Rolihlahla Mandela, 25


3

Contents Glossary..................................................................................................................................... 4

Executive Summary ................................................................................................................... 5

1. Introduction and Research Problem ................................................................................ 7

2. Problem Statement .........................................................................................................10

3. Literature Review ...........................................................................................................11

4 Insights from Industry Leaders .........................................................................................15

5 Insights from Retailers within the South African Retail Landscape ...................................17

6. Key Insights from International Immersion ......................................................................25

7. Findings..........................................................................................................................27

8. Recommendations .........................................................................................................29

9. Conclusion .....................................................................................................................34

References ............................................................................................................................38


4

Glossary HDSA - Historically Disadvantaged South Africans

CEE - Commission of Employment Equity

EAP - Economically Active Population

GDP -Gross Domestic Product

BMF - Black Management Forum

EE - Employment Equity

BBBEE - Broad – Based Black Economic Empowerment

QLFS - Quarterly Labour Force Survey

PWD - People with Disabilities

CEO - Chief Executive Officer


5

Executive Summary

Transformation policies in South Africa, such as employment equity (EE) and broad based black

economic empowerment (BBBEE) have become part of the “everyday” political, economic and

social life of all South Africans since the founding of the new democracy in April

1994.Transformation within South African Retail Companies is way too slow with regards to

equitable representation in Top and Senior Management levels. The research aimed at

establishing the levels of Historically Disadvantaged South Africans (HDSA) specifically in these

management levels and to gain an understanding as to what hinders, support, promote or have

a positive impact on transformation.

The terms Employment Equity and Transformation has been used interchangeably in this

research as it was established through unpacking its definition that transformation is

complimented by the ethical implementation of the Employment Equity Act of South Africa. We

have done significant research which covered two aspects, one being individual one to one

interviews with HR personnel within the Industry to establish what are the current challenges and

issues experienced on the “ground” and more so what the possible barriers to transformation are.

Our secondary research led us into delving into various reports, case studies, website articles,

and journals and books which provided us with the desired and applicable literature on the subject

matter.

A thorough examination of the 15th Annual Commission for Employment Equity Report (CEE) was

conducted and pertinent information relative to the research was mapped out. This was also

mirrored with a few stats published by large Retailers with reference to their workforce

representation in the various levels.

Through our research it has been established that the Wholesale and Retail Sector plays a pivotal

role within the South African Economy and is viewed to be a major employer within the sector.

The statistics revealed by the CEE as well as the research conducted, is in no doubt indicative of

the slow pace of transformation within the country and more specifically within the Wholesale and

Retail Sector.

Through our research, we uncovered that there are fundamental challenges that are faced within

the Wholesale and Retail Organizations with regards to the pace of transformation within the


6

sector. These challenges create barriers for swift progress. Companies such as Pick n Pay and

Nedbank had compelling success stories that were explored and key learning’s was extracted.

From the insights gathered from Captains of Industry, learning’s from our International Immersion

and literature researched we have established key findings.

We formulated a few recommendations that could assist in ensuring the desired commitment from

senior management is instilled which will trigger acceleration in transformation. The 3 pillars

identified were:

Ethical Leadership

Legislation

Training and Development

An adapted change management framework was recommended to be used to expedite

change within the organizations which is centered on 3 components, i.e.

Readiness for Change,

Process and

Implementation of change.


7

1. Introduction and Research Problem

On the journey towards transformation, a number of law reform and Affirmative Action (AA)

measures have been initiated in South Africa, aiming to achieve greater social justice and equality

and to redress past unfair discrimination and unearned privilege. (Booysen, 2007). Some of the

first attempts at redressing the wrongs of the past were the Labour Relations Act of 1995, which

took effect in 1996, the Constitution of South Africa of 1996, and the Basic Conditions of

Employment Act of 1997, followed then was the Employment Equity (EE) Act of 1999. In addition

to these acts, the Skills Development Act of 1998 was put in place not only to shift the focus away

from affirmative action appointments but to also promote recruitment, succession planning and

development and training amongst persons in the designated groups. (Department of Labour)

The recent stats released by the Commission for Employment Equity (CEE), reflects the

Economically Active Population (EAP) of South Africa which is made up of, in descending order,

of 76.2 percent Africans, 10.6 percent Coloured, 2.8 percent Indians and 10.3 percent Whites.

(Department of Labour, 2015).

Minister Mildred Oliphant, pointed out in her first Employment Equity and Transformation Indaba

in April 2013, that the country is still found wanting in relation to equitable representation of the

designated groups, in particular women and people with disabilities in the middle-to-upper

occupational levels. (Department of Labour, 2014).

According to (Booysen, 2007) a comparison between the 2001 and 2005 CEE report, it was

evident that there was slow progress in the implementation of the Employment Equity Act at

management levels, and it was further noted that there was a drop in representation in the middle

management level of employment which was a worrying factor in terms of EE since the middle

management level is considered to be the “feeder” to senior and top management levels.

Table 1 below is a clear illustration of the latest statistics of Top, Senior, Middle and Junior

Management levels relative to South Africa’s EAP and bears testimony to the Minsters statement.


8

Occupational

Levels

Blacks Coloured Indian White

Top Management 13.6% 4.7% 8.4% 70.0%

Senior Management 20.5% 7.2% 9.9% 59.3%

Middle Management 36.7% 9.5% 9.1% 41.9%

Junior Management 58.5% 5.8% 5.8% 22.7%

Table 1: Workforce Profile at the Top and Senior Management Level by Race. Source:

Commission for Employment Equity Report- CEE15.

It is clear that the current proportions are not replicated in Top and Senior Management Levels

across the Country. Whites are over-represented as they occupy 70% of the Top Management

level, which equates to almost more than seven times their EAP, and 59.3% of the Senior

Management level, which equates to almost more than five times their EAP. (Department of

Labour, 2015).

The good news is that there has been progress. When the Employment Equity Act came into

effect, Whites held 87% of top management positions. The recent report shows a figure of 70%,

the bad news however is that the pace is slow and South Africa has a very long way to go before

the profile at the top of Organizations reflects the demographics of the country. (Nkomo, Rand

Daily Mail - The National Coversation, 2015).

Changes and transformation in the workplace are perceived either as too slow or too fast,

depending through which cultural lens they are looked at. (Booysen, 2007). Booysen maintains

that the significant power shifts that have already taken place are still in process and have not yet

played out fully. Whites as a majority which previously held absolute power, still have the most

economic and management power. According to Booysen, this is not only illustrated in the

numbers above, but also in the change resistant to organizational cultures.

The history of the CEE reports up until 2011, confirms, first that transformation has not yet been

achieved, and further pointed out that the sectors that are least transformed are Retail, Motor

repair services, wholesale, trade and commercial agents and allied services. He further eluded

that these sectors also lack codes of conduct, or charter that map out employment objectives.

(SA Reconcilation Barometer Blog, 2011).


9

The pace of transformation is so slow that employment equity reports over the last few years read

like déjà vu. (Nkomo, Rand Daily Mail - The National Coversation, 2015).

1.1 The South African Wholesale and Retail Sector

Since the early 1990s, South Africa’s economic growth has been driven mainly by the tertiary

sector which includes Wholesale and Retail trade, tourism and communication. Among the key

sectors that contribute to the gross domestic product (GDP) and keep the economic engine

running are manufacturing, retail, financial services, communications, mining, agriculture and

tourism. (Media Club South Africa).

Figure 1: South Africa’s key Sectors: Contribution to GDP growth- 2013. Source: Statistics

South Africa.

Figure 1 above reflects the Gross Domestic Product of the various sectors. The Wholesale and

Retail Sector contributed 12.5% in GDP towards the South African Economy and featured in 3rd

place comparatively to the rest of the sectors. Stats SA also reported total Retail Sales for the

fiscal period 2014 of R707 billion, as illustrated in Figure 2 below.


10

Figure 2: Retail Trade Sales in South Africa: 2014. Source: Stats SA.

From the above statistics it can be deduced that the Wholesale and Retail Sector contributes

significantly to the South African Economy, hence not only is it regarded as a growth sector of the

economy, but a major employer as well.

2. Problem Statement

Transformation in the Wholesale and Retail Sector of South Africa.

South Africa, as a nation, is faced with a complex task of transformation, social cohesion and the

elimination of all forms of unfair discrimination. This task poses serious challenges to various

sectors within the South African Economy. The Wholesale and Retail Sector amongst other issues

is charged with the responsibility to play a critical role in ensuring equitable access to resources,

opportunities and skills.

Transformation at Top Management and Senior Management Level of the Retail sector is slow or

non-existent. More white males continue to dominate management positions in the South African

economy while the appointment of Africans into those positions is still “moving at a snail’s pace”.

(SA Government News Agency, 2015). This brings to the fore a compelling question to be asked,

as to what are the impediments that are cited as the key challenges, issues and barriers within

the Wholesale and Retail Sector from being transformed with equitable representation in both Top

and Senior Management Levels.


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2.1 Objectives and Goals

The objectives and goals of this project are to:

Understand and define the terms Employment Equity and Transformation.

Look at the progress of Transformation in South Africa.

To gather relevant facts, data and statistics from the Commission of Employment Equity

(CEE) reports.

Interview industry leaders to gain their insights, and challenges around transformation.

Identify possible recommendations, solutions and focus areas.

2.2 Research Methodology

Significant research was conducted with a combination of both Quantitative and Qualitative

methods, with the primary research being interviews that were conducted with Captains of

Industry charged with the responsibility to ensure transformation is in place within their

Organizations. The secondary research led us into delving into various research reports, website

publications, books and papers around transformation, including key insights, and learning’s

following our international immersion to New York and Toronto last year.

3. Literature Review

The Previous Chapter dealt with the introduction to the research. The significance of the

Wholesale and Retail Sector was highlighted. The problem statement was mapped out as well at

the objectives of this research. This chapter will focus on the literature review which will include

interviews conducted with individuals within the Wholesale and Retail Industry tasked and

responsible for Transformation within their Organizations.

3.1 Employment Equity


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The purpose of the Employment Equity Act, (EE) No 55 of 1998, is an act of parliament under the

new democratic government which seeks to achieve a diverse workforce, broadly representative

of our people to eliminate unfair discrimination and promotion of economic development and

efficiency in the workforce. (Department of Labour , 1998)

3.2 Transformation

Transformation by definition is marked by change. The government of South Africa’s imperative

is to bring about economic change that can meet the needs of all economic citizens in a

sustainable manner. This can only be achieved if the economy is built on the potential of all people

and communities across the length and breadth of the country. (Department of Labour , 1998).

3.3 The Progress of Transformation in South Africa

The concept of transformation has become a symbol of South Africa in transition. South Africa’s

transformation is driven by socioeconomic and political needs the most important of which are

strategic and moral in nature. The moral perspective is concerned with dismantling the legacy of

apartheid by transforming the basic structure, culture and core values of society and ensuring

equitable access to resources, opportunities and skills. The strategic perspective is concerned

with driving economic growth and eradicating poverty. (Sutherland, 2006)

The Commission for Employment Equity (CEE) was established in terms of section 30 of the

Employment Equity Act and the function of the commissioner is to advise the minister on the Code

of good practice and regulations in terms of sections 54 and 55 respectively which has been

issued by the minister. (Commision for Employment Equity, 2015)

3.4 The Commission for Employment Equity (CEE) Report

The Commission for Employment Equity (EE) provides evidence of the progress of employment

equity in South Africa. In its Annual report the Commission’s report presents a trend analysis of

representation of employees at different occupational levels with reference to the economically

active population of the country as an indicator of progress on affirmative action.


13

The workforce population is based on the Quarterly Labour Force Survey (QLFS), which is

published by Statistics South Africa on the Economically Active Population (EAP). (Commision

for Employment Equity, 2015). According to the Commission for Employment Equity, the EAP

includes people from 15 to 64 years of age who are either employed or unemployed and who are

seeking employment, and the EAP is meant to assist employers during the analysis of their

workforce to the degree of underrepresentation of the designated groups. The report populated

and published by the CCE, is intended to guide employers by assisting then in the setting of their

numerical goals and targets in order to achieve an equitable and representative workforce.

3.4.1 The National (EAP) Economically Active Population

Population Group Male Female Total

African 41.7% 34.6% 76.2%

Coloured 5.7% 4.9% 10.6%

Indian 1.8% 1.0% 2.8%

White 5.8% 4.5% 10.3%

Total 55.0% 45.0% 100.0%

Table 1: National EAP by Population Group and Gender. Source: Statistics South Africa,

(QLFS 3rd Quarter, 2014)

The data reflected on the EAP of South Africa in table 1, is indicative that the African population

group with a total of 76.2%, combination of both male and female far outweighs all other race

groups. The Coloured population group with 10.6% follows the African population group, then the

Whites with 10.3% and Indians with 2.8%.


14

3.4.2 Analysis of Workforce Profile in Top –Senior- Middle and Junior Management

Top

Management

Senior

Management

Middle

Management

Junior

Management

African 13.6% 20.5% 36.7% 58.5%

Coloureds 4.7% 7.2% 9.5% 5.8%

Indians 8.4% 9.9% 9.1% 5.8%

Whites 70.0% 59.3% 41.9% 22.7%

Foreign

Nationals

3.4% 3.1% 2.7% 1.7%

Table 2: Workforce Profile in the Top –Senior- Middle and Junior Management Level by

Race. Source: Commission for Employment Equity Report- CEE15.

According to Table 2, Whites are overrepresented in Top Management and Senior Management

level as they occupy 70% and 59.3% respectively. This equates to almost seven and five times

respectively more that their EAP. Next are Africans occupying 13.6% and 20.5% which is clearly

underrepresented compared to their EAP and Indians at 8.4% and 9.9% respectively. Colored’s

are at 4.7% and 7.2% respectively. (Commision for Employment Equity, 2015).

As reflected in Figure 2 above, the Middle Management level reflects Whites still over-represented

on 41.9% at this level in comparison with their EAP, and Africans on 36.7% gradually making

ground. Indians reflected 9.1% and Colored on 9.5%. The picture in the Junior Management Level

shows a slightly different picture with Africans on 58.5%, which indicates more or less the

representative workforce of the country’s demographics. Whites reflected 22.7% with Indians and

Colored both on 5.8% respectively.

Following the observation made by (Booysen, 2007), whereby it was noted that representation in

the middle management level of employment which was a worrying factor in terms of EE since

the middle management level is considered to be the “feeder” to senior and top management

levels, it is indicative from the data in table 2 that progress in these levels have been made which


15

will in time supplement the Senior Management Level provided the ethical implementation of

transformation takes place.

It has been noted that there has been a steady decrease in the number of black leaders who are

heading 40 of South Africa’s top companies over the past three years with black people

representing just 10% of these CEOs, as contained in the 2015 Jack Hammer Executive Report.

(Skade, 2015). According to Skade, he maintained that while some companies were making

strides in transforming the composition of their executive teams, the new report suggests that the

executive transformation landscape is unlikely to change much over the next 10 to 15 years.

4 Insights from Industry Leaders

One of the research objectives was to gain understanding as to what hinders, support, promote

the impact on transformation within the Wholesale and Retail Industry; hence the need to gain

insights from Captains of industry was imperative.

Each member of our team was tasked to interview a minimum of 5 individuals within the

Wholesale and Retail industries. Our objective was to have a sample of 25 interviews conducted,

however 4 interviewees could not avail themselves thus only 21 individuals was interviewed. The

interviewees were across various positions and levels, ranging from Head of Transformation,

Business Executives, HR Managers and Senior Managers.

A one to one interview process was followed using a structured Interview questionnaire which

contained five themes, and included sub questions. A sample of this questionnaire is found as

Appendix 1.

Theme 1 – Leading role of HR on transformation and planning in the organization.

Theme 2 – Structure and meetings for transformation management.

Theme 3 – Employee /Staff involvement.

Theme 4 – Implementation of transformation.

Theme 5 – General Information.

The interview process was used as an opportunity to gain insights from them on the subject at

hand and to try and establish what the possible barriers could be.


16

A total of only 21 managers across all levels, from Middle Manager up to senior manager level,

availed themselves to be interviewed and their responses were extrapolated, and the feedback

was analyzed. This entailed categorizing the data as per the respective 5 themes and the

responses were assessed in order to ascertain if there were common patterns or similarities. A

summary of the respondent’s views, insights and feedback is captured below in Table 3.

Following the one to one interviews with personnel from the various positions, and across different

retailers, it can it can be deduced that majority of their insights and viewpoints leans towards a

few elements, namely;

Leadership – Change Management

Training

Communication

Culture

Recruitment – Space Creation

Number Comment – Insights – Views

1

Transformation is a business imperative and their organization is working hard at it,

however there is still a lot more to be done to address imbalances.

2 As a Leadership Unit we are obligated to address same, but legacy issues still exist

within the system, even though plans are intact.

3 Communication and being vocal to the entire staff base is key critical and must be more

aggressively pursued across the workforce.

4 Heads of Departments who is responsible and accountable for Transformation got to

lead by example.

5 Efforts in training are in place, but constant follow through must prevail.

6

The committees that are formulation need to be more vocal and push back at

management to accelerate transformation within the Organization.

7 Culture needs to change from the Top, and objectives must be aligned top down and

measured monthly.

8 Leaders must be held accountable and non-achievement of specific EE targets must

impact on annual bonuses.

9

Planning is one thing but sticking to the plan is another. Discipline and Transparency

needs to be at the core of Transformation truths from the Hierarchy.


17

10 Transformation must be an ongoing process and NOT an annual event.

11 Staff at every level needs to be communicated to as to the progress of Transformation

within the Organization.

12 Weighting on the BBBEE scorecard should be amended with more weighting being

placed on EE.

13 Training- up skilling and fast tracking of Black Management must gain speed.

14 Changes in Culture and transformation in the workplace is too slow.

15 Role Coaching – Mentorship and EE candidate recruitment. Space Creation.

16 Equity Targets are not always met due to lack of skill.

17 Our inability to attract black talent with our value proposition.

18 We face budget constraints from an expense point of view

19 Internal EE representatives “weak”- need more training.

20 Filling positions in Junior management levels for the sake of achieving EE numbers.

There is no plan to enhance development of candidate and succession planning.

21 Companies need to look at training their staff as in “investment” rather than an

“expense”

22 Ensure Change management process is followed.

23 Transparency and more aggressive approach on career development with focus on

retention and development of future leadership.

24 Attract, develop and retain good talent.

Table 3: Summary of Insights- Views and Comments from HR Personnel- Source: One to

One Personnel Interviews.

5 Insights from Retailers within the South African Retail Landscape

Our research led us into looking at a few reputable branded retailers, such as:

Pick n Pay

Woolworths

The Foschini Group

Mr. Price

Clicks


18

The primary focus was to examine their current work profile stats specifically on the various levels

of management. A dashboard view of the stats is attached as Appendix YYY, which shows a very

interesting picture. The charts below reveal the composition of the equitable representation of the

work force by race in the various levels of management in across the 4 retailers, Mr. Price, The

Foschini Group (TFG) Woolworths and Clicks.

The illustrations below show the workforce representation in the Top, Senior, Middle and Junior

Management levels across all 4 Retailers. It was noted that all 4 Retailers show huge disparities

with top, senior and middle management as this level is dominated by Whites. The stats below

include females but exclude foreign nationals.

Figure 3: Workforce Profile- Top Management Level- (Mr. Price, TFG, Woollies, Clicks)-

Source: Annual Financial Reports-2014

Mr.Price TFG Woollies Clicks

Whites 289 489 642 345

African 36 81 274 112

Coloured 30 275 474 104

Indian 130 78 163 79

0200400600800

Top Management

Whites

African

Coloured

Indian


Whites 33 9 2 12

African 0 0 2 0

Coloured 1 0 2 1

Indian 1 1 0 4

010203040

Senior Management

Whites

African

Coloured

Indian


19

Figure 4: Workforce Profile- Senior Management Level- (Mr. Price, TFG, Woollies, Clicks)-

Source: Annual Financial Reports-2014.

Figure 5: Workforce Profile- Middle Management Level- (Mr. Price, TFG, Woollies, Clicks)-



Whites 289 489 642 345

African 36 81 274 112

Coloured 30 275 474 104

Indian 130 78 163 79

0

100

200

300

400

500

600

700

Middle Management

Whites

African

Coloured

Indian


20

Figure 6: Workforce Profile- Junior Management Level- (Mr. Price, TFG, Woollies, Clicks)-


It can be concluded that only the Junior Management level shows a well-nourished EAP

representation and it is only at this level that the Whites do not dominate. According to (Booysen,

2007) , the middle management is considered to be the “feeder” to senior and top management,

but the current Middle Management representations of Whites far out weight the other race groups

in these 4 major retailers. The observation raised by Booysen on stats of 2005, has been trending

on the same lines in this level. This shows that transformation is indeed an issue in these retail

chains.

5.1 Pick n Pay – A Compelling Story

Pick n Pay was the only retailer to be recognized for excellence in employment equity in the

private sector and has won top honors at the Department of Labour at the Commission for

Employment Equity’s inaugural Employment Equity Awards, which was presented in October,

2015 at Gallagher Estate. (Cape Messenger, 2015)


Whites 570 506 414 532

African 1520 1247 1293 693

Coloured 669 1218 1080 591

Indian 405 213 252 170

0

200

400

600

800

1000

1200

1400

1600

Junior Management

Whites

African

Coloured

Indian


21

Deputy President, Cyril Ramaphosa recognized Pick n Pay for excelling and advancing the true

spirit of transformation and the Employment Equity Act, by promoting equal opportunity, diversity

and fair treatment in their employment practices. (Cape Messenger, 2015) . This award was

received after an extensive audit by the Department of Labour of all levels of Pick n Pay’s business

that included an analysis of the company’s investment in training and the extent to which

leadership structures allow for employment equity.

The research further examined the approach that Pick n Pay took in order to be successfully along

the Transformation and employment equity domain. Our findings revealed that, their people

strategy carried the ethos of “Empowering Our People”. According to Pick n Pay’s sustainable

living report of 2013, Pick n Pay maintained that empowering their people was an integral part of

how they did business. (Pick n Pay, 2013). Their report also points out that their focus areas on

their people are:

Equity and Empowerment.

Training and Skills Development.

Health and Wellness.

Culture, Values and Commitment.

Employees who are satisfied with their work are less likely to leave, and in an industry where staff

turnover is high, Pick n Pay maintains it is a competitive advantage to be an employer of choice.


22

Figure 3: Pick n Pay: Skilled Work Force and Employment Equity Stats: Source: Pick n Pay

Sustainable Living Report-2013.

It is also noteworthy to mention that Pick n Pay invested a total of 241.9million in training between

2011 and 2013 and this is reflected in Figure 3 above. Top Management was at 40% black (target

of 40% maintained) and Senior Management levels at 61% falling behind by 4% against their

target of 65%. (Pick n Pay, 2013)

Middle Management level far exceeded their target of 70% with an actual achievement of 84%.

This is an exponential growth and it is indicative that a “revolution” in terms of transformation has

begun. The middle management level is a “feeder” into the Senior Management Level and it is

pleasing to see that Pick n Pay as made significant strides herein which gives them the benefit to

leverage of this talent pool in terms of succession planning and transition into the next level.

Junior Management Level reflects and impressive 99% against their target of 80%. Clearly for an

Organization that’s ranked in 2nd position amongst the big 5 retailers, have “sparked” a massive

wave of change to achieve such plausible numbers.

Pick n Pay’s strategy to promote from within and fast track external candidates from designated

group have enabled them to make a significant progress on their Transformation Agenda. Pick n

Pay also maintains that diversity drives innovation, respect and a learning culture, and as a large

employer in South Africa, they are fully committed to transformation and they will continue to

galvanize their EE and Transformation Objectives. Their core belief was that Diversity drives

responsibility and a learning culture.

5.1.1 Key Insights from Pick n Pay’s Transformation Strategy

Pick n Pay’s transformation strategy was underpinned with a clear transformation management

structure which was aligned to their key focus areas, namely:

Equity and Empowerment.

Training and skills development.

Health and Wellness.

Employment Equity Forums was formed.

Diversity Management Training program was implemented.


23

The 7 elements of the BBBEE Scorecard formed part of their Senior Managements Key

Performance Indicators. (KPI).

On the backdrop of the success story of Pick n Pay, attached as Appendix-B is a dashboard view

of the workforce profile following our research on Mr. Price, The Foschini Group, Woolworths and

Clicks at the end of this research document. It is discerning to note that the Top and Senior

Management is dominated by Whites, and the similar picture features in the Middle Management

Level. A “swell” in the junior management level is noted.

Pick n Pay have seemed to have a winning formula and a recipe for success, and with their

compelling story, the other Organizations can draw insight from their strategy and can leapfrog

by shifting the needle on transformation.

5.2 Nedbank Turnaround – The Tom Boardman Story (Case Study)

An Organization that had a good case study on Transformation within the finance sector was the

Nedbank turnaround strategy. Tom Boardman took office at Nedbank as the CEO in the late 2003.

As part of his journey amongst other issues, Tom saw Transformation not just as a numbers

game, where it looks like it’s all about employment equity targets and black economic

empowerment. (Boardman, 2004)

Boardman (2004) maintained that the “checklist mindset can diminish the socio-economic

actualities of what transformation is really about”. Transformation is about human rights, equality,

justice and dignity. At the height of Tom’s journey towards transformation, he together with his

Executive team developed and communicated 10 point Nedbank’s Transformation truths.

5.2.1 Nedbank’s Transformation truths.

It is the right thing to do Transformation

is a business and moral imperative.

Transformation will have short‐term cost

with long- term benefit.

Transformation affects every single area

of our business

Transformation targets will be embedded

in our strategies and business plans

through on-going consultation.


24

It is the responsibility of every person to

make it happen.

We will pro‐actively grow and develop our

own talent pool.

Trust and transparency is required.

Everyone should be heard

We will focus strongly on the support and

empowerment of blacks, with particular

emphasis on Africans, all women and all

people with disabilities.

Transformation at Nedbank must be

unifying, fair and transparent.

Transformation is non‐negotiable.

Table 4: Nedbank’s Transformation truths. Source: The Tom Boardman Story

Nedbank had crystal clear objectives driven and led by the CEO of the company, and as such

have made huge strides in their transformation evolution.

5.3 Nedbank’s Success Story

Nedbank has made great progress inception in 2006, with a level 2 BBBEE status having been

maintained since 2009 for the fifth consecutive year as can be seen from Figure 4 below.


25

Figure 4: Nedbank’s BBBEE Score Performance -2006 to 2013. Source: Nedbank’s

Transformation Report.

Further to this their representations in Senior Management levels in 2012 was at 33%, and moved

up by 2% to 35% in 2013. Middle Management levels for the same period were at 54% and 56%

respectively. Junior Management levels were reported at an astonishing 81% in 2012 and 84% in

2013. (Nedbank Group Limited, 2013). It is also indicative that Nedbank’s strategy is amplifying

their talent pipeline which gives impetus to their workforce profile. Nedbank was also the recipient

of a few prestigious in line with their progress made with transformation. These awards were:

The BBQ Transformation Award of the year-2013 for promoting sustainable black

business through the recognition of leadership and achievement.

The Transformation Champion of the Year-2013- The award reflects Nedbank’s Level 2

Broad-Based Black Economic Empowerment status as the most transformed company on

the JSE.

Nedbank wins Sunday Times Top 100 Companies award - Nedbank was declared the

winner of the 2013 Sunday Times Top 100 Company Corporate Social Investment (CSI).

6. Key Insights from International Immersion

The Transformers as part of our International Immersion visited Toronto, we attended a session

facilitated by Trevor Wilson who is the Author and Global Human Equity Strategist for his

Organization, TWI Inc. since 1995. During his workshop on Human Equity, key focus areas such

as diversity, inclusion and human equity surfaced, underpinned with the concept of the Equity

Continuum. (Wilson, The Human Equity Advantage, 2013). The Equity Continuum consists of

various levels, ranging from 0 to 5. As per figure 5 below, each level depicted where an

Organization was in terms of being an Inclusive and Equitable Organization.


26

Figure 5: The Equity Continuum- Source: Trevor Wilson. Diversity at Work: The Business

Case for Equity (Toronto: John Wiley & Sons Canada, Ltd., 1996).

(Wilson, The Evolution of the Equity Continuum, 2013) Rated Organizations on each level as

follows:

Level – 0: Denial. Organizations at Level 0 are those who have “not” changed and their

Leaders believe they are at level 5. These Organizations are in a state of bliss and denial

about any issues related to being inclusive and equitable.

Level – 1: Compliance. Level 1 Organization seeks compliance as a way to meet its legal

or other obligations and thus avoid the negative consequences on noncompliance. Level

1 Organizations generally stop if the laws or legislations fall away.

Level -2: Moving Beyond Compliance. These Organizations believe in the value of going

beyond compliance. These Organizations aims to support various disadvantaged groups.

Level -3: The Business Case. These Organizations understands that diversity initiatives

can impact on desirable bottom line outcomes such as efficiency, retention of best talent

and improved employment engagement.

Level -4: Integrated. These are Organizations that have evolved beyond diversity into a

relatively new area called Inclusion. They focus on creating a work environment where

each person is recognized and developed.


27

Level -5: Inclusive and Equitable Organizations. These are Organizations that focus on

the gifts and unique abilities of each individual. These Organizations practice talent

differentiation through a diversity lens. They practice human equity by maximizing on all

the intangible assets that bring people to the world of work.

(Wilson, The Human Equity Advantage, 2013) Maintained, that Organizations who moved from

level 0 to 1 used legislations as a vehicle to do so. The move to level 2 was through Corporate

Social Responsibility, and then Diversity resulted in a move to level 3, and an inclusive culture

transitioned into level 4. Once an organization reaches level 4 they use their human equity to

move to level 5.

Looking at the two success stories of transformed companies in South Africa, both Pick n Pay

and Nedbank focused on being an inclusive and equitable organization, underpinned with

elements of diversity, training and development, empowered staff force, transparency, moving

beyond compliance and ultimately striving to be an employer of choice which resonates with the

Equity Continuum framework.

7. Findings

The research has led into establishing the following:

The Wholesale and Retail Sector is a key sector towards the economic engine of our

Country. Sales reported for fiscal year 2014 amounted to 707 billion. This sector is also

seen as a major sector for employment, furthermore the Wholesale and Retail Sector is

least transformed.

Employment Equity is clearly an enabler and a “vehicle” for transformation.

The rate of Transformation in South Africa and specifically in the Wholesale and Retail

sector is slow as can be seen from the Commission for Employment Equity Statistics.

White men dominate the Top and Senior Management Levels. This was revealed amongst

4 major retailers in this research. (Mr. Price, The Foschini Group, Woolworths and Clicks.)


28

Interviews conducted with Capitan’s of industries shares insights that Leadership, Training

and Development, Communication, Culture and Recruitment are key elements to be

focused on in order to accelerate transformation within the sector.

Success stories from Pick n Pay and Nedbank backed up with stats proves that

transformation is possible and it is the right thing to do. The success stories of both these

organizations cements the fact that leadership, culture and commitment with open and

transparent communication is the recipe for success with a total fixation of staff training

and empowerment.

Despite all the pieces of legislations set out by the South African Government since 1994,

transformation in Retail Organization has not yielded the desired rate of success. On the backdrop

of the success stories in Pick n Pay as well as Nedbank, it was evidenced through the research

that their leaders effected change and lead from the front. There was total buy in and clear

objectives set and action enabled from their level all the way down to the “ground”. The outcomes

of their visionary leadership built culture and have been underscored with great success.

It can be summarized following the interviews conducted with Captains of industries and research

that some of the key barriers on transformation are:

Ethical Leadership.

Training, Development, Mentorship.

Organization Culture.

Change Management Process.

(Kotter, 1995) , maintain transformation failures to eight errors and communicates the opposite

for each of these errors as a model to guide successful transformation and refer to it as “Eight

steps to transforming your organization”.


29

Transformation failures to eight errors Eight steps to transforming your

organization

Not establishing a great sense of

urgency.

Establish a sense of urgency.

Not creating a powerful enough

guiding coalition.

Create a guiding coalition.

Lacking vision. Develop a vision and strategy.

Under communicating the vision by a

factor of ten.

Communicate the change vision

Not removing obstacles to the new

vision.

Empowering employees for broad

base action

Not systematically planning for and

creating short-term wins.

Generating short term wins

Declaring the victory too soon, and, Consolidating wins and producing

more change.

Not anchoring changes in the

corporation’s culture.

Anchoring new approaches in the

culture.

Table 5: Kotter’s 8 step Change Model – Source: Harvard Business Review- Why

Transformation Efforts fail.

8. Recommendations

In view of the findings, we recommend that Leadership step up to the call for transformation which

is a business and a moral imperative. Leaders of the Wholesale and Retail sector need to emulate

the actions of the leaders from Pick n Pay and Nedbank. We list the following 3 Key areas with

the identified pillars being (a) Ethical Leadership, (b) Legislation and (c) Training and

Development as high priority recommendation with detail below.


30

a. Ethical Leadership

Transformation is NOT just a numbers game. The “checklist” mindset can diminish the

socio-economic actualities of what transformation is really about.

“The culture of an organization or any group of individual is a reflection of the values,

beliefs and behaviors of leaders of the group”. – Richard Barrett.

Ethical Leadership requires a personnel journey toward Integrity and public

commitment to a common good.

There must be punitive measure put in place whereby CEO of Industries is penalized

with non-remuneration of bonuses if the Employment Equity is not implemented

effectively and delivery on targeted levels.

Develop a documented communication strategy that will be a used as a medium to

communicate progress on Transformation within the Organization.

b. Legislation

The Sector needs a Transformation Charter to be implemented and published.

The Commission for Employment Equity MUST become a permanent “body” so that

Ownership, Accountability and Urgency prevails.

Employee Equity targets should be set by the Department of Labour for designated

Employers using their workforce as a measure relative to the EAP of the Country

opposed to Companies setting their own EE targets. This will put more urgency and

commitment on Leaders. The annual CEE reports, when released will perhaps NO

longer be déjà vu.

Non achievement of EE targets must attract hefty fines in ratio to annual turnover.

Ethical Leadership

LegistlationTraining and Development


31

Department of Labour must govern reporting method where employers must reveal

their EE targets versus Actuals achieved. Where targets NOT achieved, there must

be an explanation of a mitigation and remedial plan. (Name and Shame Leaders).

The Department of Labour must NOT be a “toothless” body; the time has come to be

ruthless on Designated Employers.

c. Training and Development

Appropriate mentorship and job shadowing interventions MUST be “alive” in business

with accountability placed on HR Executive Management which must form part of

his/her KPI.

Succession planning and career path must form part of every employee with the aim

to up skill and build capacity for employees of previously disadvantaged groups.

Department of Labour representatives should visit place of work at least every quarter

and test to check if applicable training interventions are in place to accelerate the pace

of transformation.

On the premise of the above recommendations, leadership needs to have a paradigm shift and

break away from the legacy issues of the past. This can only be done through ensuring effective

change management transpires emanating from them and cascaded throughout the organization.


32

In order to ignite and appropriate change management process, the adapted Change

Management Framework, of Oakland and Tanner is used to contextualize this. The change

management framework has two interacting cycles, initiated by external change, such as

legislation, and BBBEE scorecard etc. as the change driver. “Readiness for Change” as the first

cycle corresponds with Kotter’s model and prescribes the “need for change” as the first step to

focus the respective stakeholders for desired change. Clear and consistent “Leadership and

Direction” turns the need into expectations, followed by “Planning” to focus people’s minds on the

strategic objective. The organizational “Process” links the first cycle and “Implementing Change”

as the second cycle. Processes drive the way the “Organization and Resources” work (the

structure, roles, competencies and resources deployed. Ongoing performance measures and

collaboration then supports the organizations “Systems and Controls”. This is where the

“Behaviour” comes in where all the elements of the Organizational change framework drives

“behavior”. (Culture- Ownership- Ethical Leadership). Returning to “Process” closes the “figure of

8”. (The 8-Step Change Model – John Kotter)

On the premise of the adapted Oakland and Tanner’s Change Management model below,

management and leadership of organization should use this change management framework as

a guide to adopt the change process, as the need for change on transformation is mission critical

and must be pursued with urgency.


33

Fig. 6 Adapted change model framework: source Oakland & Tanners Change Management


34

9. Conclusion

This research has shown that despite all the pieces of legislations set out by the South African

Government since 1994, transformation in Retail Organizations has not yet yielded the desired

rate of success. The representation in Top and Senior Management levels is not in line with the

Economically Active Population (EAP). Whites dominate these levels, and the current statistics of

a few major retailers show that their middle management level which is considered to be the

“feeder” into top and senior management levels is also poorly represented by the Country’s EAP.

This research proposes that Leaders of organization need to take charge and emulate the leaders

of Pick n Pay and Nedbank as their leadership and change management strategy showed efficacy

in transformation, thereby yielding successful results and been recognized for with prestigious

awards for embracing employment equity.

The research further proposes that Leaders need to adopt a changed management process which

is guided by an adapted change management framework as a frame of reference which will

enable leaders to inculcate an inclusive and equitable organization, underpinned with elements

of ethical leadership, diversity, training and development empowered staff force, transparency,

and a culture of doing the “right thing” and moving beyond compliance thereby being an agent

and ensuring ethical leadership is a personal journey towards Integrity and public commitment to

a common good.


35

APPENDIX -A

A-1 Mr Price

Figure A-1: MR Price Work Profile on Occupational Levels. Source: MR Price Annual-

Report -2014

A-2 The Foschini Group

Figure A- 2: The Foschini Group Work Profile on Occupational Levels. Source: TFG

Annual Report -2014.


36

A-3Woolworths

Figure A- 3: Woolworths Work Profile on Occupational Levels. Source: Woolworths

Annual Report -2014.

A-4 Clicks

Figure A-4: Clicks Work Profile on Occupational Levels. Source: Clicks Annual Report -

2014.


37

A5 - Pick n Pay

Figure A-5: Pick n Pay’s Work Profile on Occupational Levels- 5 Year Review. Source:

Pick n Pay Annual Report -2014.


38

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