Back to Basics

After years of empire building, Ahold learns the importance of focus.

The Shakeout

But there is still work to do. In addition to significant investments to revamp stores across its transatlantic portfolio, Ahold pledged in 2006 to cut costs at its corporate centre by 50% by the end of this year and slash overall operating costs by €500m by the end of 2009. For Ross, the key to achieving these savings is “focus,” a word she uses often and in a wide range of contexts, to explain the company’s direction.

The corporate-centre shakeout is ahead of schedule, with costs falling from €189m in 2005 to €106m last year. Given that the bulk of the savings come from the functions under Ross’s control, she is particularly pleased with the progress.

Ahold’s accounting scandal, the switch to IFRS and compliance with Sarbanes-Oxley — because of a secondary listing in New York — all helped to increase staff numbers at its headquarters, as well as its audit, legal and consultancy bills. In pruning mode, Ross has trimmed group-level headcount, streamlined processes and introduced new ways of working that, she hopes, will prevent the bloat from returning.

Delisting from New York last year will save compliance costs and reduce complexity, while divestments have already narrowed the scope of Ahold’s audit — the company spent €20m on audit and related fees in 2005, but only €8m last year. What’s more, notes Ross, “we showed every consultant the door.” In addition to “reducing the number of PowerPoint slides significantly,” she jokes, “we are pushing the organisation from being data-driven to information-driven.” Too often, she recalls, “you would ask a question and get a pile of data in return to sift through to find the answer.” Now, Ross and other senior executives are “big fans of the one-pager” for project proposals and the like, she says. “It eliminates a lot of work and simplifies things. It forces people to focus on the point they’re trying to make.”

It also represents an important cultural shift at the company. With fewer staff, the CFO says, it is critical for those that remain to be able to summarise, synthesise and act on information quickly. To bolster the skills of its finance staff, for example, the company now sends employees from the operating companies on two or three week secondments in Amsterdam and other group locations to participate in quarterly and annual closing cycles, attend audit committee meetings, analyst calls and investor meetings. This is doubly beneficial, as the head office gets additional support during busy periods, while the teams from the field gain a better understanding of the key issues for the group as a whole. In a similar vein, group-level staff are also sent on short assignments to assist with projects at the operating companies. “The lines of communication between the centre and the operations are much more open than before,” Ross says.

Special Offer

A visit to any Albert Heijn store shows that it’s not just the head office that’s changed. Often neglected during Ahold’s empire-building days, Albert Heijn has been the biggest beneficiary of the company’s new orientation.

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