The drugstore/pharmacy market worldwide is a tough environment. The same products are sold in different chain stores, therefore there’s not much room for differentiation. The most important decision making criteria for consumers is price. That’s the situation in Germany and that’s the situation in most other nations worldwide.
Now imagine a drugstore chain with the slogan “Here I am a human being, here I will buy”. The leaders of this drugstore chain advocate that one of the most important goals is to help the people working for it to develop themselves as human beings. It would even allow employees to choose their bosses and have a say in their salaries.
It sounds too strange to be true, but true it is. It’s the way one of Europe’s most successful drugstore chains works and made its founder a billionaire. dm (which is an abbreviation for the German word Drogeriemarkt which means drugstore) has more than 2000 stores in 9 European countries with more than 30,000 employees and more than 5 billion Euros of annual revenues. dm works because of its founder, Götz Werner, an anthroposophist, a professor for entrepreneurship who has no university degree and who is now one of the most famous advocates of a revolutionary social idea: the unconditional basic income. (We'll look into this in more detail in a future blog.)
Too innovative to work for others
Götz Werner was born in 1944 as part of the third generation of a family of chemists. He perceived his school time as a nightmare. He dropped out after middle school and started to work for a drugstore company. In the late 1960s the price-fixing law in Germany was lifted and drugstores were allowed to decide their own prices. Mr. Werner suggested to his employer that he introduce the discounter principle (selling large quantities of only a limited number of products, displayed in a simple way with simple packaging to offer lower prices) and turn the drugstore into a kind of supermarket also selling cosmetics and toiletries. His ideas seemed to be way too radical for his employer and was rejected. Consequently in 1973, at 29 years of age, Werner quit and founded his own drugstore company which he named dm.
Each store is responsible for its assortment of goods
In the early years he implemented his discounter idea offering low prices with competent staff attending to customers. In terms of leadership and structure dm was not different from other companies. That started to change when Werner became familiar with the works of the anthroposophist philosopher Rudolf Steiner. (Note: Many of the N&I Partners have made sure their children experienced educational methods in their early years inspired by Steiner) The anthroposophist worldview is one that puts the human being and its development in its center and claims that humans are by nature good and have the desire to grow spiritually and mentally. Today this philosophy is also reflected in the Waldorf schools around the world. In the early 1990s, responding to Steiner’s thinking, Werner started to reorganize, restructure and rename the way dm functions.
One small incident created a break-through in Werner’s thinking and started the changes. In the early 1990s he was on a control visit in one of his stores. Putting his hands on one of the sales counters containing expensive cosmetics the counter slid open and he realized that the lock was broken. The store manager told him that a number of goods had been stolen because of the broken counter and that she had informed the area manager responsible for her store twice to send somebody to fix it, which had not happened yet. This made Werner realize how a hierarchical organization with complex chains of communication and decision making can seriously affect the effectiveness of its operations. Instead of fixing it herself the store manager had to appeal to the people in the hierarchy above her to take care of a simple task like fixing the lock for the counter.
Ever since then things started to change radically. Werner gave all the direct responsibility and decision making power to the individual stores. After all, people in the stores know best what the situation requires and what the customers need. At the same time he stripped headquarters of a lot of its power giving the traditional managers in headquarters a very hard time. Now at dm, each store is responsible for the assortment of goods sold. Employees in the store decide on their work schedules and how to organize their time, they even elect their superiors and partly have a say in their salaries. Changes and improvements are implemented without involving or even asking headquarters. Werner’s goal was to create a spirit of empowerment and initiative. Through this, the satisfaction of both employees and customers would increase, as well as productivity. And that was what happened. Instead of controlling and supervising his people Werner empowered and supported them. The unique dm culture is one of the open secrets for the success and popularity of the drugstore chain.
Working without rules, fear or pressure
Werner really implemented the anthroposophist worldview into dm’s culture and his own leadership style. There are no company rules and regulations. While there are recommendations for how to do things, in the end employees decide on their own. Werner believes that people thrive in an environment without fear and pressure, an environment based on the principles of trust, mutual respect and creativity in which people can develop their personality. After all, the sole purpose of an economy according to Werner is the human being. The task of a company is to create meaning. The purpose of a company is to create a platform where people can develop themselves. Growth and profit are a precondition, however, not a goal or purpose. Profit is of course required for this to be sustainable. However, the task of a leader in a business is to create an environment where people can view their workplace as meaningful and not just as a place of income. Leaders should not operate using pressure but by creating pull. (What we call “future pull” in our Srategic Thinking training program) Leaders are effective when they energize a meaningful vision that others are willing to follow. Werner strongly believes that knowing human beings is the key for commercial success.
In practice this means that dm employees talk as peers with each other. A newly hired apprentice is not treated differently than a member of the board of directors. There are no individual bonuses because bonuses create egotists working on their own instead of working in a team.
Also there are no discounts on products at dm or special sales periods when goods are offered cheaper. Prices are always the same. Discounts, according to Werner’s view, would direct the customer away from their original buying intention.
dm has also received various awards for its trainee program. Actually trainees are not called trainees but learnees because they learn on their own motivation. During their learnee-time there are two theater projects of eight days each where the learnees work with professional actors and directors to perform a play. During this theater project a variety of skills such as team skills, communication skills, empathy, the ability to deal with conflicts, as well as the ability to be flexible and act appropriately to the context are learned. These skills are vitally important for the business dm is in and the theater project has proven to be a good way to help learnees acquire these skills.
We’re curious about your reaction to this story. Share your thoughts in the comments section below. Is Götz Werner showing stubbornness? Vision? Tenacity? Arrogance? Is there something that he is doing that might be useful to your organization?
Let us know what you think. There is more to this story. We’ll share it in an upcoming blog post.