· 8 min read · Features

HMV's Master

Published:

Times are tough at the UK's biggest entertainment retailer, but its group HR director Steve West tells Sian Harrington he is confident HMV will whistle a happy tune.

 

In an episode of Chester-based soap opera, Hollyoaks, last month, one of the characters was given a music voucher for his 13th birthday. His forlorn response? "Who goes into music shops any more?"

Had directors at HMV watched this episode, it is likely their reaction would have been one of disappointment, but resignation. For the UK's biggest entertainment retailer has become increasingly accustomed to negative media comments in recent months. There was 'The nightmare before Christmas' at news that HMV's - profitable - flagship Oxford Street store in London was to close, following an unsolicited £15 million approach from US fashion firm, Forever 21. Then there was last month's 'HMV shuts 60 shops in battle to survive', when, in the wake of "grisly" Christmas trading (according to one City analyst), the company announced plans to close 60 stores, across both its eponymous music and Waterstone's book chains.

Such headlines follow a year of press speculation about the group, which, in addition to HMV and Waterstone's, runs the specialist music chain Fopp and owns some iconic live-music venues, such as Hammersmith Apollo, the Jazz Cafe and Heaven. In the past 12 months, HMV has, according to reports, been in the firing-line with investors, had trouble meeting bank loans, put up with Waterstone's founder Tim Waterstone eying up the book business (again), blamed the World Cup for a slump in sales and, like many other high-street retailers which announced Christmas trading figures last month, said it was all the fault of snow.

The media have been cruel to HMV. One could be forgiven for thinking the whole group was about to keel over - a belief that will not only worry those core customers who still love the brand but also, of course, its 14,000 employees.

So is it inevitable, as one punter commented on an online forum in January, that the £1.5 billion group will go bust? Well, the retailer has been here many times before. In fact, the challenges it faces are not much different to those it has faced since the launch of online behemoth Amazon in 1995. In truth, although HMV seems to have had one foot in the grave for more than a decade, it possesses an uncanny knack of reincarnation, coming back to life with alarming frequency.

While describing that analogy as a "bit grim", the person at the centre of handling sensitive store closures, employee communication and motivation, group HR director Steve West, agrees that many of the threats the company is facing have been around for a long time.

"The agenda since 1999 was about how we could become the last man standing, which we successfully did," he says. "Today, the three main threats are still basically the same ones as were there in at the end of the 1990s."

These threats play in both the core HMV music business and in Waterstone's. They are: competition from the supermarkets, which often sell items at a loss to drive traffic; the online specialists, in particular Amazon and Play.com; and the move of HMV's core formats into digital.

While the threats may stay the same, the pace of change has quickened in the past couple of years.

"The supermarkets have gained ground and entertainment has moved up their priority list. It is now not only music, but also games and DVDs, a big market for them. They are unlikely to move away from this," explains West.

"Meanwhile, the slow transfer from physical to digital has built up pace and on a couple of titles last year we saw a very significant transfer to digital. This is not going away and we are all very conscious of that."

For any weaker management, this range of challenges would have seemed insurmountable. But West, a veteran of HMV, having started on its undergraduate scheme 25 years ago, is sanguine.

"One of the attractions of the business, but also one of the pressures, is that you are constantly trying to reinvent yourself - hopefully in a strategic way," he says. "There is a sense that in the past five years or so we have kind of defied gravity. We have to reinvent in terms of what we are selling in stores and how we operate, in order to counterbalance these threats. It's a hard agenda."

This reinvention now includes management changes and the sale of 60 stores - likely to be about 40 HMV stores and 20 Waterstone's.

"Obviously, it wasn't a nice decision for us to have to take, but our recent trading, which was compounded by the adverse weather conditions around Christmas - a critical time for any entertainment retailer - meant we had to make a bold decision to support the growth of our company going forward. The fact that quite a few of the stores that will come under review are likely to be relatively close to each other - mainly in large conurbations - means that we can look at redeploying as many staff as is possible, and, of course, we'll do our very best to help and support any work colleagues who will be affected by the decision," West says.

He concedes that some mistakes were made in the past, particularly at Waterstone's. "We drifted away from core customers and were perhaps focusing too much on the chain rather than relevance to local markets. We have extraordinary expertise in stores and it's about leveraging that expertise. Our managers have the autonomy to buy books that will appeal locally," he explains.

However, West is confident the group is right to pursue its broader strategy of evolving into an entertainment hub, giving customers the widest possible access to discover and consume music and entertainment content the way they want to - via the high street, online, digitally and the live experience. As part of this strategy, the company acquired live music group Mama last year.

In HMV stores, the focus is on three new strands: the fast-growing technology category; fashion; and confectionery/soft drinks. For a company that has a history of long service and promoting talent from within, this has meant a search outside for some specialist skills. But, says West, HMV still believes in developing internal talent.

"Head office has a high percentage of internally developed people, but that has changed in recent years to reflect our move into different categories and the fact we change all the time. But we have brought in these people without losing the internal people who can run our core business. All our store managers and our regional and divisional managers have grown up within the business. We believe that no-one is better out there in doing what we do, so let's develop our people. We are constantly communicating what we are doing and trying to update people's skills."

HMV has long had a strong focus on learning and development (L&D). Staff can access tools both instore and, increasingly, thanks to the internet, at home. In recent years, the company has reconsidered its approach to L&D, including how it inducts employees, everyday skills and senior management training. It has designed and developed an online programme called Nipperpedia (after its famous trademark, the Nipper dog - the one listening to 'His Master's Voice') that outlines the skills required, from when an employee first joins the firm up to the senior management programme. It incorporates 360-degree feedback, which some 350 store managers go through each year; the company is launching a second version shortly. A similar framework, albeit with elements specific to the chain, is now launching in Waterstone's.

While career opportunities are well communicated, the recent negative speculation means employee engagement and motivation is even more vital. Despite a slight dip in engagement levels in the core HMV chain in 2010, the company's survey shows staff engagement remains above the retail norm of 70%. Meanwhile, following the implementation of a new vision, feel and brand in Waterstone's in spring last year (the new values being, 'in love, in touch, in tune and in front'), engagement scores have risen there.

As well as a performance bonus structure that rewards when the business is doing well, the group has introduced a number of schemes to reward in harder times. Its pledge pack explains what colleagues can expect in terms of benefits and includes everything from the maternity policy to a 'sprog box' complete with children's toys and nappies.

"This is important to me, as I don't think everyone does this well," says West. "It is the board's pledge to colleagues and has some nice little touches. Slowly, the pledges are becoming bigger and we add deals from suppliers, such as new technology."

The company runs the Nippers, a quarterly reward scheme where head office or regional staff are nominated, based on how they have supported the company's values in relation to the customer or community. Corporate social responsibility has also risen up the agenda and is used as an engagement tool. The group is shortly to end its tie-up with children's cancer charity Clic Sargent (it will announce a new partner in April), but hopes to have hit the million pound mark in donations by then. Store colleagues have raised most of this through initiatives such as football tournaments, fancy dress in-store and sponsored events in the local community.

As well as encouraging teamwork and engagement, the CSR agenda is linked to HMV's customer service model. This model shows how service is aligned with the group's vision and values.

"We give training so that colleagues can recognise when customers need help and can have that initial conversation. It has some neuro-linguistic programming touches, open-question routes and how to close the sale in a relaxed, natural way. We linked the green agenda to it and have a scorecard, with the best stores/regions winning prizes, such as going to festivals in Barcelona or Chicago. To win, you have to demonstrate conversion in sales, do well in the mystery shop and raise money for Clic Sargent," explains West.

The role of HR has changed greatly since West joined HMV.

"We had a competent HR department before, but it was a bit functional and sedentary. When Simon Fox (group CEO) came in, we built the HR agenda around the new vision. Today the HR team is absolutely in line with that strategic agenda," he says.

Two years ago, the group introduced 'Ask HR', an online or phone helpdesk, to cut down on the HR field teams. There is still field support, but many general questions can be answered through the system. HMV also has a management development centre in Nottingham and eight regional training centres.

"Managing directors don't care about the Ask HR stuff, that is about taking things away from their agenda. They are interested in retaining key people and attracting key people into the business," says West.

The group has two operating boards, one each from HMV and Waterstone's. West sits on both boards, as does the marketing director. West speaks daily both to Fox and to Waterstone's MD, Dominic Myers. "I bring commerciality to HR and am comfortable talking through P&L and finance related to company performance," says West, when asked what Fox and Myers want from their HRD.

"Both have good radars for people initiatives. Simon, in particular, has a great understanding and affinity with what I am doing. It doesn't mean he doesn't challenge me, but he believes in the people agenda strongly."

The company has an HR scorecard, with senior management looking for understanding about the ability of people to deliver the demanding plans the group has in place. For West, this has meant much work in succession planning and making sure that the people resource matches the strategic agenda.

"It is hard, as this business moves so quickly and is very challenging. We have had nine different board-level appointments recently," says West. "It does sometimes feel like the cupboard is bare and it takes time to re-stock."

Despite his demanding role, West has joined the CBI employment committee and is keen that the profession has a voice. He believes HR is seen as a more commercial function in retail than before, but says that HR professionals themselves often make things too complex.

"The fundamentals in HR are quite straightforward - the vast majority of it is service and delivering service. There is some complexity in senior management and it is not an easy job, but we can overcomplicate things. HR managers and directors can put layers and barriers into a business. I go the other way and do my very best to remove these."

HMV's executive team will be pleased to hear that. With the potential for disengagement and disruption that comes with change, West's safe pair of hands is exactly what is needed at the moment.

"I would never say we have business as usual, but HMV has always been about management transformation and trying to mirror the ways customers want to purchase entertainment," he says.

True, these ways have changed beyond recognition in the past decade and perhaps HMV has been too slow in implementing that transformation. But to the blogger who reponded to the group's Christmas trading statement by saying that shops such as HMV were "going to go the way of the village blacksmith", it is worth remembering that it has always delivered an annual profit (and will do so this financial year) and is a cash-generative business. Oh, and 85% of album purchases in the UK are still via CD.

CV
Born: Reading
Educated: Salford University, BA Hons English
1985: Joined HMV on graduate programme.
Various store and regional manager positions
2001: Head of learning and development
2006: HR director - HMV UK and Ireland
2009: HMV group HR director