Dayton Hudson Learns Issues Management Lessons from Merchandising (1992)
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Dayton Hudson Learns Issues Management Lessons from Merchandising (1992)

In the retail world, where public rela­tions has traditionally taken a back­seat to merchandising and market­ing, Dayton Hudson Corporation is an exception, a company where the PR department has earned a seat at the policy-making table.

Paul Holmes

 

In the retail world, where public rela­tions has traditionally taken a back­seat to merchandising and market­ing, Dayton Hudson Corporation is an exception, a company where the PR department has earned a seat at the policy-making table and a public rela­tions issues management plan sits alongside the corporate strategic plan in the CEO's desk.

Although Dayton Hudson, the fourth-largest retailer in the country, is less well-known than its larger competitors Wal-Mart, Sears and K-Mart (partly, at least, because its stores operate under their own names: Dayton, Hudson, Target, Mervyn's, Marshall Fields) it has probably placed more emphasis on strategic public relations than any of them, and maybe one of the few companies in the world that owes its survival to effective public relations.

To a certain extent, circumstances have elevated PR to its present posi­tion of influence at the Minneapolis based corporation. In the past 10 years, the company has sold off several sub­sidiaries, streamlined its corporate staff, fought off a hostile takeover bid, and been embroiled in controversy over its corporate philanthropy pro­gram, events that thrust the company into the limelight.

All of that presented an opportu­nity for public relations to demonstrate its value, and Ann Barkelew, who joined the company in 1982 and is now Dayton Hudson's vice-president of public relations, was able to seize that opportunity.

Barkelew came to Dayton Hudson from Munsingswear, after a career that included several years as an English and journalism teacher and ten years as the chief public relations officer for the Los Angeles Office of Education, a job that gave her a first

taste of crisis man­agement during a series of bitter labor disputes.

"Public rela­tions was then a nice-to-have kind of function," she says. "When I came on board, public relations was called cor­porate communications. Investor rela­tions was handled by the finance department, employee communica­tions was handled through the person­nel department. My initial reaction was that I had not worked for 15 years in public relations to get to this point, but the company was willing to listen, to give me a chance to prove that PR could be more important than a com­munications function."

Indeed, Dayton Hudson had always been a company that placed a high priority on the good relationship

it enjoyed with its local community—having maintained its commitment to donating 5% of profits to philanthropic causes since 1946—as well as with employees and customers, and even shareholders (with 12 out of 14 mem­bers from outside the company, Dayton Hudson's board was an out­standing example of independence before it became fashionable) but the PR process was not formally estab­lished in corporate planning.

"I have worked to make public relations equal in influence to law and finance and human resources," Barkelew says. And to a large extent she has succeeded: "We're more plugged into business strategy now. If the CEO comes into your office every day and bounces ideas off you, I think that kind of access is almost more important than where your box is on the table of organization."

One of Barkelew's first tasks was to close a store in Detroit. It became clear at that point, she says, that the company needed to consider the public relations implications of such deci­sions very carefully, to plan for them, because "it seemed as if every reporter I talked to had seen their first Santa Claus in that store."

Since the company was restruc­turing—looking to acquire businesses in some arenas, while selling them (it shed John Brown in Oklahoma and Diamond's in Arizona shortly after Barkelew's arrival, and B. Dalton in 1986) in others—Barkelew decided it would be prudent to develop a formal process for identifying the issues with which the PR department would be forced to deal. Interestingly, she turned for inspiration to Dayton Hudson's core competence: merchandising.

"We are known in the retail busi­ness community as one of the leaders in what is called trend marketing," Barkelew says. "That's a way of doing business based on the belief that to meet the constantly changing needs of customers we need to know what is becoming more or less impor­tant to customer, if possible even before they do."

Barkelew cites the example of the body suit, which Dayton Hudson's trend marketing pro­cess first picked up three years ago, with the result that the store was carrying the merchan­dise for a full season before most of its competitors picked up on it, or this year the trend towards clothing with hoods, and vests for women.

The merchandising depart­ment tracks every trend it spots along a trend curve. The first phase involves testing: buying a little mer­chandise and selling it through a hand­ful of stores. Many trends die in this first phase, but if the merchandise sells, the second phase is known as "incoming" and heralds the arrival of the product in all of the company's stores. The third phase is "pre-peak" which is timed to occur just when other stores are picking up on the trend and buying up the product. "Post­peak," the fourth phase, occurs when the merchandise is widely available from other retailers, and is followed by a final phase, "outgoing."

An unusually close relationship to the customer is what makes the system work so well, Barkelew says. "Buyers for our juniors division visit college campuses and high schools. They watch MTV and Beverly Hills 90210. They read the same magazines their customers are reading, they know what their attitudes and tastes are."

Barkelew says the company tries to look at other areas of its business from a similar perspective, so that in human resources the trend manage­ment process tracks issues such as sexual harassment or empowerment, while public relations examines trends such as cause marketing and corporate governance.

One of the trends that Barkelew spotted several years ago involved the increasing use of video news releases. The technique was tested, and the PR department found that while getting the CEO on television was relatively simple, it did not stimulate business at the company's stores, because cus­tomers were much more interested in what was happening in their local mar­kets. Dayton Hudson had pretty much discarded the VNR before most com­panies discovered it.

"Another trend we picked up early was the change in our share­holder mix," Barkelew says. "Today we are 80% held by institutions. So this year our annual report followed a question and answer format in which our CEO answered the questions we had most frequently heard the analysts and institutions asking."

One of the keys to the success of the trend management system in PR is its extraordinary comprehensiveness.

As of three weeks ago, the issues under review by Barkelew's depart­ment included: business ethics, corpo­rate credibility, the problems of big­ness, disclosure, cultural diversity, cause-marketing, the impact of special interest groups, store security (after a shooting incident in a car park in California), theft prevention (and the concern that people of color were being singled-out and followed by store detectives), union organizing activity, product safety, anti-business attitudes in the media, the advantages of print advertising versus television, the pros and cons of carrying Madonna's book Sex (the company decided not to), health care reform, mergers and acquisitions, trade issues (particularly whether stores might be carrying merchandise made by slave labor in China) and the impact of the recession in California.

"We always have a standby state­ment prepared on really important issues," says Barkelew. "[Chairman and CEO] Kenneth Macke has position papers on many issues in question and answer formats, and my standby file is full of papers on even the most eso­teric issues. We are responsible for identifying the issues we believe will become more important, and making sure these issues are brought to the attention of management."

All the more impressive is that fact that Barkelew handles this work­load with a corporate staff of just five professionals, although she gets out­side assistance from Kekst & Co., working closely with the firm's svp, Larry Rand; coun­selor Patrick Jackson at New Hampshire's Jackson Jackson & Wagner; and Padilla Speer Beardsley, in particular cre­ative guru David Speer.

One of the first issues Barkelew decided to spend time familiarizing herself with was the role of PR in takeovers, although she approached the subject primarily because she expected Dayton Hudson to be acquir­ing, rather than to become the target of a hostile bid itself. Nevertheless, what she learned stood her and the company in good stead in 1987 when reputed greenmailers Herbert Haft and his son Robert began to accumulate the com­pany’s stock. The battle waged for four months from June to October and Barkelew coordinated and managed all communication activities – internal and external – as well as serving on the CEO’s strategy team.

“When our investment bankers confirmed what was happening, the CEO brought together his key advisors, the CFO, general counsel, human resources, public relations and various outside counsel, and we looked at all the options," Barkelew recalls. "Paying them off, looking for a white knights, an LBO. We didn't like any of them, and so we decided to fight."

The one advantage the company had was that it was incorporated in Minnesota, and so Macke decided that Dayton Hudson would try to persuade the state to change its takeover laws to prevent potential buyers from borrow­ing against the assets of a company in order to acquire it—a technique which amounted to selling the company even before they had bought it. Macke had to call the state's governor at home and persuade him to call a special ses­sion of the state legislature, which he did.

"We prepared background mate­rials on the impact of a takeover on Minnesota," Barkelew says. "We employed 22,000 people in the state, and we did an enormous amount of business with local vendors. We had always made enormous contributions to local causes. We even conducted research in the state which showed that 85% of people favored a special ses­sion of the legislature."

(Interestingly, the number one reason people gave for supporting Dayton Hudson in its time of trouble was not the company's philanthropic largesse, as management expected, but rather its liberal returns policy.)

"The community really came for­ward. Our employees and customers wrote thousands of letters. Local groups we had worked with, from the Urban League to the symphony, voiced their support. The whole state mobilized. We had an advertising campaign prepared featuring our popu­lar Santa Bear character, with the cap­tion `Who Gets Custody?' but we never needed to run it."

The bill passed by an overwhelm­ing majority.

Less life threatening, but in some ways more emotionally wrenching, was the difficulty the company found itself in last year over a grant to Planned Parenthood. The company's Foundation, which operated more or less independently, had for 22 years been a contributor to the group's edu­cation efforts in Minnesota, but in 1991 an executive there decided to dis­continue the funding. Barkelew received a call from a friend at the charity before she read about the deci­sion in an internal memo, and realized there would be trouble, despite the fact that the company had a clearly articu­lated reason for its decision.

"We believed the environment had changed, and Planned Parenthood was perceived to be a national advo­cate for abortion rights, a political organization rather than a charity. That's a very per­sonal issue, and we did not think it was appropriate for us to take a position on an issue that our employees and customers were so clearly divided on." 

Unfortunately, the company apparently did not understand that denying the grant amounted to taking sides just as clearly as making it would have, particularly since the decision became public in the midst of a statewide election that was focused almost entirely on the abortion issue. The Mayor of Minnesota's wife cut up her store credit card on television, and thousands of other women did the same in the privacy of their own homes and sent the cards back to Dayton Hudson.

"We were not in charge," Barkelew says now. "We tried to make the point that we gave more than $900,000 to women's issues, but no­ one was interested. The issue had become one of perceived entitlement to corporate philanthropy."

The company approached Planned Parenthood and persuaded the organization to submit a proposal for a new plan, ensuring that the money donated by Dayton Hudson would not be used for abortions, but would go to a program aimed at preventing teen pregnancy through education.

Dayton Hudson also provided question and answer cards for store managers so they could answer questions from employees and customers and produced massive quantities of in store brochures that explained the company's corporate giving policies and repeated the message that while Dayton Hudson was a large company it took a small town approach to giving.

Another consequence of the crisis was that the company formed a PR coordinating committee, which Barkelew heads and which brings together senior PR people from the operating divisions, corporate head­quarters and the Foundation, public affairs and investor relations, along with the vice-chairman to whom Barkelew reports, to discuss reputa­tional issues.

The Planned Parenthood crisis is not the only controversy the company has faced in recent years. In 1988, Target stores were boycotted by Infact, the anti-nuclear activist group, because they carried General Electric lighting products exclusively. The chain received more than 16,000 letters from customers and a year later 90% of stores stocked at least two additional brands. And in 1989, the Mervyn's chain was targeted by a group called Project Equality after the company refused to sign a pledge committing itself to disclosure on minority hiring programs.

All in all, however, the com­pany's record is exemplary, resulting in the 1989 Council on Economic Priorities America's Corporate Conscience Award, and a host of awards related to its philanthropic and social activities from organizations such as New Management magazine, Harvard University and Columbia Business School, and these issues have only succeeded in elevating the con­sideration given to PR

"The challenge for issues man­agers is to take our knowledge of the issues that the organization will face," Barkelew says, "and our understand­ing of how people think and behave, and combine those two things to help the company plot a course that will assist it in achieving its goals."

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