Matt Margereson, Hotel Chocolat COO, on navigating uncertain times with confidence

Rowena Morris:

Hi everyone and welcome to this episode of our Business in Focus podcast. I am Rowena Morris, a director at PwC and I am your host for this episode. Very few of us could have predicted the turmoil and uncertainty we’ve experienced over the past year. This has had a huge impact on how we approach risk, in both our personal as well as professional lives. At PwC we’ve been thinking a lot about what that means for business, government, and society. In this episode, we are going to be discussing the risks that has helped to shape UK organisations, and how leaders are looking at them differently now compared to before the pandemic.

We’re also going to be sharing practical advice to help you manage the business risks you are currently facing as well as help you plan for the future.

I am delighted to be joined in our virtual studio today by Matt Margereson chief operating officer at Hotel Chocolat.

Hi Matt, how are you doing today?

Matt Margereson:

Hi Rowena, nice to meet you, nice to be joining the call today and talking about such an impactful event that will hopefully advantage us all for the future.

Rowena:

Great to have you here. I am very happy, also to be joined by Richard Bailes. Richard is PwC UK’s national leader of governance, risk and compliance. Hi Richard, how are you?

Richard Bailes:

Hi Rowena, very good to join you, thanks for having me.

Rowena:

Matt if we start with you, clearly the past year has been extremely challenging for businesses, and we’ve heard so many stories on this podcast from leaders about how they have adapted to the rapidly changing risk landscape. We will be interested to hear your perspective on how the pandemic impacted Hotel Chocolat’s approach to expansion and growth?

Matt:

As you rightly said, it has been an intriguing rollercoaster for the last 12 to 15 months. The headlines for us have been that a pre-existing plan for growth and expansion globally has really been accelerated. Culturally, we apart from the incident management as we would see it in terms of the way that we responded and reacted, which I am sure we will come onto later. Other than the techniques, what we actually saw was our vertically integrated business model really advantaged us in terms of agility, in terms of how do we service our customer demand on a much more agile short-term accessible basis. What I mean by that was, any decisions that we made were probably in the medium to long term horizon, we just had to expedite much more quickly.

The benefit that we have got is because we make the majority of our products, most of the accessibility is through our own channels, and through some of our strategic wholesale partnerships, it just meant that we are able to react. Instead of a really long internal supply chain, we are quite agile, we hold the inventory, we manage the service ourselves.

We did two things, one was an immediate response where channels were closed, where bricks and mortar retail had to shut, we were able to shift all of the stock and resourcing into online supply, but also it just meant that some of our roadmaps for expansion have just been accelerated. In crude terms, we made a virtue of the fact that we had to move faster and in a different direction.

Rowena:

Really interesting to hear about that dual track approach. Moving to Richard, as we progress through the pandemic, how can business leaders pivot from that crisis management that Matt was talking about, to start to look for opportunities to grow.

Richard:

Firstly, I would say that we are obviously certainly not through the pandemic as you point out. It may still have some significant twists and turns. Firstly, before looking at upside opportunity, ensuring that lessons learned, and continuous improvement is existing in the organisation is very important. This has obviously brought the issue of continuity much closer to the CEO’s attention, for example. Understand what worked well and what didn’t, and make sure the resilience of the organisation is either intact or in fact improved.

In the discussions I have with many different clients and many different sectors, one of the things that’s come to me is that there is almost like a stage gate that organisations have either moved through at different paces really. Clearly there was a react phase, which meant that most were getting to grips with the situation and ensuring they could operate at an acceptable level. Incessant cashflow modelling, checking in with people on a daily basis, and I am sure that resonates with most people listening to this.

Moving into some more of a stabilised phase was the next element that I see out there.

This is more about taking control of the new risks that exist, and taking a more proactive stance, and ensuring long-term liquidity. In many ways, these two phases are, as you quite rightly described, they lend themselves to sort of a crisis management behaviour. This is done for the right reasons, and I am sure Matt will attest to, in terms of keeping operationally moving forward, there is a need for agility and incessant focus.

I am generally pleasantly surprised that how I hear organisations have survived and have been resilient. I would refer to actually Matt’s colleague and founder of Hotel Chocolat, Angus, who once said to me in a risk discussion that we have discovered that when we want to and we have to, we can, which I thought, was a really lovely way of coining the situation. Generally, what I find is, people have found a way to adapt.

Just thinking then to your question about upside opportunity, many are moving and are at the stage or have started moving through more of a rebound and thrive type of phasing, and that lends itself to some organic and inorganic opportunities. Firstly, on inorganic growth, I’ve heard some great stories of how organisations have fundamentally changed their operating model or channel to market. An example that springs to mind is a distillery business, which immediately switched to pure ethanol production as an ingredient to hand sanitiser. For me that had a double whammy, of being agile and doing the right thing, but also keeping production going as it was deemed a critical production plan by the government. Organic growth has been heavily publicised how many businesses are finding that successfully working remotely, and this is somewhat becoming a permanent status quo or indeed a remote working system.

The benefit of this enhanced flexibility is starting to feed through to the bottom line for many organisations, but in the way it’s useful to looking at these four phases of react, stabilise, rebound, thrive, its possibly useful to pause, validate where organisations are on this spectrum, and adapt a bit more specifically to it. For example, this might allow organisations to move into more of a growth mindset, so daily operational hurdles get replaced by strategic planning events, etc. Each company will evolve at their own pace.

Rowena:

Some great insights there, and Matt we would be keen to have your perspective here too around how it has made you think differently about risk?

Matt:

I am not sure that it has actually made us think differently about risk, but what it has got, is certainly everybody’s attention, in terms of, we’ve got quite a dynamic culture. We’ve built our position as affordable luxury. Again, that’s about how do we improve accessibility without becoming ubiquitous, is the challenge. The interesting thing in terms of the way we think about risk, is we’ve practiced an awful lot in the last 5, 6, or 7 years in terms of crisis management and incident management. Just the connectivity, the behaviour, the escalation, and again it just sounds really mundane, but the desktop exercise, the scenarios, and obviously nobody could have predicted the pandemic or the impact, and ongoing impact. As Richard rightly said, we mustn’t be complacent in terms of the next phases to work through, but I do think culturally, if you can think about opportunity and agility, and also in the same context, what are the areas of protection or the risk, and whether that’s an allowable or acceptable risk, it has consolidated our senior management culture. It stops this pendulum swing that you can achieve in a number of businesses, which is go, go, go, and then consolidate, or slow, slow, slow. It creates a much more balanced conversation. That’s probably the thing that changes that more expansively in terms of the stakeholders, when we are considering opportunities and risks. That diversity of thinking and impact is really important.

Coming back to Richard’s point, our brand centre team within Hotel Chocolat have been absolutely essential in this. They are the people, who are talking to our customers, day in day out, correcting things, changing things, making substitutions, because in hindsight it's really easy to say that, good and forward thinking businesses have navigated through and made opportunity of it, but we mustn’t forget that not all the results have been right. I do think that that continuous improvement approach has been really useful, and that it sometimes given people within the business, specific managers or specialist areas, more of a voice in terms of an impact that may not be a business priority as such.

To give some context to that, clearly, we wanted to maintain supply, we’ve got duty of care to our team. We wanted to make sure that we could continue trading, but once we’ve got through that robustness part of the phase, then it was the, where is the opportunity, where is the pent-up demand going to come from. We had a really wide stakeholder group in terms of those incident management teams, and the frequency was fast and very frequent. What we have managed to do is, inflect between the burning platform of dealing with the impacts, to now our strategic plans that were maybe 3, 5 or 10 years out into the future. We are able to compress some of those timeframes, just because of the straightforwardness of the conversation, if I am honest with you, Rowena. There is no preciousness around the opportunity, and the risk, and the speed of which we are able to execute now.

Rowena:

I really agree with all of that and it really resonates. We’ve had a number of different podcasts, where we’ve explored how this might have changed leadership styles. Working through the pandemic and definitely themes coming through that, you’ve just talked about, around that growth mindset, and around proper teaming. Not just in the senior leadership teams too, but from an operational perspective, people are thinking much more broadly about how does what I am doing connecting and create more value with other departments. Really interesting hearing your take on that. Richard, wondering if you might want to just touch on how risk might have transformed the way that you lead, or the conversations that you are having with your clients around how they are approaching leadership?

Richard:

I would say that, first and foremost, PwC as an organisation is very much a people business. I know everyone says that their organisations are people business, we are very much about people, both in our employees and our clients. One thing I would say that is, a common theme. I hosted a group of risk leaders in the technology sector recently. One of the pervasive themes coming from this type of question, in terms of the interaction levels, was a real concern around the health physically and mentally of their teams. I’ve never heard it come through so significantly and that is obviously paramount to delivering results. From the PwC perspective, in terms of leadership from a personal perspective, we can only deliver our results and our purpose indeed if that is intact. To exist purposefully, we are essentially rightly compelled as leaders, as partners, to demonstrate care and communicate with empathy. In many ways, we’ve talked about the acceleration of operating models, I like the way Matt describes, realising, for example, I know over in the US, Matt, ecommerce becoming much more of a channel as a result of the pandemic, there was an acceleration that applied, but in many ways in the leadership and the people side of things, there is much more humanity, without sounding to profound in the interactions. Quite often I find that staring at the screen 12 to 15 hours a day is never a helpful thing for anyone. Telling people to switch off, simple things like having, in my team, sometimes we’ve designated walk meetings, where the camera is switched off, we walk, we exercise. I also see that humanity with clients as well, actually.

Just a scenario I had this week actually, I had a pitch date with a very important client for next week, and I actually felt comfortable enough asking for a deferral to the following week. It was a very formalised competitive tender. The reason was, because I am off to see my mum next week, who I haven’t seen for 18 months. I was quite anxious making this call, but interestingly the conversation with the client was that they were off also, and this was actually very helpful, and it developed the relationship further.

From a leadership perspective, what I think, what I hope landed was, the team saw that interaction as a very private life first sense, and so it is these simple things. I feel that it’s a very humane series of risks that our clients are facing in their leadership journey as well. I do think that there is a sense of, probably there is a likelihood of a much greater attrition in people once they are released from lockdown and people come up for air, essentially. A lot of organisations should be looking at how the wellbeing pulse is in their organisation.

Rowena:

I love that story about the client, with you visiting your mum that really resonates. Matt, have you got anything else that you would want to share around leadership styles and how they have evolved over the last year or so?

Matt:

I think you made some really good points there, Richard. It’s really interesting, reflecting on how we have navigated our way through. It is testimony to our culture, because we are, you would support Richard, we’re very, can do, very driven, but what has helped us do, is there are two really clear messages within the business, and that is focussing on what we would regard as a Hotel Chocolat household. Being completely agnostic to channel, whereas historically a lot of multi or omnichannel businesses still have to have vertical structures in order to deliver it. Genuinely, are our customers getting the product that they want with as little friction as possible.

We’re an ideas engine anyway, so it allows us to pull things off the hypothetical shelf, so getting them to market quicker, but the other thing is doing the right thing. We’ve always had a very strong culture in terms of genuine recognition, not an employer branding type of recognition, but just doing the right thing for people. That equality has existed in terms of, we are not hierarchical, we’ve had a broad range of people working on the navigation through the last 12 to 15 months. That just permeated through into the day to day. I just think, not that any permission was required, but I just think it further instilled that, do the right thing for your team. Yes, there are policies and frameworks, and yes of course we need to have fair and equal treatment, but also, we all need to be treated as individuals. That, more often than not is just encouragement to ask, or the permission to ask, as you rightly said, Richard, is a pretty basic thing, but in a day-to-day business, it can just get in the way. It just becomes a perception that doesn’t really exist. It's “I need to take some time out, I need to do something”, and that’s fine, and it's allowable. Any decent line manager, leader, or whatever can appreciate that. I just think, we have to look at the positives that come out of this, how do we change the future for the better. All I can say is, it has just distilled down our culture even further, whether that’s at senior level or through the teams.

Back to your point, Rowena, it’s really interesting, because operationally our team and most of the teams I interact with are really good problem solvers. I can see the issue as opposed to necessarily see where the opportunity is. This balance between driving for the opportunity, driving for the gap or the growth, in balance with where is the risk and how do you mitigate it, is compatible, and that’s what this is doing. It is giving much more operational voice in terms of, there are some things that are really clunky or may not work very well within the business or to the customer, what are we going to do about it. Whereas in the past, lots of operational people made great microcosm workarounds. What this has done is, has given permission of, well let’s just talk about this stuff. It’s either going to be material or it won’t be, and we will either work on it or we won’t, but at least it’s done transparently. I genuinely think that that’s permeated through, because people want to add value, more value.

Long may it continue in a loose framework for Hotel Chocolat, because it has definitely brought out the best in our culture and in our performance, there is no question.

Rowena:

That’s really good to hear and I thought like you’ve given a lot of really good tips and pieces of advice within that. I am just wondering, Matt, as we need to wrap up, if you had one piece of advice that you would give to leaders to help them to navigate the current risk landscape, what would it be? Then Richard I will come to you next.

Matt:

I am happy you left the easy one to the last, Rowena. I would say, don’t expect to have all the answers. It is really easy to fall into a trap when you have a business continuity or risk responsibility, by the fact that you are a leader or you have some form of responsibility that you feel the need to have a lot of the answers. My personal take out through the impacts from the pandemic have been, nothing could be further from the truth. Yes, you have to put in the drive, and the framework and the engagement, but what you also need to do is actively listen. You need to take on board this diversity of views and opinions to really distil down into an action plan.

The takeout is, have good people around you, who are transparent, don’t hold back, will give you their view and their opinion in an objective way, and I just think, just encourage that. The speed of response is not necessarily about acting quickly, it’s thinking quickly, that just means giving people time to pull their view into some kind of shape as opposed to finger clicking, because we need to make some decisions.

It’s more a case of actually are they rigorous, have we preempted the next step. Almost, there is no preciousness, there is no stupid inputs, that’s the part that I’ve really taken out of the last 12 to 15 months, it’s worth the airtime, make a good decision, and then execute it well.

Rowena:

I really liked that, and ultimately that’s going to bring you the competitive advantage, so why would you not invest that time and encourage people to feel empowered to make that big a difference across the organisation.

Matt:

The challenge in that is going to be, when you’ve got the burning platform, you have no choice, how do you maintain that moving forward without burning people out, is going to be the challenge. Back to Richard’s point, how do you soften it, but you still take the competitive advantage from this transparency, and speed of thought.

Rowena:

Ultimately, my reflection on the conversation is around how do you capture this way of working for the long term and make it sustainable. Maybe, Richard, you have a top piece of advice to end the podcast on, maybe to answer that question.

Richard:

Matt touches on a lot of great points there. There is a lot of fatigue out there. The endless people interactions on the screen will have taken its toll. Don’t forget the engagement and wellbeing of your people would be my recommendation. Also, I’ve been on a number of organisations, but PwC has, in my view, a very good way of painting the strategy, the vision, etc. Not every organisation has enough time and focus to paint a clear vision once they have come through this, and that’s what encourages well is, ultimately your people want a clear vision from you, and they want to be inspired more than ever.

Rowena:

Really good piece of advice. Thank you very much both, that’s it, for another episode of Business in Focus.

Thank you both very much for joining us, I really think it was a fascinating conversation.

Of course, thanks to everyone for listening too. If this conversation has got you thinking about how you can rethink risk, visit our website at pwc.co.uk/rethinkrisk. There, you can find our research into public perspectives on risk as well as a wealth of other insights and stories to inspire you.

Finally, don’t forget to subscribe to keep up to date with all of our future episodes, thanks everyone and stay safe.

Participants

• Rowena Morris
• Matt Margereson
• Richard Bailes