by Phil Turnbull and Tim Robinson
In his first book on management Peter Drucker advocated putting decision-making as close to the customer as possible. While we have seen technology drive us away from this in the intervening period, that technology has now caught up and local decisions based on meaningful, timely data are very much driving best in class companies‘ performance.
Retail is, they say, a simple business – but it’s made complex by the variety of communities served and the variety of locations from which that service is delivered. Digital commerce has all-but removed sustainable unjustified differentials, and more than ever performance must be managed at multiple levels against locally-relevant objectives.
Local Support in a Franchise Model
One of the most successful and impressive models we have worked with (and an exemplar for several later clients and projects) was driving world-class performance in a small format franchise business. The franchisees were clearly motivated, and while they were required to comply with certain (quite strict) criteria in terms of core range, store standards, etc. after that they were largely free to trade their stores. What made the model stand out for us (a number of years ago) was the field support teams who had great information at a very granular level on what was working in other stores – from range, to service, to product placement.
The field support teams would spend time with the owners of each store to discuss the information objectively – working with them to select what they thought would work, then driving results from the changes. The field support teams were responsible for the performance of the stores they supported.
Moving this model into a context which is not franchise-specific, recent research by Aberdeen Group shows that best in class companies are significantly more likely (78% vs 64%) to agree goals between managers and employees, and 50% more likely (45% vs 29%) to hold managers accountable for development of their teams.
Perhaps the success of this franchise model foreshadowed recent performance management trends,putting accountability and good information in place to support local decisions.
Even now, one of the common challenges in managing store (and store staff) performance is understanding what drives customer advocacy, sales and profit – and making sure more of that gets done. And when we say „understanding“ we mean understanding the measurable impact on these metrics – e.g. „Stores with this characteristic are driving 5% more sales and 4% less markdowns than the average of their peer group“.
In the store, for a true self-service sale, it’s largely a matter of focusing on product, price, POS, V/M, adjacencies and availability. Zara’s focus on product, and the involvement of stores in that process is well known, as is their strategy on sell-through. But for many there’s a significant opportunity from improving availability – does the business understand the effects of availability on sales for different products, does it also understand the effect of overstocking stores which drives down full-season availability and achieved margin – and does it take action to drive performance based upon this information?
In an assisted-sale environment the availability of advice has a dramatic effect on conversion rates. For example, does the business know how long it takes for the conversion rate to half if good quality support is not available when required? The answer’s a lot less time than many probably think.
And how effectively are key sales resources deployed on customer-facing activities or coaching vs administration? The answer we often see is that they’re spending much less time on these tasks than they should be, and they could be spending twice as much time as they are – generally driving sales improvements of >10%.
Training vs Only Managing
It was working with the cosmetics sales department of one of the major department stores that first brought into clear focus the other challenge we’d like to touch on.
Not everyone who works on the retail sales floor is comfortable selling, many of them don’t know how to do it (well), and the link between selling and compensation is not always clear.
The power of the last part was brought home to us very clearly recently when discussing non-price-based promotions with a retailer. Under tough trading conditions, and anxious to preserve brand price position and integrity, this brand retailer was able to drive sales increases equal to those that would be achieved with 40-50% markdowns, without price-perception issues, and at a lower impact to sales and profit.
But the power of the first part was evident when we deconstructed the cosmetics sales process of a major department store, got all the staff comfortable with each step, and coached them through the implementation – less stress, more engagement, and increased sales. It really was that simple. And while this is unlikely to improve the effectiveness of the best sales floor staff it does greatly improve the average, increasing sales and customer satisfaction.
Employee Performance Management Systems
The biggest challenge to all this, of course, is two-fold: moving the performance of a large, varied portfolio and team where the priorities and detailed targets will be different for each store (which tends to mean we only focus at the extremes); and sustainability. Pilots are one thing, but sustained performance over a varied estate over numbers of years has to be the goal.
Which is where the latest Employee Performance Management Systems come in – using coaching techniques from sports, combined with analysis of sales and customer advocacy drivers (and correlation to financial performance), helping managers and staff to identify and agree action plans locally, and then holding them accountable – with clear, timely performance feedback – moving away (as many are now doing) from complex „compliance-focused“ static scorecards, driving significant improvements in sales and customer satisfaction – and an understanding of the critical question – „why?“
Results? Without the right framework, approach, and disciplines – very limited (just as it would be with any other technology investment). But with these in place we’re seeing the spread of performance on key metrics across the estate halved in 6-12 months – and if the spread between the top quartile and the bottom is 10% that’s worth having – and then there are „halo“ and employee morale effects – both of which are positive.
Having been engaged in retail performance management now for more than two decades, we believe there has never been a more exciting or critical time for this area. As models for multi-/omni-channel become established, and economies move back towards growth (and, even if they don’t, leading companies will increasingly do so) – the role of the store, and performance management, will be among the top three objectives of a high number of retailers.
Phil Turnbull and Tim Robinson