5 Requirements for improving employee performance for store growth
From the headlines coming out of the NRF Big Show, it was difficult to tell if retail stores were "running scared" of ecommerce, or very optimistic about their future. The holiday sales results indicate that online "kicked butt". However, the NRF keynote speakers heavily focused on how stores can compete by "doing what Amazon can't" … offering personalized consumer experience. But, the real elephant in the room for bricks and mortar retailers is the ability to improve people performance, and the strategic will to invest to do so.
Differentiate or Die … Stores should be winning on People Power
It seems like a hyperbole to state the obvious: Omni-channel is the new normal. What used to work as differentiators for big box retailers are now the winning formula for ever growing ecommerce giants like Amazon. Consider the growing competitive advantages of online:
- Breadth of assortment … Online stocks millions of SKUs not thousands
- In stock … Online can be in stock on more items vs. your local store
- Lowest price … Online wins almost all of the time on price
- Convenience … You can shop in your pajamas 24/5/365
- Returns … Pre-printed return form so you can return from your home
This year's keynote speakers at the NRF Show (National Retail Federation Show) emphasized a consistent theme: retail stores can provide consumers with a personalized experience that online retailers can't. The BIG IF, is whether retailers will invest in "People Power" as a strategic differentiator, or treat labor as a cost center to be contained.
Real world challenges of running retail stores
If you take the time to review a retailer's annual report, there is a line item labeled SG&A, which stands for Sales, General and Administrative costs, or operating expenses. One of the largest components of store SG&A is the cost of labor. In watching SG&A for stores over the last five years, there has been an overall rise in store operating costs as a % of revenue.
It is no surprise that retail CFOs are focused on containing and reducing operating costs, especially labor. In the US retail stores have been using a variety of tactics to reduce the cost of labor required to run big box stores:
- Eliminating commission sales people
- Hiring more part-time staff to reduce higher costs for full time employees
- Reducing the number of Associates on the floor
- Reducing training time off the floor, or eliminating it entirely
In short, retail stores have been highly focused on treating people as a "cost center", rather than a strategic asset that can be deployed as strategic asset to grow sales and profits.
Old habits die hard - Most retailers lack both strategy and competencies
A lot of retailers are clinging to their product centric past of competing on products and price. Many retail stores simply don't seem to grasp that "People Power" is no longer optional … it is now a requirement to survive in the new normal.
I've often said that retail stores could realize an immediate 25% gain in sales if they would go out and hire waitresses from the better restaurants nearby. Almost all waitresses are paid a significant portion of their salary in tips earned from providing great customer experience. Trouble is, waitresses wouldn't go work in retail stores at their salaries … it would mean a huge pay cut!
But, what if retailers really focused on people? In some recent store research we've been finding that the top Associates in a store outsell the bottom performers 3X. If stores could improve everyone to just 50% of the top performers, store sales could grow more than 30%!
The real question for the future success and growth of the retail store is whether they have the competencies to improve people and their performance? Measureable results in people improvement has NOT been a core competency demonstrated by most big box retailers.
5 Critical Requirements for Improving People Performance
My training was in behavioral psychology. If there was one thing I learned in grad school, it is how incredibly hard it is to change behavior in ways that it "sticks" or maintains. By the time we are young adults, most behavior has become ingrained as "habits". Research indicates that it takes at least 90 days, multiple training/rehearsal sessions, and continued reinforcement to change habits.
Yet, in an effort to reduce labor and related costs, most retailers have moved training off of the sales floor. If there is a training "class", it is often limited to a couple of sessions before the store opens. In fact, a lot of training has become an "Associate Responsibility" of completing classes online, individually, often on their own time.
IF retailers do invest to differentiate and harvest the "Power of People", there are at least 5 critical success factors which drive measurable results and ROI:
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Talent
Some people simply have the innate talent to be better at some things than others. It is extremely expensive, and practically impossible to train everyone from "ground zero". If the strategic differentiator for the store of the future requires personalized experience, retailers need to develop a talent hiring profile for that. Apple's results show why there are very good reasons to "hire for smiles".
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Behavioral Standards
Is a good personal customer greeting mean saying "Hi, can I help you?" … or is the standard need to be much higher. Associates need to know what "good" is in behavioral terms. To create a superior experience, they need to know and experience what great behaviors look and feel like with actual customers.
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Real Skills Training
If the real strategic differentiator for stores will be "customer experience", Associates need to do more than hear about it, or learn about it. They, themselves, must be engaged in training based on interactive experience. Just as Associates must learn new behaviors, they must be able to visualize and FEEL what the experience differentiators are like for the customer.
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Coaching & Feedback
This is the most difficult and overlooked area by retail stores. Most will claim that "we can't expect store managers to be coaches or trainers". In the rush for cost containment, managers have become detached "store operators". But, what is the ultimate goal of a store manager? To produce and grow sales. In the store of the future, the store manager is the customer experience manager! Retailers must invest in training to develop store managers as coaches. Training can develop behaviors … coaching creates excellence, which multiplies results many times over.
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Performance Standards
The old adage is still true: "what can be measured can be managed … and improved". The most important metrics for the retail store of the future are conversion rate and market basket attach. These have to be measured at the ticket and Associate level. More importantly each Associate AND Manager needs these KPIs on a performance scorecard with feedback on how to improve.
Superior customer experience will differentiate the retail store of the future from the death spiral of competing on low price. Quality customer experience doesn't just happen, it has to be created. "People Power" that makes a difference is a conscious strategy that will require investment. Those that invest will realize measurable result gains and ROI.
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Sources:
- Freedigitalphotos.net: Photostock and Franky242
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