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As any retailer will attest, a store is only as good as its manager. But many supermarket operators are missing the mark when it comes to measuring the performance of their stores and, more importantly, their store managers, according to an in-depth study of industry practices from the Coca-Cola Retailing Research Council of North America (CCRRC).
Most retailers have traditionally looked at pure financials to determine which stores are most successful. But that's not enough in today's market, concludes the council, which is made up of some of the industry's best retailers. Factors such as store format and size, and breadth of competition, need to be figured into the equation.
Most important of all is the role of the store manager, but many facets of that role are being overlooked or downplayed as upper management spends too much time on processes and systems revolving around reporting cold performance measures.
In the study, "Getting to Great: Mapping Management Practices that Drive Great Performance," the council sheds light on the damage being done in stores by well-intentioned corporate strategies that are strangling store manager initiative. Few upper managers have a real sense of what determines true customer and employee loyalty at the store level, the study finds. By considering a larger picture, the council theorizes, supermarket operators will be more effective at assessing their stores and their managers.
After surveying more than 11,000 individuals, including store managers, department managers, front-line associates, and even customers, the council came up with key best practices that can help retail companies of any size manage their store managers better.
A different yardstick
To begin analyzing the components of great store performance, the CCRRC enlisted the help of Salt Lake City-based FranklinCovey Co. The researchers first conducted an 18-month financial analysis of 115 stores to identify the "great-performing" stores as measured by that yardstick. But they expanded the scope beyond typically used benchmarks. In addition to looking solely at financials, they compared each store's performance to its "market potential."
In a nutshell, market potential takes into account the many factors that retailers can't exert control over at store level, such as how many people live within three miles of the store, whether the store is located on a main road, and which competitors are in the area. The major factors to be considered in determining market potential are site strength, store-specific factors (size, format, store age, etc.), customer potential, and competitive intensity.
Comparing stores' financial results with their market potential turned out to be so useful that the council recommends companies incorporate the measure. Otherwise chains may be assuming that the biggest profits automatically translate to the best performance. In fact, the council found that some "high financial results" stores actually underachieve relative to market potential, while some stores that ranked medium or low by the numbers overachieve relative to market potential.
From this initial analysis, FranklinCovey and the CCRRC selected a subset of 30 stores, surveyed 4,432 of the stores' customers to determine factors related to loyalty, and talked to more than 1,700 employees to assess the extent of their loyalty. This stage of the research revealed some intriguing characteristics of what makes a "great" store in the eyes of both customers and employees.
Customers of great-performing stores talked about helpful and friendly employees. They also talked about the things that result from a store having employees who care: cleanliness, no waiting, and items found in stock on the shelf, to name a few. In fact, intensely loyal customers were rarely found in stores that didn't have strongly committed employees.
Store management, meanwhile, seemed to be aware of the importance of customer loyalty, but few had reliable data with which to measure the success of their efforts, according to the study.
To that end, the CCRRC measured the intensity of customer loyalty using four key shopping behaviors, as identified by Boston-based Bain & Co. Those behavior measures are high repurchase rates, high referral rates, a propensity to expand the basket, and a willingness to invest some of their time (as in participating in surveys, etc.), ostensibly to help the store succeed.
As the researchers were collecting data on employee loyalty, they observed palpable differences in the levels of enthusiasm, commitment, and engagement store employees and department managers exhibited. The "high-loyalty" stores were almost twice as likely to have supportive cultures that foster open communication and creative dialogue. In these cultures, employees know that their efforts contribute to the success of their team and store, and that their contributions are recognized and rewarded.
The disparity in employee experiences showed up clearly during interviews. For instance, one manager at a high-loyalty store said, "Treat people well, the way you want to be treated. I depend on the 67 people on my staff, so why would I want to make them miserable?" In contrast, a store employee at a low-loyalty store complained, "Managers spend too much time telling us what to do, instead of helping us out and achieving the goals. They are on a power trip a lot of the time!"
After determining each store's levels of customer and employee loyalty, the researchers were better able to identify the truly great-performing stores. These stores stood out by every measure: They had high financial performance, extremely high sales relative to market potential (they exceeded market potential by an average of 38 percent), high customer loyalty scores (even higher than their competitors'), and high employee loyalty scores.
"Surface performers," the classification of stores ranked below the great performers, looked good on paper but fell short in other key areas. Based strictly on financial results, they ranked highly. But performance against market potential was no better than at average performers, and they scored poorly on customer and employee loyalty measures.
Ultimately, the CCRRC concludes, three major factors -- high sales relative to market potential, intense customer loyalty, and strong employee commitment and loyalty -- work together synergistically in great-performing stores. The council suggests leadership that includes a focus on all three outcomes is most likely to maximize a store's financial performance.
The connection between great store management and a great-performing store is impossible to ignore, according to the CCRRC. The mindset of managers in great-performing stores differs distinctly from that of managers at lesser-performance units. The best managers are both leaders and coaches for their teams. They share a common vision with employees.
The impact of managers' attitudes on employee performance is just as palpable. The approach and tone demonstrated by store managers are nearly always adopted by store employees -- from department managers to baggers.
One of the most instructive findings of the study is that best practices among great store managers can work for a retailer of any size. While collecting the data to classify store performance, the researchers asked more than 2,700 store employees about 36 management behaviors generally associated with above-average performance. Once the "great performers" were identified, the researchers went back to see which management practices were most prevalent in those stores.
Those four universal best practices are:
--Ensure clarity and commitment to goals.
Great performers make sure everybody knows the plan. Lesser performers leave employees in the dark.
One employee commented, "I feel the goals need to be outlined and presented to the staff. I also see the need for upper management to truly embrace the goals and to live by them. More often than not, the goals become the words on the wall, not the actions lived by. There is also a need to have a system that allows employees to feel the accomplishment of a completed goal."
One challenge for corporate managers is to focus on a few critically important goals instead of setting too many goals. The more goals a company sets, the fewer are achieved with excellence. Sometimes corporate leadership can be guilty of sending down too many initiatives, leaving store managers to sift through the list of priorities and identify the most important goals on their own. The key goals should be thought of as "the ones that if you didn't achieve, nothing else would matter," according to the study.
Once goals have been set, retailers must focus on establishing clear measures, so everyone knows whether he or she is winning. Managers should also consistently communicate the importance of the goals. Ideas for follow-up include newsletters, a list of goals posted in every department, and reminders during team meetings.
--Get everyone to focus on the key drivers.
Especially in a supermarket environment, it's important to get everyone involved, the study notes. One store cited in the study adopted a goal of hitting a 20 percent increase in weekly sales during Christmas. Store management solicited suggestions from departments for ideas on getting to the goal. Among their contributions: Produce proposed placing clementines, a promo product, at front end registers, instead of just on display; cashiers suggested holding a contest to see who could sell the most; and the deli manager envisioned promoting trays to area businesses. As a result of the collaborative effort, the store sold more than 400 boxes of clementines, and twice as many deli trays as the previous year.
--Implement simple mechanisms that propel goal achievement.
Great performers adopt meaningful measuring devices, while lesser performers just hang posters. The study suggests that managers display key measures on a visible, dynamic scoreboard and update it daily, weekly, and monthly so that the team can move quickly to improve the numbers.
Unfortunately, many retailers drop the ball, according to the study: It was in this nitty-gritty area that researchers found the greatest need for improvement, even among the great performers.
--Establish a constant cadence of accountability.
Finally, great managers make accountability a part of their daily routine. They establish a "cadence of accountability," a reliable routine for accounting for progress on key measures for lead drivers. Many of the great performers establish daily objectives, provide consistent coaching, and follow through to see that objectives are met.
It's important to hold employees accountable for the commitments they make, the study notes. Successes should be celebrated, but just as importantly, corrective action must be taken where necessary, and a culture in which employees learn from mistakes should prevail.