One of the critical profit issues in retail is to make sure that the 2 engines of a retail organization, namely Merchandising and Operations, work as a team. Because of the built-in tensions between these 2 engines, many retail companies have a difficult time creating the working relationships that would generate the synergy required to maximize productivity and profits. Following diagram summarizes a fundamental retail organization structure:
Obviously, the quality of contribution and support from other functions like Finance, IT and HR is very important as well. All these functions must align around the vision of what needs to be achieved and when.
One of the most effective ways of making people work together, is to tie their compensation to the over-all performance of the organization. This is as important as, if not more important than the culture building and/or other soft approaches to performance leadership.
What we see in many retail organizations is only the top management has their compensation tie in to the performance of the company. This is where many retailers go wrong. Realities of doing it for all levels are obviously much more complex and require some serious effort. But that’s the price of winning at retail just like in anything else.