As any retail professional knows, KPI’s (Key Performance Indicators) provide valuable information about the retail operation as a whole, and about individual business units – stores, for instance.
Often, store performance is quickly evaluated on the basis of a few select KPI’s. Those are usually the KPI’s that store management can have a direct and immediate impact on. For example, sales compared to target and prior year, sales per hour, average sale per customer/ transaction, average units per customer/transaction, conversion and wage cost.
It is extremely important, for the motivation and well being of the management and staff, that all of the KPI’s be looked at relative to one another. It simply does not work to single out one KPI and rush to judgment. It’s just not a very smart thing to do. And here’s why.
Let’s take an example of a store that is being managed by a competent and experienced person. This store is achieving sales 25% above the prior year and 100% of target. Already you can see that this store has been planned for a 25% sales increase over the prior year – which is a healthy increase and some would even say unreasonable. However, the store is doing it so we’ll leave it at that.
This store is performing better than chain average for wage cost, sales per hour and conversion. The average units per transaction are considerably higher than chain average. The average sale ($) per transaction/customer is consistently below chain average – but not by much. The District and Regional Managers for this store are very, very concerned about the ASPC (average sale per customer). They are concerned to the point that they talk about nothing else – not the fact that the target is being met, not that UPT’s are high – nothing else except ASPC.
The Store Manager knows the reason but no one seems interested. The reason is this: the store is located in an area that has a low income demographic. This has not always been the case but, in recent years, the more affluent customers have slowly moved away as low income apartment buildings and government subsidized housing have taken over the area. This fact is not in dispute. Everyone is aware of this, and Head Office management readily admits that the area has undergone a significant change.
So, this store is sent thousands of units of clearance merchandise from other stores because it is recognized that much more low priced merchandise can be moved out of this location than any other store in the region (much like a clearance warehouse) and, also, it helps in keeping the other stores ‘clean’ and mostly regular priced; driving up their APSC which is certainly good for the company overall.
For many of you it is probably quite clear, already, why the ASPC might be lower than chain average. The customers in this area buy more units but the units are very low priced. One could make the argument that because the prices are so good, customers should buy enough units to move the average sale up to chain average. However, that would ignore the fact that the majority of customers have less money in their pocket to spend. They can buy more units at low prices but the bottom line is that they will still spend less, in total, than their more affluent counterparts. This is not rocket science and does not require any degree of genius to understand.
The resistance and unwillingness to understand this on the part of the District and Regional Managers is causing serious motivation issues in the store.
The Manager, the Assistant Manager and all of the Sales Associates cannot possibly feel motivated in a situation like this. No matter how well they do compared to target and last year, and no matter how hard they work to keep the other KPI’s at or above chain average, there is only one thing discussed during store visits – ASPC.
One may say that the District and Regional Managers are simply trying to challenge the management and staff to achieve bigger and better things and that they are focusing on the problem area for that reason. And that would be fine if the problem area could be corrected by working harder, by hiring better people, by training etc. But it cannot. And it makes no sense whatsoever for this conversation to keep taking place.
This is not motivation and it is not challenging. This is nonsense and the only result is frustrated and de-motivated employees who will soon start missing targets and dropping below average in all of their KPI’s. And, then, of course management and staff will begin to leave and the company will have lost a great team.
DMSRetail believes strongly in building a performance culture; in holding people accountable and in monitoring and measuring KPI’s constantly. But to focus on one area that is not doing well while ignoring the realities around that and to minimize the achievements in all of the other areas, is a clear path to poor performance.
All the Success,
DMSRetail
Making Retailers Successful
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