Performance Management: A Retail Perspective

Glitzy store windows and snappy marketing campaigns make retail jobs seem simple: stock, smile and sell. But beneath the surface there’s a web of factors that influence retailing and make accurate employee performance measurement a real challenge.

When there is a downpour, customers stay home. When the economy dips, they hold on tighter to their wallets. And when oil prices rise, they don’t travel as far from home. All of these external factors affect the retail industry and make performance management improvements elusive.

However, if organizations understand these factors, they can assess employee performance based on realistic sales targets and the total customer experience. Then talent managers can make whatever behavior suggestions or corrections are necessary for improvement. Retailers who do this will have a competitive edge because employees will feel invested in their work, turnover will decrease and, ultimately, sales will rise.

“The industry has many moving parts,” said Becca Goren, global product marketing manager with SAS, an analytical software and service provider. “It’s almost like predicting the weather. There are so many parts, having a mechanism to build all of these things into a model and forecast and plan on the basis of [that] is absolutely critical.”

The question becomes: In light of moving circumstances, how can retail companies create effective performance management processes?

“A lot of it starts with good data,” Goren said. “I don’t think there’s a retail shop out there that’s not looking at economic trends and fashion trends. The question is, What are they doing about it? How are they tracking it? We traditionally find organizations do things in pockets. There is some sales planning going on here, some merchandise planning going on there. And in each, they look at these trends, but they’re not sharing the information.”

For performance management to advance or change in retail, companies need to start viewing their employees more consistently. Further, because traditionally there has been an underinvestment in employees from a performance perspective, related compensation considerations also have been lacking.

“Much of the retail industry does not pay a living wage,” said Michael Boyd, who has worked at Blockbuster, Eddie Bauer and Nordstrom corporate headquarters and now runs consulting company Customer Solutions.

“More often than not, that’s one of the most challenging factors because it interferes directly with the likelihood someone is going to be a long-term contributor. The employment model that has evolved is one that tends to treat employees as a cog in a process and tries to simplify the activities that person is expected to do to the most basic level.”

The Customer Service-Performance Management Connection

Many can claim intimate knowledge of a less-than-stellar customer service experience. The reason may be that few companies make the customer experience a true priority by integrating it into the performance management process.

“If you look at the quality of customer experience in retail across this country, the data’s not too pleasant,” said Rick Tate, senior managing partner at Impact Achievement, a training and performance management consulting company.

“And at the end of the day, the customer votes on their experience: Did they get what they came for, was the supply right and, most of all, how were they treated? And that gets the short [end of the stick] in most performance management processes.”

In today’s retail market, performance management cannot be solely based on a sales target; it has to be about the total customer experience so employees see a real connection between their jobs and how they treat customers.

“Once I embrace that the money I receive and the job I have is not dependent upon the company, but is dependent upon the customer deciding to do business with the company, then my whole relationship with the customer changes,” Tate said. “Yet, when we interview most employees, they see the company as the benefactor of everything they get. But the reality is [that] when the customer decides not to [spend their] money [at] the company, nobody wins.”

It seems easy then. Retail organizations just have to train their employees on customer service and then assess them on that interaction. But that’s not all. The whole structure of the business needs to shift to support that relationship.

“If I’m getting dinged [because] I don’t handle every customer in a certain amount of minutes, and my productivity charts are low because I answered two extra questions for a customer, then I’m not going to choose to be courteous or polite,” Tate said. “Any customer service training needs to be connected to performance management and the day in, day out fabric of the business. The problem [we] see is it’s disconnected.”

To ensure performance management is connected to the rest of the business, Tate said the process must be simple. Each employee should have a few clear performance goals, there should be clarity in those goals, measurement of the goals must be outlined, managers must coach and provide tools for reaching those targets and, lastly, there has to be an accurate evaluation of employee performance.

“This is a malaise across the United States: [Performance management is] too cumbersome,” he explained. “They have way too many performance expectations that people are accountable for — the employees get mixed messages. A good performance management system at its very essence will make sure people have clear expectations.”

The Best Buy Experience

At Best Buy, everyone has a name, not a number. This is most evident in the company’s performance management process — driven not by the bottom line, but by employees’ strengths, weaknesses and needs, and their managers’ ability to provide appropriate development opportunities.

“We don’t just jump into a numbers conversation,” said Darien Holznagel, the human resources director for Best Buy’s Territory 1, which includes 10 states in the Pacific Northwest. “We focus on the individual and make it more of a fun conversation, [targeting] what the individual can contribute to the organization versus what’s expected. That’s how we turn the corner of making it a more enjoyable process.”

Best Buy’s take on performance management is all about the individual. As a result, there is no step-by-step decreed process; instead, it’s a singular, free-flowing conversation between a manager and employee.

“The intent is not to prescribe a one-on-one process,” Holznagel said. “It’s intended to hear the voice of the employee and hear how we can better the environment for the employee and the customer. We focus on the direct supervisor understanding that employee, who they are as an individual, what their background is and what makes them tick.”

Managers use the company’s performance development guide for tips and suggestions on how to have one-on-one performance conversations with their direct reports. These discussions happen on a monthly or quarterly basis and flow right into the annual performance review. Employees are assessed on their behavior, interaction with customers and training they’ve engaged in, among other things, and when a performance issue is realized, Holznagel said the manager will help improve the employee’s behavior.

“We take a look at what behaviors they are engaged in and help correct those behaviors, whether that means providing tools, setting them up with a mentor or doing some one-on-one training,” she explained.

The performance management process is aligned with the company, and the company’s four core values: learn through challenge and change; unleash the power of the people; show humility, respect and integrity; and have fun while being the best. These values also are integrated into the process, along with an emphasis on customer centricity.

“Because we are focused on a growth strategy to improve the organization, it’s critical [that performance management] ties [back to that] and that there is a clear vision, so everyone knows what the company stands for and what they stand for as an individual employee,” Holznagel said.

Best Buy’s employee-focused performance management system has been a proven success, as in the past three years the company has decreased employee turnover. Holznagel’s advice to others who struggle with performance management is simple: Listen to employees.

“The voice of the employee at all levels is important, and that’s what we’ve really focused on making sure that we have many avenues where employees can share their voice and give their ideas,” she said. “If employees know that they’re being listened to and they are getting bought into what the processes are, it’s easier for them to understand how they’re being managed.”

What’s the Point?

A well-rounded performance management process gives retailers a competitive advantage. It offers a map, allowing companies to prepare for roadblocks that may be coming, whether it is a tremendous hike in oil prices or slow economic times. Without it, organizations leave everything to chance.

“It creates an experience where employees can learn more on the job, achieve higher levels of success and become more marketable in the future,” Tate said. “And the companies get the benefit of higher performance.”

“Look at how many mergers, consolidations and store closings there have been,” Goren said. “How much of it was done strategically? How much of it could have been prevented if they knew what was coming down the line and they had a way of dealing with the problem before it hit? [That decision] could be made well through performance management or it could be made with no insight.”

Article Keywords:   leadership development  

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