From Home Furnishing Business
Planning for 2017
Planning for 2017
By Tom Zollar
This issue presents The Power 50 and our theme is The State of the Industry. Having spent 40 years in this business, I am well aware how much the list of top retailers has changed over that time. Many of the ones that zoomed to the top are now gone, almost like they burned themselves out getting there and could not maintain their success. Others that had steady, if not spectacular growth seemed to survive the ups and downs of the economy, to continue prospering. It has been said many times that staying on top is often more difficult than getting there. Yet some organizations tend to always be at or near the pinnacle of their area of endeavor.
In sports, names like Patriots, Crimson Tide, Buckeyes and others readily come to mind as teams that have consistently been on top of their game year after year. Everyone in each league plays by the same rules, their fields and equipment are pretty much the same quality, they have the same list of plays or strategies to draw upon and they all want to win their games. In our business, we all work under pretty much the same rules, have the same advertising opportunities available, carry relatively the same merchandise and want to sell as much as we can. So why so some continue to prosper while others don’t? Obviously they manage their business/team better, but how?
In one of my earliest columns, I talked about Big Ed Breunig’s “Six P’s” of retail that he taught me long ago. He said to succeed in our business you must have:
- Population - People to sell
- Presence – A place they will go to buy from you
- Product – Things they want to own
- Promotion – Ways to get their attention so they visit your store to buy
- Presentation – An easy to shop, visually stimulating environment to show them your goods
- People – Staff that is ready, willing and able to provide top notch assistance to your visitors
Every month he graded the effort in each of these areas and targeted those that did not meet the level he expected for improvement. From this list, he created action plans to continually drive his business forward. What a simple but effective way for an owner/manager to look at his/her business to constantly find ways to improve it.
While every one of these retail elements is critical to our survival and success, in my experience, it is the last four that are the most volatile and in need of almost constant attention or focus from upper management. Are we assorting the right products, displaying them the best we can, advertising to bring in the targeted customer and lastly, are our people providing the best customer experience possible? As a coach, I must say that it always seems to be the last one that gives us the biggest problem. Products, advertising and display are easy to manage compared to people. But, even if we do a stellar job of managing all five of the other areas, if our people fail to deliver, then our business/team fails.
Therefore, in many cases it is the inability to properly hire, manage and motivate people that is the main reason that businesses and sports teams fail to maximize their sales or win total. Jim Collins called it getting the right people, in the right seats on your bus in his book “Good to Great”.
As is often the case, I am not telling you anything you don’t already know or at least suspect. The question is why can some organizations do this better than others? In my experience, it is because the most successful businesses and teams excel at doing the seventh “P” – Planning! Having a solid plan, getting everyone onboard with it and consistently executing it is the key difference I see between highly successful organizations and the “also-rans”.
While most of us do create financial, merchandising and advertising plans at the beginning of each year, many do not spend nearly as much time and effort where it counts even more – their People Performance Plan. This should involve staffing, training, motivating and coaching your team to top performance month after month. It is a lot of work, but it is well worth it and a true differentiator in our markets.
You probably know the original five “Ps”: Proper Planning Prevents Poor Performance (Yes I know there is a sixth one, but I want to be PC). Here is a new six “Ps” to help us focus on this vital part of our preparation process for 2017:
Proper Planning Positively Propels People’s Productivity
One of the biggest mistakes I see many organizations make when they begin the planning process is not establishing goals or performance targets for every department within their organization. Basically, a plan is a map for your business and the two things you must know in order to use a map, are where you are and where you want to go. It is the same with a plan, with the goal being where you want to go or your destination. Once you know that, you can then decide what steps you need to take to get you to it, how to take them and when. That completes your plan.
This month is a great time to create your plan for next year. So here are some ideas about the areas in your business for which you might want to create a Performance Improvement Plan and a few metrics you could target in each:
Sales – This is the first one that comes to mind for all retailers because it drives the business and without it nothing happens. It is also the one we most often see goals developed for by our clients. However, quite often they only deal with total sales volume, which is the product of a lot of things happening together. Increasing/maximizing sales is obviously the main result you are interested in driving, but we find that targeting the things that go into the sale like Closing Rate, Average Sale and Revenue Per Up are better to focus on, because improving them will deliver the result you want. We have also seen goals for Items per Sale, In-Home sales % and Sketch % help get the right things happening on the sales floor. We recommend you look at where you are in all your sales metrics and determine two or three that you think can be improved. Target them on a quarterly basis, changing to new ones as you improve the originals. Just don’t give them too many goals or it will weaken their motivational power. Be sure to reward and celebrate success!
Office – Does your office run so smoothly that you never have issues with orders, paperwork or other processes? If that is the case you are in the minority, yet this is an area where we seldom see goals utilized as a planning or motivational tool. We suggest you find those parts of the office process that seem to constantly be causing issues within your organization and develop solutions for the problems, then set goals for improved performance. Each operation varies as to what part of the sales support, order fulfilment and customer service processes are handled, so it is tough to come up with any universal recommendations. However we are sure that your management team can come up with some good ideas in this area.
Warehouse, Delivery and Repair – There are many performance metrics that can be goaled in the back end of your business. In fact, next to sales, this is the most common area we see clients setting goals, paying bonuses and driving improvement. Perfect Deliveries %, Items Repaired, Open Repair Orders and Deliveries Made, are some of the targeted numbers we have seen. Depending on what systems you are using, you can find several great ways to focus this business area on improved performance and customer service.
Advertising – Most retailers do a good job of planning their advertising expenditures as part of their budgeting process. The best ones do great work in planning their creative to consistently deliver the message they want to targeted customers in their market. What we don’t see as often is a goal setting process that reflects the actual performance of the advertising other than just raw gross sales. While that is of course the major result, it is also good to track and set goals for each promotion that focus on traffic level, revenue per up generated, average sale, cost per customer, advertising to sales % and other meaningful numbers. This is especially true if you have an outside agency managing this process for you. What better way to hold them accountable for spending your money well?
Merchandising – Merchandising, along with adverting and sales, are the three areas of your business that most drive sales. Yet, we seldom see meaningful goals set for it in most small to medium sized retailers. There are many very critical numbers you can track with your business system that can be goaled to help you plan for improvement here too. Obviously Gross Margin, GMROI and Turn are very important to our business so they are good places to start. There are other areas a buying effort should manage such as freight costs, OTB and Vendor Selection that can also be targeted.
Yourself – So you thought we might forget about you? Remember that unless you develop and strive to make growth goals yourself, it will be tough for you to lead a goal oriented, growth focused team – walk the walk and talk the talk!