From Home Furnishing Business
Coach's Corner: Proactive Planning Produces Power 50 Performances
2018 by HFBusiness Staff in Business Strategy, Industry
By Tom Zollar,
Our December issue always presents The Power 50 Retailers. A few years ago, I wrote about how taking time out at the end of one year to properly plan for the next one is a great way to produce performance improvement and become a Power 50 type of retailer. Since then I have spoken with many clients and friends in the business about how to improve their results and I always find myself referencing much of what was in that article. So, I thought that it might be a good idea to revisit and perhaps update the information and direction it presented for today’s readers. I can’t think of a better way to help you wrap up this year and get ready for 2019!
The big question I often get is: why do some organizations tend to always be at or near the pinnacle of their area of endeavor and others always lag behind? Well, to use a dreaded sports analogy, there are several teams that readily come to mind as consistently being 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, 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 similar merchandise (at least to our customers) and want to sell as much as we can. So why do some continue to prosper while others don’t? Obviously, the best ones manage their business or team better, but how?
The answer boils down to the fact that they are great at studying how they did and figuring out ways to do it better in every aspect of their game or business. The best teams analyze each area of their game, grade every player’s performance and set targets for improvement in the next game and at the end of the year, for the next season. What training needs to take place, which players or coaches need to be replaced and how they can improve their preparation for each game, are all examined. As a result, they create plans for performance improvement. The best companies do the same thing.
Here are some thoughts that may help you move the needle next year by starting off with a solid plan for what you want to accomplish.
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 decide what steps you need to take to get you to it, how to take them and when. That completes your plan.
As stated, 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 also have 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 parts of the sales support, order fulfilment and customer service processes are handled, so it is tough to come up with any universal recommendations. However, your management team should be able to develop 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, 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 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 those are 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 productively?
Merchandising – Merchandising, along with advertising 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, open to buy 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!
Once you have your plan in place, it is critical that you follow it and make sure you are hitting the goals you set each month. There is no doubt that executing a plan is much harder than creating one, so this is where the rubber meets the road. The biggest thing to avoid is giving in, throwing out your plan and going back to just doing what you think is right at the time. It takes discipline and courage to make the hard decisions and stick to your guns. Of course, if you determine that your plan is too optimistic, you may want to adjust, but don’t just discard it.
In retail, the most important areas to plan for and keep an eye on—because they directly impact your sales results—are what I call the Final Four: Product, Promotion, Presentation and People. These are the ones your management team needs to focus on every day, to make sure your plan succeeds. 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 though, 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 of the other areas, if our people fail to deliver, then our business/team fails.
As is often the case, I am not telling you anything you didn’t already know or at least suspect. The most successful businesses and teams excel at creating a plan and executing it. 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”. So, get busy this month and work on planning for your growth and success in 2019. If you don’t plan for it, it won’t happen. Next month I will provide you with a list of some things you may want to include in your plan to help drive performance improvement in your company!