Page 149 - DMGT553_RETAIL_STORE_MANAGEMENT

Retail Store Management

Notes 11. An extra employee cannot generate enough new sales to more than compensate the salary
of the employee.
12. Retailers that develop long-term incentives, perks, and rewards for its staff often see
benefits like less employee turn-over and better customer service.

8.5 Socializing and Performance Management

On a daily basis, retailer managers are confronted with a variety of high-impact decisions that
must be made as quickly as possible in response to a variety of problems including fraud, out-
of-stocks, ad misprints, employee scheduling crises, and customer service issues. At the same
time, dwindling margins have resulted in the reallocation or reduction of labour. Managers
cannot possibly respond to everything, so priorities must be established.

Over the last few decades, a variety of systems and technologies – such as human resource, point
of sale and inventory control systems – have become available to help retailers set priorities and
make tough decisions. Unfortunately, retailers now rely on multiple systems that often operate
on a standalone basis. Information is abundant but resides in disparate silos – making it difficult
for employees to access and share as well as for executives to use in decision making.
For example, marketing managers, merchants, and operations managers in a given organization
are often making decisions based solely on their individual roles – and the limited information
available to them – and may not necessarily be acting collaboratively. In the worst cases, one
manager may be working from information that conflicts with that presented to another manager,
such as a report that has not been updated to reflect the most recent transactions. This can lead to
individual functional areas of the company acting independently of one another, and possibly
even in direct conflict with each other.
What still remains elusive in the retail industry today is the ability to integrate – both technically
and functionally. By integrating their technologies and processes, retailers can optimize their
most valuable resources – the time and efforts of their employees across all functional business
areas. A major step in this direction is for retailers to provide the right people with the right
information – structured in such a way that they can easily see when there is a need to take
action. An integrated performance management system can help accomplish this.

Simply put, a performance management system is the process of using information to achieve
superior corporate performance. For retailers it means having the information to monitor
corporate and store performance, quickly take action, and improve operational efficiency.
There are a variety of other terms in use today – such as Enterprise Performance Management
(EPM), Corporate Performance Management (CPM), Business Performance Management (BPM),
Strategic Performance Management (SPM), Business Performance Calibration (BPC), and Business
Performance Intelligence (BPI) – that all basically refer to this same process.

A Key Performance Indicator (KPI) is critical to any performance management system. A KPI is
the measure of performance of an activity that is critical to the success of an organization. KPI’s
will differ depending on the nature and objective of an organization, so you must carefully
select which ones to use.

Unfortunately, some organizations may identify hundreds of KPI’s, making the key description
essentially false. Another problem is when retailers fail to implement consistent KPI’s among
various functions. For example, a retailer may have sales volume as a key indicator for operations,
while one of its key merchants is focused on gross margin percent. This leads to conflict, as the
operations team may want to reduce price as one method of driving sales volume, but this price
reduction will by definition reduce the gross margin percent of the sale. It is also critical that the
KPI’s for each functional business area support the achievement of the overall corporate objectives.

144 LOVELY PROFESSIONAL UNIVERSITY