Page 153 - DMGT553_RETAIL_STORE_MANAGEMENT

Retail Store Management

Notes 8.5.3 Building a Successful Performance Management System

Identify and Document Current Measurements: The first step in creating a successful performance
management system is to identify the purpose and metrics of each report and alert. This activity
typically requires a task force, or an external consultant (if there are insufficient internal resources)
who thoroughly understands the retail industry. Often end users are not forthcoming in presenting
all of their current reporting practices, and this might require the consultant to use advanced
investigative techniques to get everything out in the open. In either case, each and every report
must be documented. This initial catalogue of reports is a good starting point in the necessary
process of reviewing as a group, the metrics currently in use today. This helps you determine
which ones are relevant and should be included under the new performance management
system and which ones are not and should be eliminated.
Identify and Agree upon Corporate Objectives: The next step is to get executive agreement on
corporate objectives. There are a number of approaches that can be used for this phase, but the
key is to have management buy in on company goals.

Link Functional Metrics to Corporate Objectives: Retailers – often perceived to be independent
thinkers and entrepreneurs – find it difficult to link functional metrics to corporate objectives.
Field operations personnel may tend to distrust corporate managers, perceiving them to be far-
removed from the real world happenings in the stores, and merchants sometimes distrust store
operations because their objectives do not match. Retail functional managers must work together
in situations where store operations, field operations, corporate, and functional business units
overlap, to ensure that KPI’s do not conflict.

For example, marketing, merchandising, and operations must all work together to achieve a
successful product promotion.
A promotion will most likely fail when:

Marketing’s goal is to increase sales volume
Merchandising is focused on gross margin and wants to stock only limited quantities of
the advertised product because of its low margin
Operations is trying to save on labour by reducing the time spent on tagging the
promotional product, thereby not appropriately signing the promoted merchandise
The KPIs for each group must be in complete alignment with the company’s operations. In the
above example, the merchant’s KPI may be restated to Gross Margin Return on Investment
(GMROI) instead of straight margin, making the promotional item more appealing because it
will turn faster. The operator’s labour budget needs to include promotional readiness time, and
the operator needs to somehow be credited for the related sales to encourage participation in the
corporate programs.
Scenarios like this are all too common in retail where it is vital that functional areas work
together as a whole, but where conflicting objectives prevent them from doing so. A truly
integrated performance management system will encourage this behaviour, provide invaluable
insight across departments, and reward managers for cooperative efforts.
Revisit Performance Metrics Periodically: Business priorities will shift over time to reflect
changing market conditions and customer needs. These shifts will inevitably change the focus of
a company, so corporate metrics should be revisited at least annually during strategy discussions.
In addition, the constant monitoring of performance results against metrics should identify
situations where a local metric is driving behaviour that is counterproductive to the corporation.

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