The True Story Behind Key Performance Indicators

One of the key roles of business owners/CEOs is to look at the big picture and devise strategies for growth, amongst other things. A key area that owners/CEOs will focus on is Key Performance Indicators (KPIs): i.e. numbers. In the words of one CEO, “The numbers don’t lie!”

Owners/CEOs can’t focus on all KPIs so they need to manage the key ones relevant to their business. Generally, the KPIs provide a leading indicator of good or bad performance, and identify exceptions that need further investigation. But what do KPIs really tell us, and how are these KPIs passed down to the frontline where it needs to make a difference?

I believe the main reason why KPIs are not achieved is that most frontline staff just do not understand what the numbers mean, let alone what to do about them.

There are two main reasons why frontline staff may not understand KPIs:

» businesses do not effectively communicate the KPIs to frontline staff

» businesses do not tailor the suite of KPIs to the audience.

Communicating The KPIs

Communicating the KPIs to frontline staff is obviously essential. However, in workplaces with large numbers of casual staff, finding the opportunity to get all the staff together to review KPIs may be difficult. Many businesses, too, may not send out KPIs to stores on a regular basis, or follow up to see they have been received and communicated to all staff.

Tailoring The KPIs To The Audience

It’s no use a business communicating an endless list of KPIs to frontline staff if the staff have little or no influence on the indicators. For example, frontline staff have little direct influence on traffic count (apart from offering great service), inventory, or EBITA.

If the audience has little or no influence on a KPI, it is pointless and confusing to include the KPI in the measures of performance for that audience.

Businesses must tailor the list of KPIs so the measures are relevant to the store and capable of being directly influenced by the store.

What Do Frontline Staff Usually Focus On?

Most businesses run their stores using common systems so that each store operates consistently with other stores. There are systems that define and reinforce internal procedures and systems that ensure compliance with external regulations. This means that a significant portion of staff members’ work is about completing tasks defined by the systems.

The reality is that many staff and managers become task-focused and driven by the need to get their system-assigned tasks completed. In this scenario, a customer can appear like an unwelcome interruption and may even cause the staff member some agitation. A staff member in the middle of their tasks may provide only the most rudimentary service so he or she can get back to the tasks, and the opportunity to provide outstanding customer service and generate additional sales is lost.

Even if staff members are customer-focused, if they don’t understand what KPIs mean and how they can influence them, they will struggle to achieve them.

Successful businesses use KPIs to drive sales and growth by: (1) choosing the KPIs that are relevant to frontline staff and over which they have direct influence, and (2) clearly communicating what the measures are and how staff can influence them.

KPIs And Action – What Do Staff Need To Do?

In my experience, the KPIs that managers and frontline staff can directly influence are sales, loyalty card transactions and, if they have control over discounting, Gross Profit (% and $). Sales can be further broken down into total store sales, average sale, and items per docket.

The key to aligning staff performance with these KPIs is ensuring staff understand what they are, how they work, and what actions each staff member can take to improve the KPIs.

Sales

Of course, when it comes to sales, staff must provide great customer service to begin with. It’s hard, if not impossible, to sell more to a customer if the staff member hasn’t connected in the first place. Where there is no connection or where the staff member has not been specifically trained, up-selling can really grate on the customer. In such cases, it comes across as being forced and robotic, and hardly ever works. Furthermore, the staff member stops up-selling because of poor feedback from customers, and promptly assumes a negative attitude towards up-selling from then on.

A few years ago in a fast food store in Sydney, I observed a young staff member ask a customer in a monotone voice, “You don’t want a drink, do you?” It would be funny, if it weren’t also frustrating. Yet, if we were to follow up with the staff member, he’d likely protest he was only doing what he’d been told to do.

Contrast this to a situation in which staff have been well-trained in these subtle skills and the difference is vast. In this case, customers do not feel they are being sold to; they simply want to buy more. The customer leaves happy, the staff member feels great, the sales grow, and everyone’s a winner.

Roger Simpson and the team at The Retail Solution have provided nearly 2 decades of unparalleled expertise in retail consulting for Australian businesses.
 
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