Listen to the Little Guys
I received a very interesting comment on my post “Lessons in Business Analysis” a few weeks ago and just wanted to comment on it today. The original post was just a breakdown of the best tidbits from Eddie Lampert and Warren Buffet’s annual shareholder letters, but the comment was written from an ex employee of Sears Department stores. Basically, he recently had his sales position terminated for “giving unauthorized discounts” to shoppers. How had he done this? Apparently, Sears department store registers print out coupons along with each receipt. Most customers, however, leave these coupons by the counter as they don’t want to be bothered with extra litter. This employee decided to collect these discarded coupons and offer them to potential customers when they seemed like they were hesitant to buy a protection agreement.
Now, I can understand why Sears may have been a little upset at these actions. The design of these coupons printing with each receipt was likely due to a strategic decision to attempt to entice repeat business. Thus, the use of coupons on new customers was rather divergent from the intended strategic goal. In fact, there is some potential that if they allowed this kind of behavior, some sales employees may begin hoarding coupons in order to use them to boost sales as opposed to allowing a paying customer take the coupon home thus truly undermining the initial intent of the coupon program.
That being said, the termination of a sales employee over the creative use of likely-discarded coupons raises a few bells about the way Sears is running its operations. It is clear from my commenter’s letter that very little attention was paid by his managers to his story. Instead of realizing that the commenter may have found a potentially lucrative method to improve store sales, they punished him as severely as possible and likely have begun explicitly disallowing such behavior from other employees. From my commenter’s post, it does seem like he was not acting alone in using coupons this way and, in fact, it was a little secret of the best sales people at the store.
So, why is this alarming? Why should we worry? It’s my belief that the best businesses are run when management truly listens to its customers and delivers value targeted to each customer. In turn, this makes the front line employee one of the most important pieces of a company’s value chain. If the story of my commenter is true, Sears is failing at both attempting to connect with its customers and undermining the value of its front line sales employees. In this case in particular, its employees seem to have found a very legitimate and nearly costless route to increasing store sales by using discounts the company has already determined to acceptable-enough to give away yet won’t allow sales employees to offer.
In the end, it’s impossible police every customer interaction that happens at a company, particularly at a retailer where customers will come in and out of the store all the time. Some faith must be had that employees on the sales floor have been trained well and will work in the best interests of the business. Those on the sales floor will always be the first to notice changes in customer habits or the success of a new brand strategy or sales technique. Listening and working with them and allowing them to use their judgment when the time arises is the easiest and fastest way for management to better serve customers.
Think about some of the most successful consumer-driven businesses. Part of the sustained success of Starbucks is that baristas are trained to be allowed to make on the fly decisions to please the customers that walk in the door. Drinks aren’t taught as strict recipes but as guidelines and they are allowed to replace the cream with skim or give you two pumps of sugar instead of one. Their baristas are trained informally and encouraged to improvise within the structure of their job. You’ve probably never heard a carbon copy sales script between one Starbucks barista and another. In another example, Southwest Airlines has long maintained its competitive advantage (and is attested to by the loyalty of its repeat-flyers) by offering, in addition to low prices and hassle-free boarding, superlative service provided by flight attendants and airport personnel who sing and dance and are allowed to respond to each passenger’s unique requests without having to call corporate or consult a thick handbook.
Beyond simply allowing front-line employees to act independently, some large corporations have gone as far as to begin trying to actively harness their employees ideas and best practices. In 1998 IBM created a corporate intranet to allow for sharing of new idea ranging from changes to company policy or new products. Decentralizing the communication structure at the company allowed management to become more responsive and the overall business to take advantage of opportunities that previously would have gone unnoticed.
Everything I described above is known in business circles as the management of a company’s informal organization. A good management knows how balance the formalized structures and rules with the informal personal experiences and relationships formed within the walls of the business. Proper attention paid to the informal practices of employees – particularly front line employees (unfortunately also usually the employees who feel most ignored) – is vital for a company to succeed in instituting new policies, executing new strategies, and responding to dynamic changes in its competitive atmosphere. In the case of Sears, their management claims to be working to revamp its sales structure and turn the company around, yet they clearly have missed the boat on how to empathize and get the message across to their sales floor employees and thus are clearly missing out on the strongest way to bond with the few customers that actually walk through their doors.
As you can tell, the way management deals with its employees and customers is one of the most important aspects of a business’ success. Realize that and next time you’re visiting a store you like (and might want to invest in), you might find that the best source of “inside” information may just be the person taking your order or scanning your items at the register. If your interested in learning more about the informal organization and how some companies attempt to harness its power to drive performance, check out Katzenbach Partner’s report on “The Informal Organization.” (You’ll have to request it and they will mail a hard copy to you.)
If you enjoyed this post, please consider to leave a comment or subscribe to the feed and get future articles delivered to your feed reader.
