The Employee-Customer-Profit Chain
In the early 1990s one of my former colleagues was working with the executive team at Sears. The Sears Board had hired a new CEO, Arthur Martinez, whose charge was to turnaround the failing company. As part of the turnaround effort, Sears' leaders sought input from all levels of the company. They were particularly interested in the perspective of the frontline retail sales personnel.
The leaders were shocked to learn that these employees were completely in the dark on how Sears made money. When asked how much profit was earned from each dollar spent by a consumer, sales personnel guessed from 40 to 50 cents. When they were told that profit margins hovered around 2 cents, they were shocked. No one had ever explained the economics of the retail industry to them. Discussion of financial results was limited to store and senior management.
The Sears leaders made another discovery during their investigation of consumer buying behavior: the knowledge, attitude and helpfulness of the sales personnel were critical factors on whether and how much merchandise consumers purchased during a visit. In short, the hourly employees were a critical lever for sales growth.
"Pushing the Edge" of Your Thinking
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Do all of your employees have a stake in the financial success of your company?
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Do your employees understand the economics of your industry?
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Do your employees understand how your organization makes money?
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Do they understand what role they play in the company's revenue growth and profitability?
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Are you sure?
I welcome you comments. Feel free to share this mailing with friends and colleagues.
September 2008
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