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Posts Tagged ‘bottom line performance’
Wednesday, March 24th, 2010
While conducting a workshop on driving bottom line performance a few years ago for department managers in a chain of supermarkets, I had an interesting experience. One of the participants was a rather elderly and somewhat crusty Bakery Manager. His name was Lynn and at the first session he introduced himself as having been a bakery manager for longer than most of the other attendees had been alive. I took his unusual statement to mean that because of his experience he was unlikely to learn any new tricks or techniques about performance at any workshop, especially one facilitated by me.
You Can’t Teach A Old Dog New Tricks
Over the course of a couple of sessions, Lynn participated just enough to stay out of trouble with his boss, but not enough to gain much advantage as a manager. After the second session he told me privately that with his considerable experience as a manager he didn’t need to attend the sessions, but that he was being forced to attend. He told me, “You know old dogs can’t be taught new tricks. Well, I’m that old dog.” I thought at the time that he was trying to put me on notice that I should back off in trying to change his managerial style.
Lynn’s statement motivated me to look for a way to get his attention so he could benefit from the workshop experience. That’s when I concocted an experiment that not only taught him and his fellow managers a valuable lesson, but also me as well.
In the workshop I asked Lynn if he would help me conduct a “psychological experiment.” Before he could say no, two of his bosses were nodding affirmatively. Truthfully, I had set that reaction up in advance. Shame on me!
With Lynn obviously very reluctant to hear my proposal, I nonetheless pushed on. I told him that the experiment was to test the power of a graph, or scorecard, to motivate hourly employees to change their behavior. I explained that I would help him create a separate scorecard for each of his employees who worked the bakery counter on Saturdays. The scorecards would have the person’s name at the top, and across the bottom x-axis of the graph would be the dates of the next six Saturdays. Up the vertical y-axis would be numbers from 1 to 20.
Driving Results To Increase Profits
His employees would be instructed that each time they mentioned the words “chocolate chip cookie” to any customer in any way on Saturday they could put a mark or dot for that date progressing up from 1 mention of chocolate chip cookie to as many as 20 mentions. The measurement would be voluntary, because about one person in five typically doesn’t like to participate in such exercises that require competition. We would be happy to deal with the four out of five employees who find such exercises fun and exciting. The scorecards would be posted in the bakery back room and employees would be encouraged to keep their scorecard up to date as often as they could during the day. The experiment would use an honor system, where marking scorecards accurately would be up to the employees. Lynn’s responsibility would be to explain the exercise to the employees, have a positive attitude toward the exercise, and, of course, lead by example, because he needed a scorecard too.
At the next two workshop sessions Lynn gave brief progress reports on the project, but didn’t elaborate very much. I became worried that the experiment wouldn’t work and that Lynn might miss the point of it. But those fears were forgotten when Lynn returned to the last session and exclaimed, “Did you know that it’s possible to sell too many chocolate chip cookies?”
Lynn explained that by the second Saturday most of his employees really got into the exercise. It became a Badge of Honor to be recognized as the employee with the highest number of chocolate chip cookie mentions each week. Lynn’s assistant manager had a badge made at a local mall that said, “Chocolate Chip Cookie Champion.” The person with the highest mentions each Saturday got to wear the Champion badge during the following week, which further intensified the competition. Isn’t it interesting how a simple badge can create so much excitement? During the week his employees plotted what they were going to do and how they were going to get the most mentions. Lynn said that he had to adjust the rules because people “were taking unfair advantage.” One employee got on the store PA and mentioned chocolate chip cookies, then walked around the store counting how many customers must have heard her announcement, trying to claim those mentions. Another employee stopped in the middle of taking a cake decorating order and said, “Oh, by the way we sell chocolate chip cookies. Now how do you spell your son’s name?”
Apparently the competition got so intense and the bakery was selling so many cookies that the ovens were consumed with baking cookies, at the expense of the other products that needed oven time. That’s why Lynn exclaimed, “It’s possible to sell too many chocolate chip cookies.”
As a facilitator it was fascinating to see the change in Lynn’s attitude over the six session series of workshops. The crusty Bakery Manager became a champion of measuring, providing instant feedback, and healthy competition. He even told me in the last session that he had “learned a ton of new stuff.”
So how did Lynn’s cookie sales go? In his final report he explained that for as long as he could remember his bakery had sold about 15 dozen chocolate chip cookies on an average Saturday. (Actually, for a bakery the size he managed, 15 dozen is at best only a fair result, so I’m told.) The first Saturday of the project the bakery sold 27 dozen. The second Saturday they sold 36 dozen. The third Saturday they sold 67 dozen. The fourth Saturday they sold 117 dozen. And on the fifth Saturday they broke the bank, or perhaps the ovens, with 157 dozen chocolate chip cookies!
Increasing Profits 10X
The improvement over a month was a ten times increase. How did this happen? Providing frequent feedback to people who otherwise had not much incentive to suggestive sell cookies caused the incredible results. The personalized scorecards each employee had in the back room provided a method to measure performance. Thomas S. Monson once said, “When performance is measured, performance improves. When performance is measured and reported back, the rate of improvement accelerates.”
As Lynn was leaving the last workshop session I asked him, “Well, was this experience worth it?”
With a slight smile on his face Lynn replied, “Maybe it’s possible to teach an old dog a thing or two. Thanks for a great class.”
Tags: bottom line performance, Increase Profits, scorecard
Posted in Increase Profits, bottom line leadership, leadership, scorecard | No Comments »
Tuesday, February 16th, 2010
Interview with Ted Zimmerman on Bottom Line Leadership
In 1981 I had the honor of interviewing Ted Zimmerman. You might have a similar reaction to hearing the name as I did when I first heard it, because I had never heard of Ted Zimmerman. As a teenager Ted had been a clerk in the first self-service grocery store in America. Although there has been an unresolved debate concerning when the first self-service store actually opened, and by whom, I will go with the Safeway claim of being first, with Ted Zimmerman working as a clerk in that store on grand opening day.
S.M. Skaggs opened the store in early June 1915 in American Falls, Idaho, and within months sold the store to M.B. Skaggs, one of his six sons. Neither Ted, nor any other witness can pinpoint the date any closer than, “early June.” Prior to the advent of self-service, clerks assembled product orders from a customer provided list. But everything changed on that grand opening day in June 1915 and I was given the privilege of interviewing an elderly gentleman who was a personal witness to that historical event.
The reason for the interview was that Ted Zimmerman was in declining health and it appeared that his story might go forgotten and untold if it wasn’t documented. On the day of the interview near Tacoma, Washington Ted was in good spirits and seemed eager to have his participation in history documented.
After a few cordial preliminaries, I asked, “Is it true that on the first day a cigar box was used as a cash register?” Smiling, Ted said, “Yes, we couldn’t afford a real register for some time. In those early days a cigar box was all we had and it worked just fine, even as we opened more stores.” So the rumor I had heard about a cigar box was true.
Measuring Success
Later in the interview I asked, “In the store’s early days how did the Skaggs brothers measure results or success?” Ted’s response was simple. He said, “At the end of each day we counted the cash in the cigar box and entered the total in a ledger we used to keep track of our sales. It was cash only in those days, because there were no checks or credit cards. That meant our sales for a day was the cash we had in the cigar box at closing time.”
Ted explained more about the ledger, “We kept track of daily sales in one column and added the days of the week into a weekly total in the next column. The weekly totals then added up to a monthly total, and so forth.”
I asked, “What other measurements were used in the early stores?” He said, “It didn’t take long to learn that when an owner isn’t managing the store that labor cost can get out of hand. So we divided the weekly labor cost in dollars, by the weekly sales dollars and called it Labor Percent. It was easy to know your labor dollars, because we paid the help in cash right out of the cigar box each Friday.”
I continued, “How was Labor Percent used to manage a store?”
He explained, “We figured out Labor Percent benchmarks so we could tell within a week or so if a manager was using too much labor. As you can suspect, there wasn’t much of a problem with a manager using too little labor. Figuring Labor Percent each week gave us an easy way to look at the biggest controllable expense we had.”
Overall Gross Margin
Ted described another bottom line measurement used in those early stores. He continued, “At first we kind of stumbled onto things as we opened new stores. By knowing our sales for a period of time, what it cost to purchase the products we sold, and how much inventory we had on hand, we could figure out an overall gross margin percent for the store. That made it possible for us to help a manager whose gross might be lower than other stores. If a gross was low it meant that something was wrong. It gave us something to look at and work on.”
My next question was, “How long did it take for the company to develop a Profit and Loss Statement?”
Ted wasn’t sure about the answer, but clarified, “I know it wasn’t for a while, because none of us had much accounting background. But after a while I think it was a bookkeeper that started to make them. When we got used to them, they came out every few months. Then, when the company got bigger the P&Ls came out each month.”
Measurements for Success
I summarized to Ted, “So what you are telling me is that the primary measurements for success in the early days of self-service grocery were:
1. Sales Per Week,
2. Labor Percent Per Week
3. Store Gross Profit Percent After An Inventory
4. A monthly Profit and Loss Statement.
Is that correct?” Thinking for a minute he said, “That’s about it and it worked pretty good for us in those days.”
Having heard this piece of history, consider this: “What has changed in measuring bottom line results or success in the grocery industry from 1915 until today?” The answer is: the cigar box, and not much else. That’s why, “The more things change, the more they stay the same.” The sad truth is that almost all retail stores today function with the same four primary measurements that were used almost a century ago. With the unbelievably sophisticated POS systems, scanning, computers, and expensive software, can’t we do any better than what Ted and his colleagues did so long ago?
Consider the cost of an empty cigar box and ledger, compared to the cost of today’s highly computerized POS systems. If Ted and the Skaggs brothers could get four critical measurements out of a cigar box, how much valuable information should we get and use from a POS system that can cost hundreds of thousands of dollars?
How well do you use the information supplied by your POS and accounting systems? Is your organization’s bottom line leadership and measurement strategies stuck in 1915, or have they progressed beyond the four standard measurements into more specific and motivational ways to measure results?
Pennies Lead To Profits, Dollars Lead To More Profits
In an industry where dollars of sales only produce a few pennies of profit, do you honestly believe that measuring bottom line results on a weekly and monthly basis, and only in a manner that hasn’t been improved in almost a century, is adequate? I don’t think so! Give these ideas some thought and then consider how much information coming from your front-end and accounting systems are being used, and how much is going to waste. Remember, if we don’t actually use the information that comes out of the POS system, we might as well use a cigar box.
Tags: bottom line leadership, bottom line performance, Leading for bottom line results
Posted in bottom line leadership, bottom line performance, bottom line results, leadership | No Comments »
Wednesday, January 7th, 2009
We are all aware of the economic challenges in the global economy. In fact, it seems that you can’t even turn the TV or radio on without hearing about it. Staying profitable in these difficult times is obviously a top priority for leaders, including in my organization. But despite the media coverage of businesses going under every day, I have been surprised at how many employees in my organization and others I work with are not concerned about the business’ profitability. It appears to me that the attitude is as long as they have a job, getting a paycheck, and can generally make ends meet, they aren’t as concerned about bottom line performance as they probably should be. Yet, when business are not profitable or can’t make it, look at the indirect trickle down affects on job loss, charitable contributions, the viability of communities, and the lifestyle we have all grown accustomed to.
 Ironically, employees are the life blood of our business, and in fact, have a tremendous impact on bottom line performance. In many cases, I don’t think employees completely understand how they contribute to or influence revenue streams, cash flow, expenses, or other factors that have an impact on profitability and in turn how to make adjustments in their performance in a way that will benefit them and the organization as a whole. With supporting metrics and leader feedback about their performance in key areas, I believe we can keep even the employees engaged in contributing to the success of our organization. So as leaders, let us recommit to helping our team members see how they directly influence the bottom line and motivate them to perform at higher levels during these challenging times.
Tags: bottom line performance, employee participation, employee vision to help business, motivating employees, team inclusion
Posted in bottom line performance, bottom line results, profitability | No Comments »
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