If you own or operate a retail or food service business, you may be amongst the large percentage of companies that is stifling its managers and, by extension, the performance of your front-line.
Over 50% of the global economy is driven by businesses with “distributed networks” of sites and employees. Retailers, including food service and retail banks, are an important segment within this group. And for most of these businesses, McKinsey & Company has found that managers are being stifled. Whether by over-loading them with heavy administrative burdens, or simply not empowering them to make decisions critical to providing a good customer experience, these companies are undermining their own success.
According to McKinsey, front-line managers – including district or area managers as well as store managers – are not empowered to spend their time where it can create the most value. Instead of spending as much as 60% of their time on administrative tasks, front-line managers could be spending more time on the floor and coaching staff.
In fact, a lack of front-line coaching can be disastrous for service businesses, where research shows that the attitudes and behavior of customer-facing employees is strongly related to customers’ perceptions of service quality.
It’s no surprise then that Gallup has found hiring great managers can result in a 27% increase in revenue per employee. Gallup’s own research shows that many companies hire managers based on years of service or tenure instead of talent and their natural ability to lead. This natural ability to lead – to inspire employees, drive outcomes, overcome adversity, hold people accountable, build strong relationships, and make tough decisions – drives better performance by itself, but is also critical to overall employee engagement.
In fact, Gallup reports that naturally talented managers play an essential role in creating an engaged workforce, explaining at least 70% of the variance in the engagement of their teams. But many companies haven’t woken up to this reality. Based on 2012 data showing that the majority of American workers are either “not engaged” or are “actively disengaged” at work, Gallup calculates that low engagement levels are costing U.S. companies between $450 billion and $550 billion per year.
But before changing hiring practices, many companies ought to first rethink the role of their front-line managers. Rather than ‘cogs’ in the administrative machine of the company, the role of front-line managers should be about achieving improved store performance.
This may be easier said than done.
Current attitudes towards the role of front-line managers have left many believing that their ability to impact the business is limited. McKinsey reports one study showing that store managers spent more than half of their time on administration and felt they had no control over key performance drivers (such as sales in important product categories). The company in the study experimented with an improved store layout, streamlined reporting, and other strategies to free-up their managers to spend more time on the floor.
The results were impressive: Their managers were able to allocate 60 to 70% of their time on the floor, providing high-quality coaching to staff and interacting with customers. Through their coaching, managers were able to discuss strategies and performance metrics with their staff. This included a new performance scorecard, which helped focus staff on key behaviors like greeting customers when they enter the store and on “suggestive” selling. When rolled out across their store network, this new approach drove a 51% increase in productivity in one region and 65% in another.
With this mind, we believe retailers can make significant gains by both hiring great managers as well as implementing the strategies and practices that empower them to allocate more time to the floor, making decisions, and acting on opportunities.