Performance Metrics Drive Behavior
Retail excellence comes from mastery at the Director level more than the VP or manager level. That has been my observation across dozens of companies. Inexperienced managers can be coached and developed by capable Directors. VP’s too removed from the action or driven by the need to “manage UP” rather than DOWN can be mitigated by skilled Directors. But in every company I have seen, incompetence at the Director level is not easy to overcome by great managers or accomplished VP’s. For well-run companies, developing a strong Director level with a deep bench is critical to its ability to be agile and work as a unified organization.
Companies that have strong directors can still be stymied by a monster of their own creation: misaligned performance metrics. I see this time and again – even in Fortune 100 companies. Functional heads create their own metrics and functional excellence driven by directors leads to suboptimized results across the board. Here are examples:
- Supply Chain selects days of supply, turnover, inventory leverage or out of stock metrics.
- Merchandising selects sales and gross margin rate (before shrink and markdowns.)
- Distribution selects cost to serve, on-time shipments, order accuracy and peak capacity metrics.
- IT selects cost of ownership, service level agreement compliance and staff utilization metrics.
- Stores select payroll to budget, store contribution and labor turnover metrics.
Then someone in the C-Suite wonders why all the oars are not pulling in the same direction. Retailers trying to harness the energy of all their resources must get under the like-minded babble of the officer level and look hard at the metrics Directors are striving to improve. If this describes your organization, resolve to knock down the barriers created by entrenched functional heads to preserve their operational metrics. Executives at the C-Level and HR must devise a plan and a timeline to move toward an integrated holistic set of metrics for everyone to adopt to build an organization that is capable of fighting competitors instead of one another. Operational metrics are great for scorecards and driving incremental improvements. But for a company that needs to harness the energy of all its people to transform and build long-term success, there must be unified performance metrics driving the right behavior among the Director level.