Benchmarking
September/October 2002
Better personnel
productivity
By Ian Brown
he right people in the right numbers make the difference
In our first article in this series, we noted that
there were three primary ways to improve your convenience store:
- Higher gross profits
- Tighter cost control
- Better personnel productivity
This article deals with the last of these, better personnel
productivity. (Previous issues have dealt with gross profits and cost
control.)
My son worked as a casual "check
out chick" for a large supermarket group in Brisbane whilst studying
there. The store was noted for customers that were sometimes rude and
demanding. In turn my son felt this at times rubbed off on staff as
they found it hard to deal with some customers. This boy has a fairly
outgoing personality and so tended to take most things in his stride.
Surprise surprise!! - The supermarket General Manager, having received
a number of positive comments from regular customers to the store, sent
my son a personal letter congratulating him on his customer service
care and manner. This made his day and to this time he values that letter
and the special attention shown to him.
How many owners and managers think
money is the top motivator? There is no doubt that all employees will
be attracted by a good and fair wage and most employees consider this
as a right in exchange for the work done. There is a weight of opinion
that asks us all to recognise that employees really want to be valued
for a job well done. People want to feel they are making a contribution
at work, and for most this involves having the respect of their peers
and colleagues, having a manager who tells them when they do a good
job and being involved and informed about what's going on in their department
or organisation.
So whilst this all may seem "warm
and fuzzy" the reality is that we are dealing with people, people
who are the direct interface with our customers. But how do we measure
how well we are performing with our staff? Can we do things differently
and better?
Our benchmark studies report personnel
productivity in terms of Sales and Gross Profit, "per person"
and " per dollar of wage". Productivity per person and per
dollar of wage are important measures of whether a business is receiving
value from its staff and from wages paid. In the table below we have
set out a few performance parameters for Corner Stores, Supermarkets
and Service Stations to give you a feel for typical personnel productivity
levels.
The dominant message here is that large
Corner Stores and Supermarkets have consistently had higher income per
person and gross profit per person. The Service Station figures show
a trend towards this same outcome for large businesses but medium size
businesses demonstrate a higher income and gross profit per person.
It is important to recognise that a "high sales per person"
ratio might reflect a high turnover and low pricing, but a high gross
profit per person shows genuinely higher productivity.
Higher productivity delivers two benefits
- firstly, it reduces the wages expense, since comparatively fewer people
are needed; secondly, since many of the overheads are fixed in dollar
terms, the higher productivity makes some expenses a smaller percentage
of the higher turnover figure. Use the Gross Profit per Person ratio
to work out how many staff you need. Typically the bigger firms' gross
profit indicators improve, since bigger firms have more scope to achieve
efficiencies in rostering. Gross profit per person shows that there
is more money available to pay overheads and to leave some profit for
the owners.
| Corner
Stores |
| Income per person |
Gross Profit per
person |
| Large $248,624 |
Large $46,117 |
| Medium $169,054 |
Medium $42,378 |
| Small $116,284 |
Small $25,378 |
| Supermarkets |
| Income per person |
Gross Profit per
person |
| Large
$281,500 |
Large
$56,023 |
| Medium $260,709 |
Medium $46,438 |
| Small $234,905 |
Small $54,796 |
| Service
Stations |
| Income per person |
Gross Profit per
person |
| Large $410,969 |
Large $55,376 |
| Medium $436,832 |
Medium $55,791 |
| Small $285,138 |
Small $40,579 |
So where to from here? The most obvious
solution might appear to be getting rid of staff. However there are
many better strategies to look at first.
Manage
your Staff:
Ensure that you have effective and hardworking sales staff with a friendly
manner and a good attitude towards people. In turn, make sure that those
selling have sales ability. Be prepared to monitor your sales and purchases
and have a look at how your staff is performing in terms of sales and
gross profit. Roster your staff so that more people are available at
busier times. This may require a mix of full time staff as well as part-time
and casual staff.
Check that the physical area and merchandise
layout makes it possible for your staff to make contact with your customers
so that they have the best chance of securing a sale. Too large an area
or poor merchandise layout can lead to difficulties for your staff in
seeing or making contact with customers that may need assistance. Equally,
if you make stock easy to locate, customers can find much of it themselves
and your staff become advisers rather than gophers.
Increase
marketing and promotion:
How can you achieve better results by improved marketing and promotion?
Promote special sales or special events to lift sales during the "quiet
times". Ask your customers what they want. Is it possible to create
a package of several items? - "Companion Selling" is a technique
that has worked well in many retail areas. You are more than familiar
with the "would you like fries with that?" question as a related
product is put in front of the customer. Aim your promotions at keeping
customers coming back. Our local take away shop always includes an extra
calamari ring or small piece of fish in our fish and chips order. He
has traded on the "fair deal" and "good bloke" strategy
and it works because we, together with many others, have remained loyal
to him for the past 24 years - not a bad effort in today's rough-n-tumble
world of small business.
Pricing:
Decide what your pricing strategy is - "low margin/high turnover",
or high margin/low turnover". Work on lifting the gross profit
margin as it will help boost gross profits per person.
Remember: the most obvious solution isn't always the best one!
Feedback
corner:
Thank you to those readers that were in touch following our last issue.
Let us know what you would like covered In future issues and we will
be pleased to pull together some suitable material. Call us on 1300555334
and speak to Catherine or Ross
Ian Brown is Director, FMRC
Benchmarking.