A Fortune 500 company with hundreds of retail stores located throughout the United States was facing an unexpected challenge. The company set uniform standards for store design, employee dress requirements, and inventory. Pricing and advertising were set at corporate headquarters, minimizing local differences. The company worked hard to give its customers the same high-quality shopping experience in every store. But in spite of their similarities, the company's stores produced a widely varying range of revenue and profit growth.
Why, company leaders wanted to know, when so much is the same, would their stores' financial performances vary so significantly? Corporate leaders were also concerned about high turnover rates among store managers and full time store workers and wanted better insight into their customer relationships. The client hired Gallup to help them discover the answers and meet these challenges.
Over a period of several years, Gallup worked with corporate leaders to implement several measurement-based performance management initiatives. Gallup consultants:
- Designed and implemented a customer-loyalty tracking program. Gallup conducted daily interviews with a random sample of each store's customers. Store managers received a monthly scorecard rating how well their staff created and enhanced customer relationships. Gallup also designed and delivered a customized education program to teach store managers how to use their tracking data to improve customer relationships.
- Designed and implemented an employee engagement program. Gallup consultants and Gallup University instructors worked with leaders and managers system wide, teaching them to understand and use Gallup's Q 12 metrics to continuously improve employee engagement in each store.
- Provided analysis and consultation on the client's brand positioning and customer segmentation. Gallup helped the client develop a customer segmentation model and strategy, which was instrumental in helping the Gallup and the client to develop their brand positioning and advertising strategies.
- Used cutting-edge development and education strategies to build a strengths-based organization. The company used Gallup's Clifton StrengthsFinder assessment tool and Gallup University learning programs to build a strengths-based organization - a core element of corporate leadership's growth strategy.
Over time, Gallup Business Impact Analysis, which assesses the linkages between engagement levels and business outcomes, demonstrated that client stores with higher levels of employee engagement showed higher levels of customer engagement, increased sales, greater profit, and lower employee turnover.
- Controlling for the potential of a given market, Gallup's customer and employee engagement measures are the most powerful predictors of that store's future success. Store managers who excel at engaging their employees in building customer relationships have measurably outperformed their peers over time on a wide range of internal performance metrics.
- Stores that have improved the most on employee and customer engagement metrics have experienced superior sales and profit growth over time. These elite stores have integrated employee engagement and customer engagement into a single unified performance management practice.
- Since the client began focusing on employee engagement, employee turnover has fallen by nearly one-third, saving an estimated $27 million in replacement costs alone. Estimated savings in total turnover costs over this same period range from $150 - $200 million. Stores that improved the most on employee engagement experienced the greatest reductions in turnover.
- During this same time frame, workers compensation claims have fallen by $4.5 million. Stores that improved the most on employee engagement experienced the greatest reductions in workers compensation costs.
- Store that increased their employee engagement mean scores by 0.10 increase store profits by an average of $100,000.
During the past three years, Gallup estimates that the total additional profit achieved since the client began implementing Gallup's performance management systems is about $75 million.
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In the past, companies have not applied rigor and precision to measuring and managing the "softer," human side of business. That is about to change.