Level 5 Human Resources Management ©

(Level 5 HR)

How Evidence-Based HR Management Can Drive Organizational Execution and Improve Financial Results

Rex Gale, SPHR, HCS

© 2007 Rex Gale. All Rights Reserved

Level 5 Human Resources Management

In the book Good to Great, Jim Collins coined the term Level 5 Leader. In his study of enduring companies, one of the key characteristics of these companies was the presence of a leader who exhibited a rare combination of professional will and personal humility. David Maxwell of Fannie Mae, Darwin Smith of Kimberly-Clark, and Colman Mockler of Gillette all exhibited this Level 5 Leader key trait: ambition first and foremost for the company, and concern for company’s success, rather than for one’s own riches and personal renown. (Jim Collins, Good to Great, 2001)

The lessons of the Level 5 Leader can be applied to Human Resources (HR) Management. “Level 5 HR” should exhibit ambition first and foremost for the company and its success, rather than for the respect of HR as a function, a “seat at the table”, or the label of “strategic advisor”.   

In 2005 the HR community was broadsided with the article “Why We Hate HR”. (Keith Hammonds, Fast Company, Why We Hate HR, August 2005)  It hit a nerve. What nerve depends on your perspective. It was met with consternation by most HR professionals, and with nods of agreement from most business leaders.

Thus, the problem. There is a great divide between business leaders and HR leaders about the contribution of HR to the business. A divide that HR must close.

The Business of HR

Simply stated, people execute business strategy. As business strategies change, HR should lead the change required to enable people to best execute the new business strategy.

How? What follows is a specific example of how “Level 5 HR” might position a company for sustained business success.

A New Metric

In June 2006 a leadership shakeup changed not only the structure of RadioShack Corporation, but one of the key business metrics. New CEO Julian Day was tapped to lead RadioShack out of a business downturn that had begun a few years earlier. Prior to Julian’s arrival, the inability to meet growth and earnings expectations for most of 2005 had triggered a turnaround plan that included the closing of over 500 underperforming stores and a company-wide focus on improving average unit volume; rationalizing the cost structure; and growing profitable square footage.

Soon after Julian’s arrival he mandated a significant cost-cutting program that led RadioShack to shed upwards of 30% of its corporate office staff.

 Julian also changed a key business metric. Instead of focusing on profit margin percentage, Julian shifted the metric to dollars of margin. For a business that prayed to the highest gross margin deity, (RadioShack’s gross margins had hovered in the 50% range for most of the last decade), this was a monumental shift in thinking.

Why? It would require a change in organizational behavior. High margin merchandise is often low cost and low tech. A talking picture frame, retailing for $18, may have a profit margin approaching 100%, or $9. Lower margin merchandise is often high cost and high tech. The Apple iPod, retailing for $300, has only a 15% margin. For years RadioShack didn’t sell the iPod, one reason being its relatively meager margin. Yet seen from the dollars of margin perspective, a $300 iPod produces $45 dollars of margin, versus $9 dollars of margin for the talking picture frame.

And these are two very different sales. RadioShack’s selection, training, and sales compensation strategies would have to change. The sales force would need to shift to selling more technologically relevant, complex, higher cost, and higher dollar of margin stock keeping units (SKUs). In tandem, marketing, merchandising, supply chain, and other corporate functions would need to refine the assortment and distribution strategy to deliver the new high dollar of margin assortment to the stores and to customer’s homes..

The shift to dollars of margin also would also fundamentally improve the performance of other key retail metrics, including same-store sales; average ticket price (average dollar value of each transaction), and profit per square foot, all driven by sales of the higher cost and higher dollar of margin assortment. This, in turn, would increase earnings, fuel growth, and improve shareholder value.   

So, what does this change from margin percentage to dollars of margin mean for HR? It means that HR should take the lead in transitioning the workforce to drive greater dollars of margin through an integrated talent strategy that includes:

1) Planning                             4) Engaging                            7) Leading

2) Branding                             5) Developing                         8) Retaining

3) Acquiring                           6) Deploying                           9) Evaluating

Let’s take a closer look at how each of these integrated processes would help drive dollars of margin.

Planning

HR should begin by engaging the merchandising, marketing, and finance organizations to identify the highest dollar of margin SKUs. Once identified, a secondary analysis should identify which of the SKUs are “technologically relevant”, and would help to deliver on the RadioShack brand perception as “one of the nation’s most experienced and trusted consumer electronics specialty retailers” where “knowledgeable, friendly, conveniently located sales associates help to satisfy your most complex technology needs.”

  

Let’s assume that this analysis identified 100 “targeted” SKUs that had high dollars of margin and were technologically relevant. A talent management and strategic workforce planning process would identify a number of critical talent requirements. How will the

store manager and sales associate hiring profile and competencies need to change to successfully sell the new product and service mix? Based on the new hiring profile, what are the gaps in the current workforce, and what interventions need to take place to fill those gaps? How will you assess the knowledge, skills, and abilities of the current sales associates? How will you transition out those who lack the required skills to sell the new assortment? How will you more effectively screen new sales associates so they arrive better equipped to sell the new assortment? Based on historical and projected turnover, and growth projections, what volume of sales associates and store managers need to be obtained over the next few years to meet the new staffing requirements?

HR must also plan to roll out sales training and an ongoing performance management process to change behavior. HR should lead the development of content and the delivery of sales training to the field to teach product and service features and functionality, and to communicate clearly the key value drivers to the customer. Appropriate store and individual sales incentives need to be tested and refined to drive the required change in selling behavior around the new dollar of margin assortment and to drive customer satisfaction. With the change to a dollar of margin metric, getting the reward structure and training right will drive the behavior change required to improve sales of high dollar of margin SKUs, build on the brand, and improve customer loyalty.

Apart from driving the execution of the new dollars of margin strategy, HR should be front-and-center during the strategic planning process to articulate the key human capital issues that need to be addressed as the business charts its strategic direction for the next three to five years. 

Branding: Competitive Talent Advantage Through Employer Branding

What is your brand in the marketplace? How about your employment brand? How do they compare to your competitors? Are you considered a leader in your industry? A Best  Employer? Competitive positioning as an employer of choice attracts more, and better, talent, and improves the pipeline at a time when demographic changed are shrinking the skilled workforce.

In the consumer electronics space, RadioShack competes with the likes of Best Buy, Circuit City, and non-traditional competitors like Wal-Mart. Has RadioShack clearly differentiated itself as a leader in the specialty consumer electronics marketplace? If not, the ability to attract the best talent will be impaired, and an aligned external and internal branding strategy should be created to improve the brand perception required to attract the best of consumer electronics sales and operational talent. 

Acquiring

Acquiring the right talent is mission critical. People execute business strategy. Jim Collins in Good to Great talks about “First Who, Then What”, and goes on to explain that you have to get the right people on the bus in order to figure out where to drive it. Great vision, without great people, is irrelevant.

Larry Bossidy and Ram Charan, in their book “Execution”, identified three critical processes that are required to drive great business performance: the Strategy process, the People process, and the Operations process. Of these three critical processes, they found the People process the most critical. (Larry Bossidy & Ram Charan, Execution, 2002)

At RadioShack, the high dollar of margin focus would impact the selection of the “right people” in the sales force. From the customer’s perspective, store sales associates must move from a product-based framework to a more technology and solutions-based framework. It is critical to determine required capabilities, assess the capabilities of the current sales force, retrain for the desired competencies, and retool the hiring process to hire only those sales associates who fit the new competency profile, and who exhibit the specific behaviors and habits of high-performers. Examples of how the profile might change include additional critical competencies around Problem Solving, Personal Learning, Interpersonal Savvy, Listening, and Patience. (Selections from the Lominger Competency Model)

Understanding your talent pool, your competition, the competitive advantage of your business, your reputation, and your brand are key ingredients to any effective talent acquisition strategy.

Measuring the effectiveness of your talent acquisition process is critical. Who are your high-performers? Where did they come from? What are the strengths, competencies, behaviors and unique skills that are contributing to their success? Constant analysis of where you find your best people, and understanding the critical skills, behaviors, and competencies that make them successful, are important to continually fine-tune your hiring profile, recruiting strategy, workforce plan, and ultimately your business performance.

Analyzing human capital data will tell you which sales associates are most successful. Why are they successful? Is it prior work in a related industry? Is it a specific depth in certain competencies? Is it a higher level of emotional and social intelligence that helps them to better understand and interact with customers? Is it specific patterns of behavior? Go through the analytic process to identify the most successful store managers and sales associates. Inventory their behaviors, competencies and capabilities. What did you learn? What attributes are most contributing to their success? Use this knowledge as the basis for the selection of new sales associates and the assessment of current sales associates.

Continually test and measure. RadioShack has a footprint of over 5,000 company and dealer stores. Use the new profiles for selection in a targeted region and measure results.

  

Do new sales associates hired under the new profile outperform their peers hired under a different profile? What was the financial impact of the new hiring profile on sales, dollars of margin, profitability, productivity and turnover? Measure the increase in average tickets per day (converting traffic to customers), average ticket price increase, and dollars of margin. How did overall sales of high dollar-of-margin SKUs differ by associate, location, geography, and region? And what was the impact on quarterly earnings and future earnings expectations?

Technology also plays an important role in talent acquisition. RadioShack hires about 35,000 people every year. Managing the volume, and the quality of hire, in what is a very transactional process requires focus on technology and assessment solutions that quickly select and screen for the most qualified candidates.

Engaging Employees and Customers

How do you engage a workforce when a fundamental tenet of the business is changing? No longer is profit margin king. Dollars of margin now rule.

And, really, does an engaged workforce matter? Does engagement really impact business results?

Research clearly establishes both a correlative and increasingly causal link between engagement and financial results.

·       A 2004 Harvard Business Review cited Gallup’s work with Best Buy to quantify the ROI on what it referred to as its Human Sigma. The study correlated employee engagement (the Gallup Q12) & customer engagement (the Gallup CE11). (Human Sigma, Harvard Business Review, 2004)

·       According to Corporate Leadership Council Research Data from 2005, highly engaged employees exert discretionary effort 57% more than the non-highly engaged employee, perform at levels 20% higher, and are 87% less likely to leave.

·       A Towers Perrin study of 50 companies found that firms with the highest percentage of engaged employees collectively increased operating income 19% and earnings per share 28% year-to-year. Those companies with the lowest percentage of engaged employees showed year-to-year declines of 33% in operating income and 11% in earnings per share. In a related study over a longer time horizon (three years), the firms with the highest levels of employee engagement achieved a 3.7% increase in operating margins, while those with the lowest levels of engagement suffered a drop of 2%.

·       James Heskett, W. Earl Sasser Jr., and Leonard Schlesinger found that profitability and growth was driven not only by customer loyalty and satisfaction, but by employee loyalty, satisfaction and productivity. The strongest relationships, they found, were between profit and customer loyalty; employee loyalty and customer loyalty; employee satisfaction and customer satisfaction. (James Heskett, W. Earl Sasser Jr., and Leonard Schlesinger, The Service Profit Chain, 1997)

 ·       The Forum for People Performance Management & Measurement at Northwestern University studied 100 companies and found a direct correlation between employee engagement, customer satisfaction, and financial performance.

·       Rolls-Royce Engine Services–Oakland implemented a major employee engagement improvement initiative, and in about a year saw a 19% improvement in operating profit and an 18% improvement in productivity.

Bottom line...the evidence is clear that engaged employees greatly improve customer loyalty, employee loyalty, and overall business performance.

What do we mean by “engagement?” There are many definitions, but most focus on the emotional state that exists when employees are so committed to the company and what it stands for, that they exert discretionary effort to achieve whatever it takes to make the organization successful.

If engagement drives business performance, how to we improve engagement? Recent Towers Perrin research (Towers Perrin Global Workforce Study, 2007) indicates that the most critical levers of engagement are:

·       Senior management sincere interest in employee well being

·       The ability for employees to improve their individual skill and capabilities, and

·       The reputation of the organization as a good employer

What’s important to also keep in mind is that key drivers of engagement will vary around the globe, and companies must understand the leading drivers of engagement by country in order to engage employees in all countries where the business operates. While the top driver of engagement in the United States is senior management’s interest in employee well-being, in China it is “having excellent career advancement opportunities”, and in India the top engagement driver is “having input into decision making in my department”. (Towers Perrin 2007 Global Workforce Study)

Engagement also has a direct impact on retention. According to the Towers Perrin study, half of the engaged employees had no plans to leave their company, compared with just 15% of the disengaged ¾ and roughly a third of the workforce overall. Less than 5% of engaged employees said they were actively looking for another job compared with more than 20% of the disengaged employees. The Towers Perrin study also offers evidence that contradicts the widely held view that engagement is an innate trait. Rather, it is the organization itself ¾ and most particularly, its senior leadership ¾ that has the biggest impact on engagement levels. Personal values and work experience factors have less of an impact on engagement than what the company stands for. People want to be a part of something greater than themselves.

In retail, the cost of turnover is enormous, with 100% turnover not unusual for store sales associate positions.

 The Saratoga Institute and Hewitt Associates both estimate that the cost of hourly turnover is 1.5x annual pay.

If we conservative

ly assume that RadioShack’s hourly turnover is 75%; that average pay is $20,000; and that we only assume that the cost of turnover is 1x pay,  the cost of turnover at RadioShack is conservatively estimated at $525 million ((35,000 x 75%) x (20,000) = $525,000,000).

The bottom line is significant. Reducing turnover by 10% would result in estimated savings of $52 million, improve Earnings Per Share by an estimated $0.39 (as of November, 2007), increase stock price by an estimated 21% to $23 (based on the Nov. 2007 earnings multiple of 11.80) and increase market capitalization by an estimated $3 billion.

Are your employees engaged? It’s important to survey your employees and understand what their key drivers of engagement are. What is the level of confidence in senior management, and the perception of senior management’s interest in employee well-being? Are employees proud of the company and what it stands for? Do employees believe that they have been given the opportunity to learn and grow?

Use research to set the engagement baseline. Then track your gaps, your actions, your progress, and the accompanying financial outcomes as you improve engagement within the company. Continue to use pulse surveys to assess ongoing engagement within the company, and the customer base.

Dig deeper with engagement analytics. Your workforce plan has identified critical roles within the organization. How engaged are the people in these roles? How engaged are your high-performers? How engaged are your next-generation leaders? Understand each pool of employees with unique and critical skills; those who are high performers; and those who are the potential future leaders of the enterprise. Focus you efforts on engaging and retaining the people who are most contributing to the current and future success of the organization.

In RadioShack’s case, what will engage customers in the high dollar of margin world? Will it be technology-savvy sales associates who will delight customers with their knowledge of leading technology and consumer electronics products and solutions? Listen to your customers. What does your customer research tell you that you need to deliver - not only to engage your customer, but to differentiate yourself from your competitors? Engaging your employees, who in turn engage your customers by helping the customer make the best decisions about, and get the most out of, their increasing sophisticated and complicated consumer electronics, will be a winning strategy in the ever-complex consumer electronics marketplace. RadioShack has altered its tagline recently to…Don’t just buy stuff…Do stuff. This new tagline seems intuitively aligned with what many people seem to want. “Help me better use the great technology that I have”. “Help me to understand what technology I need that I don’t even know about”.

 Link your customer, consumer, and employee research to surprise and delight both your customers and your employees.

Engaging the customer also means rethinking the store layout to maximize shelf-space, strategically positioning the high dollar of margin and technologically relevant inventory, and “clustering” solutions in the same spot so cross-selling opportunities and accessories are in close proximity to the featured item.

Developing

How do you best develop people? The most effective development approach involves a 70/20/10 formula. Seventy percent of development comes from on-the-job experience; 20% comes from coaching and mentoring; and 10% comes from formal training programs. While in retail there may be a larger percentage of training due to the breadth and complexity of the assortment mix, sales is fundamentally on the job training, centered around each customer interaction. In RadioShack’s case, sales associates should be using the technology that is being sold, becoming intimately involved in each function and feature in order to amaze the customer with both the capability of the technology, and the knowledge of the sales associate. It also means that managers need to spend time coaching sales associates to capitalize on the individual strengths of their team; help to strengthen the key competencies that have been identified for individual associates; and to make sure that the rewards system is aligned to create the desired behaviors. Product and service training is integral to the achievement of sales goals as sales associates need to master the products and service assortment in order to maximize the sales opportunities to the customer. On-the-job in retail means hands-on understanding of the assortment that you’re selling, and much of the hands-on learning is fundamental assortment training. 

Retail is a great laboratory to master the 70/20/10 rule and the SAIC model of “see one, do one, lead one, teach one”. See, touch and feel the critical items in the assortment; use them to understand the key features and functions; lead a training session to share the knowledge learned so that others, particularly new sales associates, can benefit from the  knowledge; and continue to teach new sales associates to help supplement any formalized certification or product and service training programs.

Later we’ll discuss the idea of a weekly RadioShack Technology Expo that could take place at each RadioShack store each Saturday (and Sunday) afternoon. Combined with a featured product or service, this customer-focused and brand-building event would feature a specific technology and offer the opportunity for a different sale associates to take the lead each Saturday in mastering the device or service, train the other sales associates in advance of the event, and lead the event during the Expo. In addition to developing content and assortment mastery, it would help to build leadership and management skills and pave the way for the more rapid creation of an assistant manager and manager pipeline, provided that the other requisite competencies and skills are exhibited.

 Never forgetting key business metrics, sales associates must understand that the path to improved performance and development begins with an understanding of the focus on high dollar of margin items, a business orientation that helps them understand the business rationale for the shift in focus, and a content-specific training program that will make them masters of the targeted items in order to please the customer, the employee, and the company.

One last point. It is critical to have a system in place to measure development. Individual Development Plans should be in place to not only track aligned sales and dollar of margin goals, but developmental goals as well. Goals might be focused on content expertise in specific areas, such as wireless, or on the development of specific competencies, but these plans must be discussed, understood, documented, and continually updated to ensure that clear expectations are set, agreed to, and that the individual and the business continue to grow.

Deploying

Once planning has been completed to identify the relevant high dollar of margin items, merchandisers have to determine how to obtain the optimum assortment at the most favorable price and quantity. Supply Chain has to determine how to best move the assortment from the source through the distribution center to the store, and to leverage online ordering if inventory levels are low.

In retail, the bottom line is the customer interaction. How do you maximize the customer experience with the store sales associate? Sales associates should be assessed to determine if they have the competencies to sell the new mix of high dollar of margin items. If not, they should be retrained to develop those competencies, and if they are not able to demonstrate them, they should leave the organization. New sales associates should be hired who already possess the desired competencies, improving their ability to successfully sell most quickly the targeted mix, and delighting the customer with their knowledge and friendliness. This will further strengthen the RadioShack brand of having knowledgeable, friendly, conveniently-located sales associates, and further broaden the brand of RadioShack as the preferred destination for relevant, leading-edge consumer electronics. Only when sales associates have been assessed, trained, retrained, or acquired with the right competencies to understand and sell the high dollar of margin assortment will the business achieve accelerated revenue growth, improved same store sales, improved tickets per day, improved average ticket price, improved dollars of margin, and improved profitability.

While mentioned previously, it’s worth repeating. The deployment of talent also creates a tremendous opportunity to test and measure the success of the deployment process. The tenets of decision science should be used to understand the relative competencies and capabilities of individual sales associates. Which sales associates are most successful? Why? What specific mix of talents, competencies, and capabilities are being put to the best use?

 How can the role profile be continually refined to understand those capabilities that are most critical to retail sales success in the RadioShack consumer electronics environment? What is the impact of the store manager or assistant manager?

What is the impact of location and assortment? Retail stores make it a habit of analyzing sales, profit, and margin data, and the movement of fast- and slow-selling merchandise. The same discipline should be used in the analysis of human capital data to understand why certain sales associates are successful, and what variables appear to be driving that success. Continually focus on ongoing testing and measuring to identify root-cause interventions that will lead to better development of talent, retention of talent, movement of talent across the enterprise, and improved financial performance.

Lastly, the deployment of store managers should be driven by market opportunity. What stores have the most market opportunity? Low-performing stores in expanding markets may offer a tremendous growth opportunity. The same analytic discipline around broad human capital data should be utilized in the search for high-performing store managers and assistant managers. The right people in the right place is a fitting analogy here. Just as General Electric identified the top talent and assigned it to the most opportunistic markets (Execution, Larry Bossidy and Ram Charan, 2002), RadioShack should continually assess their top performing store managers and assistant managers and continually deploy them in those locations where the greatest opportunity for growth exists.

Leading

Leadership at all levels needs to focus on the urgency of the changing business model. RadioShack for years has been focused on margin percentage, with pressure to improve margins above the 50% level. Wall Street has also focused on this metric, so leadership at all levels needs to take an aggressive approach to:

·       Clarify the need to change the financial focus from percentage of margin to dollars of margin

·       Help financial analysts understand how the shift will drive profitable growth and shareholder value

·       Help employees understand that this shift is fundamental to the future of the business

In the store, managers should spend their time supporting their sales associates, and not siphoning sales from their sales associates. In the world of retail, turnover is high, recruiting is challenging, and quite often highly-successful sales associates are promoted to manager and assistant manager positions because of their ability to sell, not their ability to manage and develop others. Store manager and assistant manager competencies should be reviewed to assure that they are focused on the growth and success of their store through the growth and success of the store sales associates.

  

Previously we shared some very compelling data on the impact of engaged employees on sales, profitability, and productivity. Clearly understanding the different skills and capabilities between the role of the manager and sales associate, and an aligned rewards program, will lead to higher engagement, lower turnover, higher customer satisfaction and loyalty, and improved financial results.

Store managers and corporate leadership should be held accountable for the talent and leadership pipeline. With the significant demographic changes to take place over the next twenty years as the baby boomers leave the workforce, the ability to retain, develop, and deploy great talent in your most critical positions will become increasingly difficult. A systematic process to identify top talent, understand their strengths and developmental needs, develop them through on-the-job assignments, mentor them to further engage them in the enterprise, and retain them should be the top priority for leadership at all levels. Executing strategy is done through the thoughts, ideas, minds and acts of people. Great talent will come up with the best ways to most successfully execute your strategy. Many business models, technologies, and ideas can be copied, reengineered, and regurgitated. How your people create and execute your strategy, compared to your competitors, will win the day. Your people are arguable your only true competitive advantage.    

Retaining

Retention is the glue that holds most organizations together. It’s the end result of engaging people’s minds, hearts, and hands. In their minds they understand the business strategy and their role in the bigger picture. In their hearts they feel that they are part of something bigger than themselves, that they are part of a team in an industry that will accomplish great things, both collaboratively and individually. And with their hands they will do what it takes to not only succeed, but excel.

Retention gets back to executing all of the above flawlessly. In RadioShack’s case, people need to understand the plan and the focus. Leadership at all levels must communicate the vision of the new RadioShack as the local, convenient, destination for the most relevant in consumer electronics technologies, with the most knowledgeable, friendly, and thoughtful sales associates who are able to understand your technology needs, assemble the right solution to meet your technology needs, and help you get the most out of your consumer electronics. This will best deliver on RadioShack’s most recent advertising tag line. Don’t Just Buy Stuff…Do Stuff. 

There are definite links between employee retention and business performance. Frederick Reichheld, in The Loyalty Effect, found that in one retail organization the stores ranked in the top third in employee retention  were also the top third in employee productivity, with 22% higher sales per employee than the stores in the bottom third. (Frederick Reichheld, The Loyalty Effect, 1996)

Sales associates must be acquired and deployed with the right skills to make them the most successful in the world at selling the high dollar of margin and technologically relevant assortment.

 Training and development must be focused on the identified assortment, improving the knowledge of the sales force and their ability to quickly engage and impress the customer. Compensation structures must be changed to drive sales of the high dollar of margin items, customer satisfaction and loyalty. Overall corporate performance and rewards systems should be structured to include incentives based on achieving desired revenue growth and dollar of margin targets.

One this framework is in place, some of the key drivers of retention can be addressed, such as the organization’s reputation as a great place to work (driven by the success of the strategy in the marketplace), satisfaction with the organization’s people decisions (based on well-thought-out selection, compensation, and promotion processes), and good relationships with supervisors (as managers become coaches and mentors instead of sales competitors).

Evaluating

In retail, as in almost every enterprise, what gets measured gets done. If you don’t measure your progress, how do you know that you have accomplished your goals?

Let’s first evaluate a dollars-of-margin sales strategy. To test and measure, focus on subsets of the identified high dollar of margin SKUs in each region. For example, focus on 10 SKUs in the Northeast, another 10 in the Southwest, etc. Track the improvement in sales by SKU in each region. What particular SKUs are outselling the others. Why? Was it better training? More experienced sales associates? What about local demographics? Be sure to take the external environment in to account when selecting SKUs for focus. For example, if current sales figures indicate greater sales penetration for Sirius satellite radio in large urban metropolitan areas this might be an area that merits increased focus and larger inventory. Conversely, it might be that rural areas would deliver excellent satellite radio sales because of limited reception of traditional AM and FM bands. Rely on the data. In urban areas, commute times are longer, and satellite radio sales may be driven by the perceived ability to ease the commute. What does customer research tell you? Similarly, perhaps a separate training regiment is appropriate in rural areas where the Sirius solution isn’t about the commute, but is about bringing the world to the fingertips of people where conventional radio doesn’t. Use the 5,000 store footprint to track successes and failures. Quickly drive successful practices through the organization. What assortment combinations sell well together? Wal-Mart found that banana sales peaked when positioned near the dairy case. What’s the banana/milk formula at RadioShack? What product, price, promotion, and placement mix is driving the greatest increase in sales and dollars of margin? Quickly expand those that are successful. And stop those that fail. Try other approaches to improve upon what’s working today. Customer preferences change quickly, and keeping up with them will be a true competitive advantage. Try different sales and training approaches. Different compensation structures.  Reward for improved tickets per day, average ticket price, and dollar of margin growth. Measure what works, and what doesn’t. Quickly spread what works to the rest of the appropriate stores, and stop doing what’s not working..

 The opportunity is enormous. RadioShack estimates that 94% of Americans live or work within 5 minutes of a RadioShack. Upwards of 35,000 sales associates are just minutes away from educating millions of customers on the intricacies of technology. To help people not only Buy Stuff, but Do Stuff. And increasing individual, store, and business results, and increasing shareholder value.

But how can you even further accelerate growth now that the plan is in place? By accelerating traffic.

Driving Traffic: The RadioShack Technology Expo

Remember RadioShack’s brand promise as the specialty consumer electronics retailer where you’ll find knowledgeable, friendly, conveniently located sales associates?

How do you make this brand promise come alive to both a new generation of twenty-somethings, the key 26-45 marketing segment, and the core RadioShack baby-boomer customer who may not, in fact, be getting the most out of their consumer electronics?

Imagine a RadioShack Technology Expo. Every Saturday and Sunday, rain or shine, from 1pm to 4pm, in every RadioShack store, coast to coast. Each weekend, one or two high dollar of margin and technologically-relevant items are highlighted during the Expo. This week it may be Bluetooth. Explaining what it is. How it works. What’s the latest in Bluetooth technology. The limitations of some wireless handsets and alternatives. Or home networking. Or a host of other leading, relevant consumer electronics products and solutions.  

Think again about our key talent functions, and how a focus on improving each of them will drive traffic and improve performance:

·       Plan:  What will be the schedule for the Expos for the next year? What seasonal issues should be considered, and what timing will maximize sales? How will we tie each Expo to marketing and circular production, and how will planagrams be tested to maximize placement within the store? What product-specific training will need to be prepared to be sure that the sales associates are experts on the featured Expo items.

·       Acquire:  Increased traffic, accentuating the latest in consumer electronics, and offering a learning environment focused on relevant technology will improve the brand perception of RadioShack to both the consumer and the potential employee. The employment brand proposition will be improved, and current RadioShack customers will consider RadioShack as a possible future employer of choice.

·       Engage:  Sales and corporate office associates will be engaged by the improved traffic, sales, and image of RadioShack as a destination that will more rapidly extend and improve the brand promise. Top engagement drivers, including senior management interest in employee well-being, the organization’s reputation in the community, and the ability to improve skills and capabilities, will all be heightened by the Expo, and leadership’s commitment to helping people learn not to just buy stuff, but “Do Stuff”.

  

·       Develop:  In conjunction with each weekly Expo, the item or items to be highlighted will be used to develop content-specific training programs to maximize the knowledge of each sales associate. One sales associate can take the Expo lead one week, while another prepares for the following week. Knowledge about the high dollar of margin and technologically relevant assortment is accelerated, which will accelerate sales, profits, and customer satisfaction.

·       Deploy:  What lessons can be learned from the Expo? Perhaps successful Expo store managers and sales associates could visit other locations to help imbed best practices related to the execution of the Expo. Growth opportunities might be available for new sales associates who might be teamed with more experienced associates to co-lead an Expo.

·       Lead:  The Expos would energize corporate and stores sales associates each week. Highlighted sales from featured high dollar of margin items would be top-of-mind, and the collaboration of marketing, merchandising, supply chain, finance, HR and other corporate functions would instill a collaborative environment.

·       Retain:  The Expo would help to focus on some of the key drivers of retention. The Towers Perrin 2007 Global Workforce Study identifies having excellent career advancement opportunities, satisfaction with the organization’s business decisions, and good relationship with supervisor as the three key drivers of retention. The Expo would help to let store sales associates shine as they organize and lead the Expo (leading to career advancement); the Expo would be a business initiative focused on improving financial performance, improving learning and development, and improving the corporate brand (satisfaction with the organization’s business decisions); and close interaction with the store manager would further improve relationships (good relationships with supervisor).

·       Evaluate:  At the end of the day, it’s all about improving sales. Some ideas related to the Expo might be focused on regional deviation. Segment the country in to 10 market segments. Highlight 2 separate items each week in items each week. In a month, 80 SKUs would have been tested across the country. What was learned? What specific items were the most successful sellers? Take your learnings and roll them out to the other stores to accelerate traffic and success.  Finally, what was the impact of the Expos on traffic? Did it increase? Where? Why? Continually analyze data to understand the implications of the actions you’re taking.

A Business Leader, Not Business Partner

We started with the premise that “Level 5 HR” would exhibit ambition first and foremost for the company and its success, rather than for respect for the HR function, a “seat at the table”, or the label of “strategic advisor”.  

When HR starts to speak in terms that the business, shareholders, and customers understand, there will be no need to focus on the function of HR. Or a seat at the table. Or improving the reputation or perception of the HR function.

  

HR will have improved the execution of the business strategy, and ultimately business results.

Simply stated, people execute business strategy. HR needs to take a lead in how people are attracted, deployed, rewarded, developed, engaged, retained, and continually redeployed to execute the business strategy and enable the success of the business.

Executed flawlessly, and evaluated intensively, the changes described would move RadioShack quickly toward a focus on selling a high dollar of margin assortment, improving the underlying same-store-sales metrics, and increasing shareholder value.

© 2007 Rex Gale. All Rights Reserved

Telemetry Health

Life is Social. So is Health.
Telemetry Health is an innovative health and wellness consulting firm focused on improving individual and organizational health through social interaction and intervention. More to come. Join the social health movement...

Bahavioral-Based Design: Pay Attention to the Tension

Behavioral-Based Design: Pay Attention to the Tension

How effective are corporate wellness programs?

While corporate wellness programs are flourishing, the jury is still out on their effectiveness.

Wellness proponents have been encouraged by the advent of value-based insurance design (VBID). This approach does two things: 1) Lowers (or eliminates) copays and coinsurance for certain medications and preventive services (high value) that prevent or effectively manage disease, and 2) Increases copays, coinsurance or other payments for hospital-based and higher-cost (low value) services.

VBID has been shown to increase medication compliance and the use of preventive services. But is the investment achieving the cost savings and health improvement long sought after?

Regarding cost, an article in the February 2010 issue of Health Affairs (1) suggests that one employer’s value-based insurance design “broke even” by reducing non-drug health care services that offset the increase in drug spend. While the study did not include the cost of implementing the program, it did provide some support for the continued use of VBID approaches to manage cost.

What about improving health and reducing health risk? This is a thornier question because it relies on two things…you and me. Are we willing to change our behavior to improve our health, and if not, what then?

Incentives have also been a popular approach to get people’s attention. But how effective have incentives been? A recent survey by Buck Consultants (2) estimates that only 19% of employers believe that incentives are “effective or extremely effective” at changing behavior. At the other end of the scale, 48% of respondents said their incentive programs were “minimally effective”, “not effective”, or “don’t know”.
With little concrete evidence of wellness program success, and the perceived ineffectiveness of incentives, what can be done to successfully lower cost and improve health through wellness?

Behavioral-Based Design

Behavioral-Based Design (BBD) is an emerging concept centered around one key driver…managing “tension” to motivate action. The “tension” driver is derived from much of the behavioral economics research related to human biases, particularly social bias, loss aversion, inertia, present bias, and statistical optimism.

In the VBID approach, reducing financial barriers certainly encourages people to obtain and take their medication as prescribed. And it encourages people to seek out care to treat and preventive disease. But the lack of an increased level of tension is the main reason that even these approaches are not changing the behavior of the vast majority of people. While it’s great to pay less…or nothing…for prescriptions and preventive care, evidence shows us that many people still don’t take the action to change their behavior. Incorporating more “tension mechanisms” in VBID will help to improve the success and effectiveness of these programs.

Incentives, though widely used, also rarely increase tension. Why? The incentive amounts are usually not high enough to get someone’s attention. Most employers are offering annual incentives in the $100-$250 range, according to the Buck Consultants Global Wellness Survey. In a rational world, pocketing an extra $100 should be a no-brainer. Yet people leave money on the table all the time, often due to inertia, the strongest of the behavioral biases.

Pay Attention to the Tension

How does BBD manage tension to motivate action? Let’s consider a few examples:

Safeway introduced their “Health Measures” program a few years ago. The design had its roots in the basic tenets of behavioral-based design. Under the program, if you take certain actions and reach certain thresholds, you can earn an incentive up to $1,300, or up to $2,600 if your spouse participates and reaches those same thresholds. Does $1,300 or $2,600 get your attention? Yes, because it raised your level of tension. $100 may not get your attention, but 13x that does, as it did for 85% of the employees eligible for the Safeway program. The learning is that incentives should be meaningful enough to get attention and motivate action.

AmeriGas requires employees to obtain periodic medical exams. If you don’t, you lose your employer-provided health insurance. Compliance is high…because tension is equally high. Mandates increase tension and get people’s attention.

Let’s take another example: On-site fitness centers. Do they pass the “tension” test? No. Fitness centers are a wonderful benefit, and many employees benefit from the corporate investment in on-site centers. Yet without a “tension mechanism” in place to motivate the majority of the workforce to act, usage will be limited to a small percentage of the workforce.

What about corporate “challenges?” Do they meet the “tension” test? Yes. People are influenced to a large extent by social bias. We like to “be in it together”. That’s why corporate challenges and The Biggest Loser have been wildly successful. Not because of the program itself. Because the program creates tension, which initiates motivation and action.

The tenets of BBD need to be aligned with your organizational culture and overall total rewards strategy. While this approach may not be for everyone, it should be considered as you look at benefits design changes for 2012 (yes…it’s that time time). As you reviewing new design alternatives, remember to pay attention to the tension and ask one question: “Will this provision raise tension to the level that people will act”

Measuring Behavior Change
Remember to track your results. Human behavior change can be easily measured. You should always pay attention to the success of your programs and practices. What participation, completion, and achievement goals have you set? Are they high enough to increase your own level of attention to achieve them? Are you meticulously tracking cohort groups who are achieving the desired goals, and the impact on health care cost, health risk, absence, disability, and productivity? Are you showing tangible results of the financial impact of your strategy and interventions? We need to be thinking about ways to dramatically increase the bar to initiate action, change harmful behaviors, and foster helpful behaviors in the effort to improve individual and organizational health that will lead to improved individual and organizational productivity and sustainability.

Bottom Line: Improving Health, Improving Life
The holy grail of health and wellness promotion is the ability to change human behavior to promote health and improve overall health risk. Only by increasing tension to motivate action can we get people to take the right steps to volunteer, participate, achieve and believe that they can improve their health and live a long and healthier life.

Remember: Pay attention to the tension.

From Boom to Bust: How’s Your Financial Health?

Baby-boomers (full disclosure…I resemble that remark) are confronting a financial bust.
The Feb. 19th Wall Street Journal article, Retiring Boomers Find 401(k) Plans Fall Short, starkly paints the picture:
A 60 year-old boomer has a median income of $87,700, and a median 401(k) account balance of $149,400.
Guess what that $149,400 would generate monthly if invested in a fixed annuity today?
About $757 a month (or $9,073 a year).
Even with the expected social security median annual benefit payment of $35,080 (about 40% of pre-retirement income), that equals $44,153 annually, or about 50.3% of pre-retirement income.
Could you live on half your income tomorrow…comfortably?
If you have a pension or other investments, this helps, but half of all boomers do not have a pension to help fund retirement.
How did we get in this situation?
A simple answer is that we, as boomers, elected to spend rather than save.
And as employers, we moved from defined benefit pension plans to defined contribution 401(k) plans as the primary retirement vehicles for employees.
And our need to save for retirement grew exponentially.
And our minds may not have been able to deal with this new reality.
Decision science, behavioral economics, and raw emotion have shown that we prefer pleasure over pain (we buy versus save) and inertia over action (it takes effort to enroll in the 401(k) and save at the maximum level, and it takes no effort to forget to enroll.)
How is your financial health? And if you are responsible for designing your company’s retirement plan, what is the financial health of your employees?
Many employers now offer auto-enrollment, auto-escalation and auto-rebalance features that “nudge” people to make better long-term savings and investment decisions.
Yet many auto-enrollment provisions have employees contributing just 3% of their salary.
So a 30-year old today earning $50,000 annually, saving 3% of pay, receiving annual pay increases of 2.5%, and earning a 6% average annual rate of return, will accumulate just over $200,000 over the next 35 years. Quite simply, that's wholly inadequate. Inflation will take an even bigger bite out of your retirement income needs by 2045.
Vanguard Group, one of the world’s largest mutual fund companies, is now advising people to contribute 12% to 15%, including employer contributions, to adequately prepare for retirement and uncertainty about Social Security and Medicare.
While the best time to plant a tree was a generation ago, the same rule applies to saving for retirement.
But it’s never too late to save more today.
One final note:
I’ve sent this article to my children who are 23 and 26. And I’ve asked how much they are saving. They are increasing that amount significantly
Here’s to your financial health...and the financial health of your children!

Sustainability-based Human Capital Management

How sustainable are you? Your company? Our world?
Sustainability-based human capital management looks holistically at moving beyond a "culture of health" to a "culture of sustainability" based on three fundamental pillars: Environmental sustainability, organizational sustainability, and individual sustainability.
Environmental sustainability is what is normally considered the "green" movement...reducing an organization's carbon footprint; adopting environmentally-friendly operating and manufacturing practices; and on a more micro level, working locally in the community to promote environmentally- and community-friendly programs and practices.
Organizational sustainability is about focusing first and foremost on the ability of the business to drive sustainable growth and profitability. This includes processes to continually assess strategy (vision, mission, values, markets, and competitive advantage); operations (structure, processes and practices); innovation (the "fuel" of organizational sustainability); analytics (the lifeblood of any effective enterprise) and talent (people execute and operationalize business strategy. When people execute well, it's almost impossible to replicate).
Individual sustainability is about helping people rise to their greatest level of achievement.Individual sustainability is driven by critical talent management practices that holistically engage people in their career, health and wealth; and inspire them to achieve their greatest potential in work and life.
People have an innate desire to be part of something greater than themselves. Sustainability-based human capital management will take the individual, the organization, and the environment to the next level.
Sustainability is about understanding the best of the current environment...externally, organizationally, and internally...and creating the path that will lead to perpetually improved environmental, organizational, and individual health.

Count your $20 Blessings

We happened to stop at the store the other night on our way home from getting a little exercise. It was a quick stop, we gathered the few items we were after, and went to the checkout. I wasn't aware of it, but it seems that the woman ahead of us in line was having a problem with her credit or debit card. It wouldn't approve her purchase of $14. 67, and she walked out of the store. As she was leaving my wife Susan noticed her pretty quick departure. We put our few items on the counter and the cashier said that she was sorry, but she needed a manager to cancel a transaction. My wife put 2 and 2 together and realized that the woman that had been ahead of us was not able to pay for her groceries. There they sat, bagged and ready to be taken home. We could see some if the items...a loaf of bread, peanut butter, some apples...pretty much the staples of a quick lunch or dinner. We offered to pay the bill...the only problem was that the woman had left the store and the sacks had nowhere to go. So the register was cleared, we payed for our things, and went out to our car.

Perhaps there is such a thing as divine intervention...or sheer coincidence. As I slid into the passenger seat and Susan the driver's seat, Susan noticed a family in the car beside us. Looking closer, she saw it was the woman who had left her groceries, unable to pay. Susan quickly took a $20 bill and walked over to the neighboring car window. We'd like to help pay for the groceries, she said. The woman objected at first, but slowly, and thankfully accepted. Inside the car with her were her four children, ranging in ages from toddler to high school. She opened the door and thanked Susan for her kindness. She broke into tears, sharing that her husband had left her, there was little money, and all she wanted was to buy some bread and groceries to feed her children.

The next time you see a $20 bill, count your numerous blessings. For some, $20 is a week's worth of coffee, or a few workday lunches. To others, it's a simple matter of survival, a full stomach for your children, and a windfall on a day when the winds seem destined to blow strongly against you. Count your $20 blessings. And if you're able, share your $20 blessings, like Susan.

Random Acts of Grocery Carts

Yesterday's post mentioned my friend Jack, who took the hand of an elderly woman in dance and transformed her evening from one of mere observation to one of dance and participation. Jack demonstrated a random act of kindness that made the evening memorable not only for the elderly woman, but for all who witnessed the event.

My random act of kindness was not nearly as powerful. At an unplanned stop at a local store, I walked my basket out to the car to unload my groceries. Dutifully, instead of leaving the basket to the fates of the winds (which were gusting at 35 miles per hour), I returned the basket to the store. Walking back to my car, another shopper had just finished unloading, and had less dutifully left her cart to the wiles of the aforementioned winds. As she pullout of her parking space, her orphaned cart made a beeline straight toward the right front side panel of a defenseless grey Chrysler 300. I quickly intercepted the cart before the collision, and retraced my steps to the front of the store to return the cart to its rightful home.

While the owner of the Chrysler is unaware of my actions, I am.

Jack, you've made me think about looking every day for those random acts of kindness that will make me, and the world, a better place to live. Here's hoping that Jack will inspire you as well.