Retailing today is characterised by a distributed model with large numbers of people making independent decisions. Organisations often see a wide variance in performance between product ranges or stores that should be performing at around the same level. The challenge is to achieve sufficient control to ensure consistently high performance levels without unnecessarily hampering decision-makers’ freedom and creativity.
The right balance of control and distributed decision-making can be achieved by putting in place frameworks and management processes that allow performance to be measured and managed in a consistent way across the distributed estate. Once you can easily see the business’s performance objectives and the extent to which they are being achieved by each business unit, it becomes much easier to correct any shortfalls.
Benefits of Business Performance Management
The unexplained variance in performance that is typically seen in a distributed business indicates considerable scope for improvement. While it’s not realistic to expect all stores or ranges to equal the performance of the best, you can achieve a lot just by getting bottom-end performers to equal middle-ranking performance. One of our retail clients identified and closed a value gap of over £100m this way.
The first step in moving performance upwards is accurate segmentation. By grouping together comparable stores and product ranges, you can compare like with like to make sure the improvements you are asking for are realistic.
With the correct segmentation in place, a number of tools can help you move performance in the right direction. Balanced scorecards, appropriate metrics, carefully-defined roles and responsibilities, alignment of individual KPIs with organisational ones, senior management incentives – all these have their part to play. Individual objectives and incentives must be balanced to achieve the desired business performance.
The tools must be used within a management process that identifies and reacts to significant changes, encouraging and replicating exceptional performance and quickly addressing problems. And it's equally essentail to have the right data to populate scorecards and dashboards. The data has to be rigorously defined to ensure that everyone understands an item such as “sales” in the same way (net or gross? how is VAT handled? and so on), otherwise comparisons will be constantly challenged.
We have many years’ experience of helping tier one retailers, including Tesco and Waitrose, to implement tools such as balanced scorecards and steering wheels, together with the management processes to make use of them. As well as designing business intelligence solutions, we can help build them, and work with you to develop a suitable data warehouse if necessary.
We can provide, or help set up, a business intelligence competence centre, staffed by experts in data management and statistical analysis. This centre will ensure a single version of the truth by checking that data is consistent and reliable and is interpreted correctly. Statistical process control control techniques can interpret movements and ensure that management reacts to significant trends, but recognises temporary deviations for what they are.