The most recent rounds of corporate earnings reports for retail companies has by and large been very disappointing. Many companies are struggling to survive in an environment dominated by a few large ecommerce companies.
Disappointing earnings have resulted in lowered outlooks and fallen stock prices of many retail companies.
I recently had the opportunity to talk to several people who work in corporate America, particularly retail. What I learned is scary.
In addition to focusing on closing stores and reducing costs, many companies are resorting to extreme discounting and price matching strategies in order to draw in more traffic and stimulate sales. However, the net impact of this approach has been to alienate the company’s high value core clients (due to impaired customer service) and to attract a clientele that is focused on lower price and discounts. As a result margins are being squeezed even more than before.
When asked about whether local stores are able to use innovative strategies at the store level of management to increase sales, the answer across the board was, “there is no creativity; it has to come from corporate”. In addition the sense among many is that local managers feel safer in their jobs by conforming, rather than innovating.
I talked to David Schlueter, a staff sergeant in the US Army with 19years experience and MBA candidate for Organizational Leadership and Change Management, about this issue.
I asked David, ‘What are the top 3 things that must be changed from a management perspective in order for failing corporations to turn things around?’
“First the leadership team who ever that might be, needs to determine what exactly the cause of the problems are. For example sales are down, but what is causing sales to be down. Once there is an agreement on the cause of the issues then a plan needs to be made that will fix the problems. Then once the plan is in place to fix the problems there needs to be supervision and revision. What I mean by that is the plan needs to be supervised so that the employees don’t fall back in to their old way of doing things. The revision part is to check for any weak points in the plan and then adjust according.”
While I agree with all of what David said, there is little proof that this has been successfully accomplished in the past. Most plans fail due to poor execution, poor analysis, and poor internal dynamics.
I asked David, ‘What changes would you recommend to improve communications/relations between local managers and corporate offices?’
“I think this has to come from the top down. The employee is not going to go to his/her boss without feeling comfortable in doing so. The corporate managers need to show the local managers that they are a valued part of the team and the corporate guys are willing to go out on a limb so to speak for the local managers.
One of the first things I was told in the Army was that bad news doesn’t get better with time. So if their communication issues between these two levels then something needs to be done to fix it.
The first time I was deployed to Iraq my section was out on patrol with the Platoon Sergeant and his crew on a couple of Bradley fighting vehicles. I was in the lead vehicle the Platoon Sergeant and we passed a suspicious looking hole on the side of the road. I drove passed the Platoon Sergeant and his vehicle stayed on the far side. So the Platoon Sergeant called over the radio and told me to check out what was in that hole. I knew I could sent one of the Soldiers that were riding in the back, but I choose to go check it out myself putting my life on the line for my soldiers. Long story short there were 3 155mm artillery rounds wired together to blow up… lucky for me they didn’t. Any way the point of this story was to show that leaders sometimes need to do things their employee should do in order to show those employees that the leader isn’t better than they are. This will help with communication problems between the two levels.”
I thought that was very insightful on many levels. The real work gets done in the trenches; leaders can’t lead hiding behind corporate desks and martini lunches.
Finally, I asked David, ‘What impact does poor morale have on corporate financial performance (i.e. Sales, revenue)? What do you recommend to improve moral?’
“Poor moral can have an effect on any part of a business, but several things can be done. The management might have to look in to the causes of the problems like what I talked about in the first question and figure out a plan of action. Some of the employees may be feeling unappreciated for their work and that can be fixed by some esprit de corps type functions or maybe the managers just need to change their attitudes towards the employees and stop acting like there are better than everybody else. Sometimes the managers need get down in the so called trenches and get dirty with their employees.”
The truth is most corporations are focused on quarterly earnings reports and not their employees.
I love watching the show “The Profit” with Marcus Lemonis. One of his key pieces of advice… “Value your employees first.” If you don’t, he says the rest of the business is going to fall apart.
The sad truth is that companies that do not innovate, do not survive. And the best innovation comes from the trenches.
While I understand that it is important for corporations to maintain control over its brand and message, there has to be allowances and even promotion of innovation throughout its management structure.
Let me know your thoughts on this subject. I’m happy to chat.
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