Employee Retention Efforts Drive Turnaround at Sears
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Employee satisfaction is essential to any effective employee retention
strategy - any good HR manager knows that. However few managers think of the
impact that employee satisfaction has on their customers and ultimately company
profits. One can assume that happier, more productive employees will make more
sales, treat customers better, and ultimately make more money for the company,
but few companies have analyzed this assumption to the extent that Sears,
Roebuck and Company has. Sears has put this common assumption to the numbers
test and the results are intriguing to say the very least.
1992 was the worst year on record for Sears, losing almost 4 billion dollars
on over 52 billion dollars in retail sales. The early and mid 1990s were truly
trying times for the retail giant and tested the will and resolve of managers
and employees alike. During this time the company was in near shambles, morale
was low, revenues were suffering, and the bottom line was hemorrhaging red ink.
This was in stark contrast to nearly a century of stellar results that Sears had
comfortably enjoyed. For Sears, something needed to be done, and fast!
Sears began their turnaround by identifying three key objectives: Creating a
compelling place to work, a compelling place to shop, and lastly creating a
compelling place to invest. One of the tools used to establish these objectives
was the employee-customer-profit chain. The employee-customer-profit chain is
essentially a flow chart that diagrams revenue creation starting with employee
attitudes and satisfaction, followed by its effect on customer satisfaction, and
ultimately the effect on revenue and bottom line profit generation.
One thing Sears realized it needed to do was exert a greater effort focusing
on the customer. This is often times easier said than done for many
organizations. However Sears took an innovative approach to increasing customer
focus. Based on the employee-customer-profit chain, it realized that it could
not better focus on the customer without first focusing on its employees.
For Sears 70% of its workforce was part-time status and turnover among its
part-time workforce had become alarmingly high. Sears suspected that low morale
and poor employee attitudes towards the company were to blame. Sears began a
rigorous process of measuring employee attitudes and satisfaction via a 70
question employee survey. The results of this survey were then juxtaposed to
customer satisfaction surveys and ultimately compared to revenue and profit
trends for the company. The correlations drawn from the data were greater than
Sears could have ever imagined.
Undoubtedly Sears expected to see some positive correlation between employee
and customer satisfaction and ultimately revenue and profit generation; however
they were amazed to see just how great an impact employee satisfaction levels
had on the bottom line. The data revealed that for each five point improvement
on the employee attitude scale, there was a subsequent 1.3% improvement in
customer satisfaction, and a 0.5% increase in revenue growth.
A 0.5% increase in revenue might sound miniscule, however when it is based on
revenues of over 50 billion dollars it adds up quickly and significantly. For
Sears this would equate to a 250 million dollar increase in revenues a year!
This revenue increase does not require investments into advertising, new
facilities, or improved operations, only an investment into the satisfaction and
happiness of employees.
There are also cost savings that can be attributed to improved levels of
employee satisfaction. It should come as no surprise that happy employees stay
in their jobs longer than unhappy employees. By focusing on increasing employee
satisfaction Sears was able to concurrently increase revenues and reduce the
costs associated with employee turnover. Sears was also able to determine that
employees with greater levels of satisfaction and a favorable attitude towards
the company were more likely to speak positively about the company and recommend
shopping there to friends and family members. By increasing employee
satisfaction Sears was able to generate free word of mouth advertising spread by
its employees, thus in a way reducing the reliance on paid advertising to
generate revenue. Sears realized the importance of its employees and their
levels of satisfaction and made it a corporate goal to increase levels of
employee satisfaction throughout the company.
Sears feels that employee satisfaction levels are so important to the
company's health and vitality that it treats attitude and satisfaction numbers
the same as "hard" financial numbers. Sears is so committed to these numbers
that it has them audited by an accounting team to ensure validity and
reliability just as it does with all of its internal financial measures.
For Sears its turnaround did not take place overnight. It took several years
of hard work and dedication from managers and employees at all levels. Improving
levels of employee satisfaction was not the sole contributing factor to Sears'
remarkable turnaround. However it is fair to assume that without the focus on
the employee as a base to better focus on the customer the turnaround at Sears
would not have been as quick or amazing as it was.
As business leaders we should all pay careful attention to the approach that
Sears took to improving its bottom line. The urge to drastically cut costs
through outsourcing, layoffs, reducing benefits, and streamlining operations
might well be overly complex solutions to a relatively simple problem. In lieu
of cost cutting initiatives to preserve profit margins, a customer focused
approach might be a better solution. As we can learn from Sears focusing on the
customer ultimately begins by focusing on the employees who serve the customer.
Give it a shot, your employees, your customers, and ultimately your shareholders
will thank you for it!
For more information about Sears' remarkable turnaround in the 1990s check
out the cover story of the January/February 1998 issue of The Harvard Business
About the Author
Chris Young is founder of The Rainmaker Group of Bismarck, ND. Young and his
team specialize in the selection and development of human capital in
organization of all sizes. Give Chris a shout today and start maximizing
possiblity in your organization!
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Article Published/Sorted/Amended on Scopulus 2007-03-28 19:32:12 in Employee Articles