NEW YORK -- Benchmarking based on sales data has its benefits, and benchmarking based on sales per labor hour had real positive results for one Oklahoma retailer. We were able to break [our data] down to the smallest factor, said Martin Smith, president of Elmer Smith Oil Co., so [store supervisors] knew that on a Friday afternoon in the summertime, you need to have an extra person [on the clock], but on a Tuesday in the middle of the day, we can get by with one fewer [employee].
Smith shared the results of his Clinton, Okla.-based company's new philosophy [image-nocss] during a CSPNetwork CyberConference titled How's Business 2006Improving Your Bottom Line sponsored by McLane Co. By breaking it down weekly for them, [employees] were able to track their progress and say, OK, where am I at?', said Smith. [To view an OnDemand replay of this CyberConference, click here (free for retailers and wholesalers; $49 for suppliers).]
After signing up with the benchmarking experts at CSX LLC, Columbia, Mo., Smith got a fresh look at how his sales-per-labor-hour data compared with industry averages and realized he had to do something. The result was establishing sales budgets for store supervisors and offering them incentives to meet those budgets.
We didn't just give them the information and say, Go ahead and do it.' After wegave them the incentive, they were real curious about how to [meet their goals], said Smith, who runs 13 stores under the Domino Stores banner. We did have managers say, That's impossible. It can't be done.' Then after some time passed, we'd show them that the other stores were making it happened, and that set an example of how to do it.
In the year since implementing the new process, Smith has increased his stores' gross profit dollars per labor dollar spent from about $2.20well below the CSX average $2.59to more than $3.00. I don't think we have any stores that haven't hit their goal, he said.
Gene Gerke, co-founder and partner in CSX, said gross profit per labor dollar is just one of many metrics that lends itself to benchmarking and developing new initiatives. Others include:
Fuel gallons plus inside sales per store. Pre-tax profit per store. Merchandise inventory turns. Return on capital employed. Gallons of gasoline sold per store. Gallons sold per fueling position. Merchandise sales per square foot.One of the advantages of benchmarking on a broad base of items is that it helps you focus on where the opportunities are, and it helps provide accountability to people in terms of measurement, Gerke said during the CyberConference.
The advantage of looking at these metrics is to not become overwhelmed with all the metrics you can have doing benchmarking, but to very quickly focus on those areas where you're underperforming, and focus on fixing that problem first, he added. Then you go look at the next area where you could have improvement and have your management team focus on that. And if you do that consistently and take focused efforts on improving key productivity measures, you're going to make more money.
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