It's a people thing

Consider Pete, a 12-year garden center veteran and hard-goods department manager who doesn’t seem to get out on the sales floor as much as he used to. Or Allison, the annual department head, who always expects her people to fill up the tables wrongly on her day off because they never do it like she showed them in April. Then, there is Lynn, the gift and Christmas manager who finds it hard to keep good help, as no one seems to understand business.

Sound familiar? Jobs taking longer than expected, people producing less as the company expands or new workers not as productive as the old guard? Can’t delegate because they’ll never know it or do it to your standards?

Invest in People First
In most garden centers, the cost of labor is huge compared to most other costs. For instance, labor can cost five times as much as the advertising and more than 10 times as much as shrink or theft. Yet in a recession, some retailers have invested in cameras and other ways to reduce losses through theft while cutting back on training, communicating and team building – the essentials of increased productivity. It was the wonderful Peter Drucker who suggested that management spends most of its energy solving repetitive problems that slow business down, rather than developing opportunities for expanding it.

Labor productivity is one of those opportunities; people are simply a company’s greatest asset when on their game – and its biggest drain when they are not. There are a thousand ways to motivate and keep people on their game, but first a manager needs a yardstick to measure productivity.

There are several ways to measure retail labor productivity, but the easiest to work with is “Sales Dollars Per Labor Hour.” To find this simply divide the year’s sales volume by the number of RETAIL hours worked (including a reasonable amount for salaried and owners who might be putting in a lot more than 40 hours a week). In a full-service GC, across the whole 12 months, this number must average at least $65 per labor hour (PLH) just for the company to break even. I am always reluctant to give a “magic number” without adding an explanation because people might take that one figure and apply it out of context, so bear with me while I add some background.

The Backstory
Obviously, on a spring Saturday if you divide the sales volume that day by the hours that were on payroll, the number may be well over $300; and, of course, the reverse will apply on a wet Tuesday in February. The $65 PLH is an average to bear in mind throughout the year.

This number should NOT be applied to a single employee, either, because it takes into account “hot shot” salespeople together with those who simply ring up sales at the register plus those who never see the public but are just as important to the overall running of the company. However, this number is very helpful when determining labor scheduling and hiring needs for departments or divisions.

For instance, in a “full service” retail garden business (with a 40-hour week over 50 weeks), the break-even point of a department or category is 2,000 hours x $65 or $130,000 in sales volume. That means if you expect sales of only $130,000 you can really only afford one person or 2,000 hours in that section in a year. Did I hear wailing from those departments with two full-time and one part-time staffers that bring in only $150,000 per year? Don’t panic, I’ve seen worse.

Certainly, every business is different. This is a cautious number to use to compare with your peers and networkers because it depends on the definition of “service.” I have seen centers that call themselves “full service” and produce a figure of $125 PLH or $250,000 per year, but when you shop there, no one appears. Other places might employ vendors to do much of the work, which is why some of the home stores would have an enormous figure. But as an internal measurement or output produced by your human resources, this is a great measurement to monitor.

Obviously, if you have a figure of $65 and employees averaging $18 per hour (plus benefits and taxes amounting to another $6 or more), that $65 doesn’t leave very much once you have paid your suppliers and your team!

Over the years this number should at least keep pace with the rise in the cost of employing people – and should consider factors such as wages, taxes, insurance and so on. To show real progress and to make a higher bottom line, companies are trying to grow this number by at least twice the rise in labor costs.

We have full-service clients who always exceed $90 PLH with a few in the $100-$120 range. They are not any bigger in facilities – though smaller sites can be more efficient to run – nor are they blessed with perfect locations, weather or markets. What they do is leverage their team talent and invest in the opportunities their people bring to the company.

Remember that this Sales PLH number is not about the cost of labor or pay rates; it is about the number of people-hours a company uses to produce sales revenue, so cutting wages or hiring cheaper isn’t the answer. Working smarter is.

So, in the spirit of sharing and caring, here are some of the ways the garden centers with high productivity maintain their “edge”.

What's in Store for 2010
I predict that this is going to be a “people” decade and that the sooner you realize this the quicker you will succeed. Labor is your biggest cost, and in a time when sales are flat and profits are challenged, the output from the people employed is your biggest opportunity for improvement.

As shoppers become more technologically dependent (think Googling for the nearest retailer of Mexican Sage), the people in front- line contact can and will be the differentiating factor. As competition intensifies and margins become more challenged, the productivity of those people will decide which companies thrive and which wither away.

Happy productivities for the New Year!

For more useful – and profitable – ideas from Ian Baldwin , check out his new sales motivation training program called “T.L.C … Think Like Customers.” The DVD and interactive training workbook are available at www.ianbaldwin.com.