Information breeds employee engagement and increased profits.
One of the podcasts that I listen to regularly, having an interest in economics, is Russ Roberts of Econtalk, which can be found at www.econtalk.org. Russ Roberts, of the Charles Mason University in the United States, provides very interesting interviews with economists and other business people on a wide range of business and economic topics. Recently he interviewed with Charles Platt, who had worked for a short period of time at Wal-Mart. and the interview was about some of the lessons that Charles learnt at Wal-Mart, and it’s one of the lessons he spoke about in the interview that I’m covering today in this blog post.
Charles talked about the autonomy that employees had at Wal-Mart. Now, we think of Wal-Mart as the world’s largest company, and the size and scope of its supply chain and the level of control that it potentially seems to have over its suppliers, and also over its staffing. There is the common belief out there that Wal-Mart employees are fairly “hard done by”. Whilst in the United States and Canada last year, we visited a couple of Wal-Mart’s to have a look at this phenomena, but I noted that there is still a large number of staff still being employed by this company. Not everybody hates it, it seems.
But the lesson that Charles talked about was the actual level of autonomy that individual employees were given. They had a hand-held scanner called a Telexon linked to a computer that runs the store. This tells how much of a particular item is available in stock, the price and how much Wal-Mart pays for the item. Thus, each individual employee knows what the profit margin is of a particular stock item. Wal-Mart wants employees to be properly informed because they want staff to have the information to be able to make informed decisions. Because the individual employees are given the authority to re-order merchandise and also authority to do a “special” value price.
So individual employees can set out a pallet stamped with a discount price, print the price stickers, put it on the pallet, and those who set up the most successful value price get a $50 coupon or similar item. Those who are particularly successful end up being recognised by head office. So think about this for a minute – low-paid employees on typical wages in the US of $7-$10/hr have the information to know exactly the profit margin of each line item, and not only that, have the authority to put on a special price where appropriate.
Wal-Mart believes that this local knowledge will lead to greater sales overall than dictating what the price must be from head office for every line item without any discretion by anybody. There are measures in place through regular weekly meetings on the profit and loss of each division within the Wal-Mart store to ensure that there is not over-zealous under-pricing, but the important point to remember here is that all employees were given the information and then the authority. Oftentimes in business, I see important information on the profit and loss statement being withheld from team members, but here we have the world’s biggest company giving the front-line people not only the information on the profit margins for each line item, but also the authority to change the prices if they see fit.
I do believe that it is important that we inform everybody and have a relevant scorecard, so everybody knows how the business is going. Give the individual staff the information on the buisness; give the people the information to be able to know the consequences of their actions. If the world’s biggest company is able to provide their profit and loss per line item to their front-line employees, surely you can. Yes, there needs to be the appropriate checks and balances in place, but not as many as you may think. It is through the value of local knowledge that the head office of Wal-Mart has ensured that they will maximise the sales from each store. Wal-Mart head office would have a lot of information about what is selling, but it doesn’t have the local information as to what is appealing at that point in time for particular reasons to that community, whereas the people in the front-line of the store do, so they give them the information to know, so that knowledge can be taking advantage of.
What is the knowledge that is in your employee base that you aren’t taking advantage of? Through this protectiveness of the information pertaining to the profitability of a service or a product, we miss out on being able to utilise the knowledge of our team members. How can you implement a system to take advantage of your team members to lead to increased sales and increased profit?
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