‘Big Data’ in HR Can Improve Retailers’ Profits
By Jason Taylor, Ph.D., [email protected]
A friend who’s a retail chain operations VP recently told me about his company’s expansion plans, but he wasn’t sure they were expanding in the right ways. That’s when we talked about how data can answer strategic questions with certainty. He already had some of the data, and he could easily get other data that could show which specific departments and employees consistently perform best during which hours and days to determine where to expand.
In the past, retail executives’ success required great intuition and risk-taking abilities bound with hope and luck. Today ‘big data’ is replacing intuition and hope. With technological advances, organizations are now able to collect large amounts of data and turn it into the fuel that drives a predictive decision-making machine. Similar to how retailers analyze data to learn shoppers’ habits, employee selection and succession can also leverage big data to predict success.
The nuts and bolts of gathering and storing data may be IT topics. However; investors want higher profits and customers want better products faster and delivered with superb customer service, which aren’t IT issues. Executives must also predict market needs and then determine who, how and from where these needs can be fulfilled. People make this happen.
In today’s marketplace, successful retailers are searching for new ways to collect and analyze the most strategic business data that provides a competitive advantage. Those that have data and know how to use it are methodically outperforming the competition. In fact, the McKinsey Global Institute determined that data has swept into every aspect of business. In terms of importance, data now sits alongside both labor and capital as critical factors for business success.
The human capital field has embraced the use of big data to identify, select and develop a cutting-edge workforce that will produce and contribute more to the bottom-line at the job level. A call center operations manager, for example, can see productivity by employee down to the day and time to see where improvements are needed.
People are usually the greatest expense on balance sheet. All executives need to maximize the effectiveness of their people is a systemic way to measure performance and tie it back to selection. Retailers now have the ability to use big data to ensure every new hire is selected based on their probability for high performance. Good data reduces the intuition and guesswork. If done correctly, companies can calibrate employee selection criteria and how they measure employee performance and use the new knowledge to improve performance throughout the organization.
Where to begin for good, fast results
To effectively leverage big data, retailers must first have valuable high-quality employee data that provides objective performance level information of each individual in a given role. What isn’t measured won’t improve, so measuring data will enable valuable predictions.
When numbers do not meet expectations, organizations make cuts, sell divisions, or execute other large-scale group changes. Since larger companies typically don’t collect data at the department or individual levels, executives often make strategic decisions based on regional or overall company performance data. They use group solutions to resolve individual performance problems, creating a cycle of reactive decisions – like closing branches – based on very little accurate information.
Big data breaks the guessing game cycle. Regardless of the job, starting with performance and behavioral data at the individual level rather than at the location, role or other level to create prediction models will increase the probability of hiring employees that will improve profits and company performance. Eventually stock price will also increase.
Frequency and timing is critical to effective data analysis. Collect periodic data that provides insight into performance over time. The more granular the information, the more interpretation and insight can be gained from the data. For example, a retailer that collects individual total sales for each calendar year limits the insight and contribution to a prediction model. The company could gain more information by collecting individual performance data at quarterly, monthly or weekly increments. This retailer would now be able to evaluate individual-level performance to understand early stage ramp-up times, sales cycles and each employee’s consistency over time.
How to collect valuable performance data
Data collection is just as critical as the data itself, so accuracy, method and variability are vital components. To become data-centered organizations, retailers should use systems to ensure data is accurate and represents true performance over time. Accurate performance data will provide the data needed to create prediction models that will improve performance employee by employee.
The quality of data collected drives retailers’ abilities to select candidates with the highest probability of high performance. To gain the most accurate insight from big data, first determine the question, and then ensure the data is focused on providing an accurate answer. For example, a retail client that desires to be known as a high-service brand can focus on secret shopper scores or sales by employee. The client should focus on sales since sales numbers are a more stable metric with less subjectivity, and the best indicator of high service levels are reflected through customers’ wallets.
With data collected and analyzed all the way to the individual level, big data truly becomes the competitive advantage. Big data helps align company strategies with individual employees’ goals, and helps organizations reward performance based on the most strategic measures. Organizations can hire and use their people as a competitive advantage to achieve priority company strategies.
Big data is here to stay, and retailers with the greatest ability to leverage it will continue to outpace their competition. These companies should continue to develop the practice to move into the future. If a retailer is staring at a blank page, then it’s time to make a case to improve the data situation. The effort and reward for using big data will have worthwhile profit payoffs.
Dollar General Q4 earnings rise; 635 stores on tap for fiscal 2013
Goodlettsville, Tenn. — Dollar General reported Monday net income of $317 million for the quarter ended Feb. 1, compared with $293 million in the year-ago period, beating Wall Street expectations. The company also forecasted 2013 sales growth of 10%-12%, slightly below analysts’ views.
Revenue edged up 0.5% to $4.21 billion in the quarter, missing Wall Street’s expected $4.26 billion. Same-store sales rose 3%.
For the full year, profit grew to $953 million from $767 million, and revenue rose 8.2% to $16.02 billion.
“We grew our market share and invested strategically to continue to win with our customers," said Dollar General CEO Rick Dreiling. “These results demonstrate the strength of our business strategy, and we believe we are very well-positioned for future growth.”
The retailer also announced Monday that it would add 635 stores this fiscal year, including 20 of its Dollar General Market stores and 40 Dollar General Plus banners. In addition, the company said it will remodel or relocate 550 stores this year.
Separately, the company announced that EVP and general counsel Susan Lanigan will retire later this year. Dollar General said it will consider both internal and external candidates for her replacement.
Schulze back at Best Buy
MINNEAPOLIS— Best Buy founder, Richard Schulze, is returning to Best Buy as its chairman Emeritus. In addition, Schulze has nominated Brad Anderson and Al Lenzmeier to serve on the Best Buy Board of Directors, pursuant to a previously disclosed agreement between the company and Schulze.
Schulze had resigned from the company last June over the scandal involving from CEO Brian Dunn. He then made several failed attempts to take Best Buy private.
Schulze expressed support for Best Buy’s current chief, Hubert Joly.
“Over the past several months, I have come to know and respect Hubert, and have a high regard for the work he and his executive team are doing to revitalize Best Buy for the benefit of all stakeholders,” said Schulze. “My dedication to the company that I founded and love is unwavering and, together with Hubert and the Board, I determined that the best way to support Best Buy would be to return in support of the initiatives underway.”