5 KPIs to better manage employee performance
As a store owner or manager, you should conduct employee performance reviews with every single employee at least once a year. These formal sessions are an opportunity to sit down with each employee, look over on past discussions, make sure the employee took previous feedback into account and is on track to hit their objectives. Performance reviews are also a chance for you to share your expectations and benchmarks with your staff. Regardless, these reviews shouldn’t be the only time you give feedback to your employees. Ideally, you should monitor their performance consistently so you can offer help when needed or congratulate them when deserved.
Key performance indicators (KPIs) will help you easily track whether objectives are being met. With this information, you’ll identify any pain points and implement a strategy to improve your staff’s overall productivity. Reward your most outstanding employees and you might notice a spike in productivity amongst your sales team, as others want rewards, too. By managing staff performance, you’ll also be able to pinpoint those who aren’t meeting expectations and provide them with additional training. Retail success doesn’t come easy, but productive staff can make your job a whole lot easier!
Here are the 5 key performance indicators (KPIs) we recommend you track to improve your employee performance from today.
Sales per hour
Sales per hour will help you determine your most and least profitable store hours so you can schedule the amount of staff you need. If sales per hour are low, try to find the causes.
Is foot traffic abnormally low at certain times? If so, make sure your store display window is eye-catching to draw customers in. Try placing staff at the entrance of your store to greet customers or offer them free product samples; tasting or feeling your products might entice them to see what more you have to offer in store. Also, if you have a large front window, make sure employees are busy and don’t seem bored. Desperate-looking employees might just make them turn around.
Are you understaffed? Are your employees underperforming? Maybe you simply need to schedule more staff to better serve customers, or provide training to your staff to help them improve their selling skills.
Sales per employee
Probably the most obvious employee performance metric, sales per employee will help you assess employee performance on the sales floor. Make sure your employees are well aware of the benchmarks and expectations you want them to achieve. When you’re looking at sales results, don’t forget to take into account any variables that can skew them. Some employees might have higher-traffic shifts than others; others might have other tasks to do during their shifts, which prevent them from making sales.
To avoid unfair employee performance assessments, set benchmarks based on your own store history. If you don’t have a sales history because your store is new, ask similar retailers, your local bank or credit union for benchmarks. Essentially, you want to make sure you are using a reasonable point of comparison, so if you’re not using your own store, choose stores with similar products, square footage and foot traffic. During performance reviews, show your staff how much they’ve sold and, if necessary, give them constructive feedback on how they can improve their performance.
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Units per transaction (UPT) and average transaction value (ATV)
To know how effective your employees are at upselling, look at units per transaction (also known as items per customer (IPC)) and average transaction value. ATV shows the average dollar value for every transaction per employee and the extent to which your staff can maximize the dollar value out of each customer interaction. UPT shows how well sales associates are upselling and adding accessories or other items to the transaction. Are your staff such great stylists that customers leave your store newly clothed head to toe? Are they able to upsell accessories and convince them that the belt, blazer or necklace is a must to achieve the perfect look? With the right sales approach, customers will buy more items per transaction and the transaction value will increase.
Average transaction value shows the average dollar value for every transaction per employee. It shows to what extent your staff can maximize the dollar value out of each customer interaction. Units per transaction show how well sales associates are upselling and adding accessories or other items to the transaction.
ATV = Total sales per employee / Total number of transactions per employee
UPT = Total number of units sold per employee / Total number of transactions per employee
Here are a few tips to help you increase these metrics:
- Make sure the accessories you sell fit nicely with the rest of your clothing line.
- Ensure your staff are knowledgeable about your products. This way, they can better educate customers and encourage them to make additional purchases. To effectively upsell to customers, your employees need to show customers the value of the additional purchase.
- Show your staff how they can improve their upselling skills and remind them of the value of the fitting room conversation and the value of accessorizing.
- If you’re upselling something that’s only available for a limited time, make sure your staff create a sense of urgency. If an item is out of stock or especially popular, make sure your sales associates inform your customers.
- Offer rewards to thank customers for their additional purchases, or give away samples along with a purchase of x amount and more.
- Use displays to showcase your products in a more realistic setting. Often, customers need to see it to believe it!
How much staffing can you afford based on your levels of inventory? Using this metric, you’ll know if sales are keeping up with staffing costs. As wages are one of the largest controllable expenses, retailers need to measure this metric to ensure they stay profitable.
Payroll percentage = Payroll expense / Total sales
Keep in mind the following:
- All your labor costs, including vacation pay, benefits and taxes, should be included.
- Second Wind Consultants recommend staying within 15 to 30 percent to stay healthy.
- Paul Erickson, Senior VP of Client Services at RMSA Retail Solutions, says 17.5 percent is a good target, with 10 percent going toward sales associates and 7.5 percent going to administrative pay. Small stores will likely need to put 17.5 percent towards sales associates’ pay.
- If payroll percentage is high, the real culprit may be inadequate merchandise management. Assess how inventory is moving in your store before cutting staff.
By measuring and managing employee performance, you’ll get your employees working efficiently and productively. One-on-one reviews, as well as regular feedback, will give your employees the opportunity to work on weaker areas and learn that their hard work is appreciated.
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