Page 63 - 100 Great Business Ideas: From Leading Companies Around the World (100 Great Ideas)

• How customers’ shopping experience affected profits.

Sears asked 10 percent of its workforce how much profit they
thought was made for each dollar of sales. The average answer
was 46 cents, whereas in reality it was 1 cent. This highlighted
the need for employees, especially those at the front line, to better
understand the issues determining profitability. Sears’ approach
was to develop the employee–customer–profit model (ECPM),
making explicit the chain of cause and effect. Because employees
were better able to see the implications of their actions, it changed
the way they thought and acted. This, in turn, was reflected in
bottom-line performance.

The Sears approach to creating an ECPM (which is a specific version
of the service profit chain) started by devising a set of measures
based on objectives in three areas: making Sears a compelling
place to work, a compelling place to shop, and a compelling place
to invest.

For the top 200 managers at Sears, incentives are based on total
performance indicators (TPI)—which include non-financial and
financial measures.

• One-third on employee measures—attitude about the job and

company

• One-third on customer measures—customer impression and

retention

• One-third on financial measures—return on assets, operating

margin, and revenue growth.

As a result of the employee–customer–profit chain, managers
at Sears are recruited, promoted, and appraised on the basis of
12 criteria:

56 • 100 GREAT BUSINESS IDEAS