NEW YORK, NY--(Marketwired - September 06, 2017) - While Elon Musk and Mark Zuckerberg debate the positive and negative consequences of artificial intelligence, and Jeff Bezos continues his efforts to transform every retail job into a warehouse or delivery job, the smart-money luxury and retail leaders are unflinchingly preparing for the reinvention of retail by innovating on products, venues, and, most importantly, developing their people at all levels. One critical objective in these extremely challenging times is to effectively attract, select, and retain humanistic, high-performance relationship builders who drive sales.
The New York-based Luxury Institute recently conducted a research project in conjunction with top retail executives to identify current best practices in retaining high-performing sales associates during what is an increasingly challenging and complex luxury and retail environment. One over-arching conclusion is that many brands are stuck in a vicious cycle of constant turnover, and in recycling poor performers from other brands at all levels.
Most human resources and financial executives calculate the costs of replacing a front-line employee simply as recruiting and retraining outlays. Replacing a good sales associate can cost 50% to 75% of an annual salary, but the real economic costs are much higher. These include significant client attrition and diminished revenue from losing contact with high-value and high-potential clients, and the loss of productivity during job vacancies and new employee training. There is also the cost of disruption to overall team performance due to negative productivity effects on remaining associates. Factor in these very real costs, and turnover may be one of the biggest hidden costs of doing business.
While the luxury and retail industries are in crisis, closing stores and dissolving brands, sales associate turnover runs at 30% at the best brands, and well above 60% annually at lower-performing brands, even though the supply of available talent is greater than even before. In its research, the Luxury Institute finds that most of the Industrial Age best practices currently used to address the crisis have two common themes. The first is a focus on employee coercion via robotic, task-oriented training that says, "You must consistently do this, you must say this, and say it exactly this way." The second amounts to offering ineffective dollar incentives that assume if you pay people more, they will stay and perform well, despite a toxic culture.
Luxury Institute has held meetings in hundreds of stores with thousands of sales associates globally over several years, confirming that these misguided efforts only intensify the worst enemy of high performance, fear. In fact, they aggravate the three greatest fears that choke high-performance: the fear of failure, the fear of rejection, and the fear of negative consequences for trying to improve processes.
Here are seven best practices that Luxury Institute is implementing jointly with humanistic luxury, premium, and a growing list of mainstream business clients within its Luxcelerate system in order to identify, nurture and retain top talent while enabling the mindset and behaviors that drive high performance in the New Age of Emotional Intelligence.
1: Build Trust Through Transparency And Honest Dialogue
The first order of business for luxury and retail brands is to be transparent with associates about the current challenges. Executives need to be courageous and to admit when significant product innovations are required to remain competitive, and to take immediate action. They need to confront consumer trends that are dramatically reducing store traffic, and to empower associates to share the responsibility to innovate in building new and deep client relationships. For stronger brands, there is cause to celebrate the fact that robotic tasks will soon be taken over by robots, and that many brands stuck with far too much real estate, and an unwillingness to invest in change, are either exiting the industry or sharply reducing their number of stores. This translates into higher market share for brands that are creative, agile, and relationship-driven. There has never been a better time to inspire headquarters and front-line teams to collaborate around a common entrepreneurial mindset that adapts quickly. Step one is to communicate openly and directly with front-line teams in a rich dialogue, not a monologue, that generates positive transformation. Luxury Institute worked with Gucci to develop these honest, open practices in 2015, and this is one key reason why Gucci, under the humanistic leadership style of Marco Bizzarri, has dramatically outperformed its luxury peers who remain mediocre, or are in decline.
2: Select People For Emotional Intelligence And Individuality
There is a growing body of science that indicates most people can dramatically improve their emotional intelligence with the right culture and systems in place. Even the large majority of average performers are capable of building deep personal, peer, and client relationship skills. Some individuals are more developed, whether through nature or nurture, and brands should give preference to those in hiring. The catch is that these individuals are hard to identify and recruit. While standardized tests can be helpful in identifying high-potential candidates, the best method is still a thorough, team-based interview process. Zappos is prolific in identifying such individuals, not through testing, but through a focused and deliberate interview process. The online apparel and shoe retailer would rather leave a position open than rush and hire someone with the wrong fit. The company also avoids the algorithmic, look-alike, models-based hiring practices used by many companies. Luxury and retail brands often stereotype people, and have a very specific associate persona in mind, then use the job description or 'talent filters' to hire employees who look and act the same. Individuality is a cornerstone of high-performance relationship building. Brands need to embrace the fact that they will have to work diligently to develop talent regardless of what level of emotional intelligence associates possess when they join the company. It is critical that brands enable people to fearlessly be their unique best selves, and not a robotic stereotype that a consultant or algorithm have dreamed up as their 'brand ambassador.'
3: Help People Discover Their Life Purpose And Teach Them Skills For Life
It is now clear to business leaders that our nation's educational systems, from elementary school through college, produce students who often lack not only technical skills, but also emotional intelligence. Business is one of the greatest change agents in society, and the time has come for businesses to take on the challenge of educating associates, helping them define a life purpose that aligns with their good morals and values, and teaching them to achieve self-mastery, along with the essential skills to build flourishing personal and business relationships. Brands must teach people how to think, not what to think. For luxury, which will continue to define itself as highly experiential, there is nothing more critical than ensuring that every internal and external human interaction makes people feel special and delivers an extraordinary experience, concurrent with delivering unique and compelling products. The critical skills that drive self-mastery, such as self-awareness, self-measurement, self-assessment, self-coaching, self-correcting, and self-accountability, must be seamlessly embedded in the daily work processes. The skills that drive breakthrough results, such as critical thinking, design thinking, systems thinking, and creative processes, must become the educational imperative within corporations at every level, especially on the front-line. Skill-building programs must go beyond currently popular, yet ineffective, feel-good wellness programs. Instead, programs must focus on the mastery of hard emotional intelligence skill-building that drives hard metrics such as client data collection, conversion, average transaction value, retention, and referrals. By focusing on life skills instead of dollars, brands can dramatically increase sales.
4: Incentivize Moral, Ethical Behaviors that Build Deep Client/Associate Relationships
Today in luxury, incentives continue to be used in arcane ways to coerce associates to coerce clients. This may not be immoral or unethical, but it is certainly amoral. That is, incentives are not based on good morals and values, or common sense. In today's world, you need to start by paying people a solid base hourly rate so that they can raise a family and have a decent life. Desperate people don't make good employees, or customers. You must replace incentives that push dollars with incentives that inspire consistently emotionally intelligent behaviors such as expertise, deep empathy, trustworthiness, and generosity. These are all measurable attributes for any individual, by their clients, peers, or both. Furthermore, in a world of shrinking store numbers and sizes, brands need to staff and schedule each store so that everyone feels valued and respected. Employees must also have a reasonable amount of time to reenergize, and live a high quality of life. Research demonstrates that attaining high performance is not an exhausting marathon, but a series of well-executed sprints with continuous coaching, practice and solid rest in between. As one enlightened head of retail told Luxury Institute, "Over the course of a year, the cost of hiring and retaining two additional part-timers to make the schedule flexible and acceptable to everyone always beats the cost of turning over four high-performing full-timers who have personal obligations they can't fulfill due to inflexible schedules."
5: Embed Best-In-Class Technology That Enhances Human Relationships
Retail technology consistently fails to achieve its potential in helping businesses thrive, often because of over-hyped claims by the tech providers. Vendors must offer the best functionality, or they quickly become irrelevant. Most retail technology is a high-level commodity, and the choice a company makes is similar to choosing Apple or Samsung in smart phones. The tech vendor you choose will really be based on the ease of integration with your existing systems and the cost to operate. The real tech challenge for most brands is that they acquire front-line technology, but fail to educate and inspire their teams to use it efficiently and effectively. For example, accurate, continuous client and associate data collection is a critical skill that must be mastered in a world where artificial intelligence algorithms feed on vast amounts of quality data. Retailers must demonstrate and prove, through successful pilots, how using technology frees up associates to focus on building meaningful client relationships. By providing the ease of recording client data, measuring relationship-building behaviors, and promoting effective learning, coaching and practice, technology can reduce or eliminate rote tasks and allow associates to express their full humanity and earn more. Not too long ago, Luxury Institute conducted a project where the associates of a top-tier automotive brand were failing to use the new CRM technology and saw it as yet another burden. By working with the associates to eliminate fear, build usage and confidence, especially with the more tenured associates, usage of the technology rose 500%, and is now a consistently-used tool that helps to build client relationships and drive sales.
6: Develop Local Teams That Drive Self-Disruption And Innovation
Good things start to happen when brands teach self-accountability, self-management, and self-mastery to people on the front lines. From here, the next critical step is to empower and teach store teams to operate as a cohesive and coherent locally adaptive, agile unit. Research demonstrates that when brands educate local teams to master and use brand-appropriate, human-centered design and systems thinking, along with creativity skills, teams can tackle many of the challenges faced on a local level. Far too many brand executives, acting out of unfounded fear, forbid local initiatives to the point of choking the creativity out of their front-line people. Every store has unique challenges and characteristics that can best be solved on a local level. By brainstorming how to increase client appointments, do large consignments, conduct successful store events, achieve client referrals, and develop brand partnerships, store teams can deliver strong results locally. Effective local solutions can be shared across the store network to drive high-performance globally. True innovation means eliminating fear and bureaucracy, both at headquarters, and at the front-line, to enable the organization to develop into a high-performance complex adaptive system that aligns with the reality of today's volatile luxury and retail market.
7: Create Clear, Fair, And Equitable Career Paths For Upward Mobility
Most luxury and retail organizations currently function with a top-down approach that stifles continuous learning, adaptation, and expertise, especially at the front-line. Organizations incorrectly assume that most leadership talent should be developed at top universities and top brands, and that recruitment into the organization should come primarily from those two sources. Today, in the military, and in medicine, two of our most critical lines of work, there is no commander or chief of department who has not served at the front-line for sustained periods of time, and each is required to demonstrate thoroughly that they have earned the right to lead front-line teams. While luxury and retail began with such traditions out of necessity, today we find ourselves with leaders who have never sold anything to a client, and never served in a store or in a call center, either because they were recruited for 'management' skills that were developed in a university or in a headquarters staff career track. These disruptive times call for a radical rethinking of the organization and its career paths. Luxury and retail must begin to educate all front-line associates so that they can become the next CEO of the company, and reverse course and recruit most leadership from the front-line. The essential skills in the near future will not be 'knowledge' and 'management' skills. Any robot and algorithm will soon deliver knowledge and managerial tasks far better that any human in five seconds, or less. Machine learning will allow people to manage their own tasks and coordinate with teams better than with any 'manager.'
It bears repeating that the critical skills that drive performance today are mostly emotional intelligence skills. These social skills include expertise, deep empathy, trustworthiness, and generosity. They are not soft skills. They are the hard skills of the 21st century. In order to help human beings achieve great results, brands must educate their people to develop self-mastery, including self-awareness, self-measurement, self-assessment, self-coaching, self-correcting and self-accountability. All front-line people must master how to drive breakthrough results in teams, using newly acquired collaborative skills in critical thinking, design thinking, systems thinking, and creativity. Then, and only then, can brands produce the deep talent pool of skilled, emotionally intelligent leadership to survive the onslaught of competition and disruptive forces of the 21st century.
Management guru Peter Drucker once stated that the only purpose of any business is to gain and keep a customer. When Luxury Institute CEO Milton Pedraza conducts his speaking engagements with senior management teams, he always asks leaders as to whether attracting, selecting, developing and retaining top performing front-line associates is mostly a matter of luck, or skill. While most executives pause, and, then reluctantly say it is a skill, it is one that everyone admits is in very short supply in the luxury and retail industries today. According to Pedraza, "If Drucker were alive today, we believe he would boldly conclude that the only way a business can gain and keep a customer is to gain and keep top talent, especially at the front-line."
This paper was co-authored by Milton Pedraza, Luxury Institute CEO, and Alyssa Reppenhagen, a senior retail executive based in New York. For more information and additional insights visit www.LuxuryInstitute.com, or contact Luxury Institute CEO Milton Pedraza directly with questions (mpedraza@luxuryinstitute.com).
Contact Information:
Katherine Sousa
ksousa@luxuryinstitute.com