56 • 100 GREAT BUSINESS IDEAS
- How customers’ shopping experience affected profi ts.
Sears asked 10 percent of its workforce how much profi t 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 profi tability. Sears’ approach
was to develop the employee–customer–profi t 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 refl ected in
bottom-line performance.
The Sears approach to creating an ECPM (which is a specifi c version
of the service profi t 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-fi nancial and
fi nancial measures.
- One-third on employee measures—attitude about the job and
company - One-third on customer measures—customer impression and
retention - One-third on fi nancial measures—return on assets, operating
margin, and revenue growth.
As a result of the employee–customer–profi t chain, managers
at Sears are recruited, promoted, and appraised on the basis of
12 criteria: