Sharing Secrets

Q: One of my long-time employees keeps asking questions about annual sales, and the store's profitability. I assume she's fishing for a raise, but I'm not sure. Do you think it's a good idea to share financial information with staff?

A: There's an old business joke: "How many managers does it take to change a light bulb?" "None, because they'd rather keep their employees in the dark."

Most retailers do keep their staff in the dark, but probably not intentionally. The truth is that many are uncomfortable talking about sales figures, and profit and loss, because they feel that financial matters should be kept private. After all, most people don't tell others their salary or brag about their net worth.

However, if you have long-term employees who show a real interest in the business, you might consider an approach called "open-book management." After all, you can't motivate a sports team without letting the players know the score. And in retail, the two most important measurements of "the score" are sales figures and the bottom line.

The main advantage to open-book management is that it builds team spirit among staff members, by dispelling the "us vs. them" mentality that crops up in many workplaces between management and staff. If employees don't take pride in the health of the business, they're probably not going to be very effective in their daily duties.

On the other hand, if you do decide to share financial information, you'll probably need to educate employees so they know how to interpret the data. Many employees will be surprised by how narrow the margins are for a retail operation. For instance, they see an item sold for $100, and might wonder why their share of the $50 gross margin is only $7.25 an hour. While you probably shouldn't share information about individual salaries, you can show them how payroll costs, including insurance and FICA, fit into the total expense picture.

In addition, sharing profit and loss statements can help everyone in the store understand how crucial small savings of overhead can be. Consider rewarding employees for ideas that save money on supplies or services, and stress the importance of shoplifting prevention as a way of increasing profit margins. You can even set up a bonus system that rewards all employees for increases in profitability.

Some storeowners are hesitant to share financial information because they fear it will be leaked to competitors. It's reasonable to request that employees respect the confidentiality of information. But truthfully, most of that data is of little use to a competitor. Think about whether you would do anything different if you knew the annual volume of a store down the street. Probably not. You and your staff should already be trying to improve your own numbers — and you can do that best when you work as a team.

Q: I can't decide whether I want my salespeople to approach every customer who walks into our card shop, or just let customers browse in peace? We recently hired two new employees. Sabrina won't even make eye contact with customers, and Joan interrupts their shopping to chat. Which approach is better?

A: As the owner or manager of a store, you should offer standards of behavior for all of your employees. In a specialty shop, the goal should be to have customers greeted by an employee when entering. This kind of cordial service doesn't happen in most big stores (with the famous exception of Wal-Mart), and is part of what sets specialty retailers apart. It sets a pleasant tone, and lets the shopper know that there are employees close by if they do need help.

But beyond the initial greeting, there is great deal of variation in staff/customer interaction, because shoppers are ambivalent about the amount of assistance they want. In his fascinating history of shopping, I Want That! (HarperCollins, 2002), author Thomas Hine explains that in Victorian times there was a shift away from solicitous sales clerks to employees who were instructed "not to speak to shoppers unless spoken to or signaled." This encouraged browsing, in which shoppers of all economic levels could examine the goods in a shop, even without the intention of buying.

The novelty of independent shopping soon led to the culture of self-service that is now the norm. Yet customers who want or need assistance often find it frustrating when stores fail to provide face-to-face service. No wonder, as Hine remarks, "Few shoppers are pleased with the quality of service they get." He goes on to note, "Customers' most frequent complaints are that they can't find a clerk to serve them when they need one, and that the clerks they can find are ignorant of the product line."

The answer is probably to aim for behavior somewhere between Joan's and Sabrina's. An initial greeting should be followed by an offer to be of assistance if needed. Of course, the worst thing to ask is, "May I help you?" The answer to this question is invariably "Just looking," even if the shopper really does want help.

The trick is to strike the right balance between being too pushy and too aloof. You might do some role-playing at a staff meeting, encouraging open-ended queries such as "Do you have any questions about that item?" or "Are you shopping for anything in particular?" Lastly, be sure that employees have good product knowledge, so that every interaction with a customer is a positive one.