Retail Human Capital

The people dimension of retail business analytics transformation Creating a culture of insight
The tools and technologies of analytics are important, but equally important are the people who use analytics-driven insights to do their jobs each day. Without attention to the people dimension, analytics efforts can often fall short.

Buyer beware: The power of the people It can require a significant investment to transform how a retailer uses their existing customer, product, supplier, and workforce data to provide new insights. The increased access to detailed and timely data is the payoff, potentially offering improved understanding of customer behavior, merchandising trends, supplier price flexibility, talent gaps, and workforce/labor scheduling and risks. But what happens after that initial investment in technology or analytics? A business analysis does no good sitting on a shelf. Technology is beneficial only when people know how to use it and know what to do with the information it produces. Regardless of the type of business, the size, or the effort involved, ultimately it is people who will use these new tools and insights to make decisions and take action to improve the business. Unlike technology, you cannot simply flip a switch and turn on new behaviors in your workforce. Instead, leadership should plan for the people dimension of the analytics transformation by moving the workforce through several stages of preparedness to make them capable of using the new tools and taking action on the available analytical insights.

Specifically, there are three areas of people risk to consider addressing: Reaction Understanding Adoption Planning for and taking the correct action in each stage will help firmly embed analytics and the insights delivered at each level of the organization. The dilemma of first impressions Retail businesses run on reports. The same reports come out day after day and look the same from month to month. Financial planners utilize the same reports when preparing annual budgets, and purchasing groups reference the same trends when making buying decisions. Store managers know exactly which line items on their daily reports to reference and what actions to take if the numbers arent within the desired range.

Migrating to business analytics can change this. Depending on how extensive your analytics transformation, planners may be using different reports, buyers examining different trends, and store managers seeing a change in either report format or the metrics used to generate the numbers in those reports. From a people perspective, taking away reporting tools that users are familiar with naturally introduces some uncertainty and anxiety into a workforce that leverages these reports each day to make business decisions. After all, the information delivered through these reports often represents the metrics by which employees are evaluated and compensated. As a result, many workers initially react negatively to this sudden change in how information is presented. Managers within the business may refuse to use the new analytical tools and instead continue to perform business as usual, wasting time and resources to reproduce the old reports they are used to. Leaders within the organization may even decide to shut down the transformation before it has the chance to realize its full value. Organizations can reduce negative reactions and help smooth the transition by devoting resources specifically to the challenge of managing the change, achieving buy-in, making analytics personally relevant, and training users. Devoting resources Establish guiding teams Effective transformation does not just happen. It requires strong leadership support and organizational commitment. Ideally, a group of senior executives are actively involved to drive the implementation and endeavor to keep the transformation on track. But senior executives cant be in each meeting. Establishing guiding teams at relevant levels of the organization to steer the effort can help buffer initial resistance and move things forward. Achieving buy-in Communicate, communicate, communicate Resistance may arise for many reasons, and is often very personal and individualized. It is important to communicate frequently and reiterate the importance of the initiative as well as the benefits that are relevant and exciting to the business and each individual. It is also important to get analytical data from assessments, interviews, and other vehicles in order to help identify and mitigate specific resistance risks. Analytics can be just as helpful in gaining insight into the concerns of individuals and teams within the workplace as it is in more effectively understanding the concerns and desires of customers.

Making analytics relevant: win their hearts and minds Most analytics-driven transformations attempt to move people through the reaction stage by simply showing them the facts. Unless stakeholders feel an emotional connection to the rationale behind the analytics implementation, however, they will likely be apathetic at best, or simply feel frustrated that this is yet another change being forced upon them. Wining hearts takes a mix of planning and passion. It requires a personal realization of the benefits. If performance metrics are changing, the organization should show how improved performance can lead to increased compensation. If tools are changing, the business is tasked with demonstrating how these tools can result in increased productivity or less time spent on repetitive tasks. Emphasizing the benefits Make the change stick When an organization implements new tools and technologies, it is important to take steps to make sure the change sticks and the business does not slide back into business as usual. One of the preferred ways to do this is to make sure the organization understands not only the benefits of this transformation, but also how to use the new tools and apply them to make business decisions. Analytics hits home A real-life scenario: A retailer could not get their associates to accept that a change in how they did business was needed. So they brought in a customer to talk about their frustrations with getting the right product shipped to the right place. Hearing the pain of their customer directly got everyone focused on fixing their reporting and analytics problems. The result: The customers story struck workers at many levels of the organization emotionally and got them to take action.

managers reviewing Profit and Loss statements reverted back to the older systems that they were familiar with because they did not understand the new reports. This behavior compounds confusion and introduces errors. While a well-planned analytics transformation can address some of this behavior, it cannot solve each of these people-related problems. Unless action is taken to prepare employees to understand the new tools, they may often use the wrong systems, make the wrong decisions, and may even revert back to creating custom-made reports. Train, train, train The preferred way to prevent this reaction, to avoid backsliding, and to pave the way toward adoption is to consider planning and implementing an appropriate learning and development program for associates. This program may require your learning organization to move from developing task-based skills toward enhancing analytical and decision-making capabilities. Some basic items a learning and development program should cover include the value of the report, how to read the new reports, where to find the numbers most relevant to a given business unit (whether it be the stores, purchasing groups, or merchandising), as well as how the numbers in these reports are calculated. One of the biggest miscalculations companies express post-implementation is that they underestimated the amount of training required not only training on the tools, but understanding the details of new reports and the sources of the numbers that are important to end users. Employees also need to understand more advanced topics, such as what the information means, what insights can be gleaned, and what action to take to improve the business based on the data they are receiving. Now what? Driving adoption With new access to new information comes new ways of thinking, leading, and managing the business. Business leaders are often left looking at the new data and thinking, Now what? To fully realize the benefits of an analytics transformation in terms of competitive insights and growth, changes should be considered across the organization and its talent. Postimplementation, employees whose job it was to prepare spreadsheets and develop custom reports will see basic changes to their jobs. They will no longer have to copy and paste between spreadsheets. Instead, they may be called upon to perform analysis and draw conclusions from

Toward real understanding Many employees do not understand the measures or calculations behind the existing reports. Instead, they have memorized a certain place on the report that contains the information they need. And although it may be the primary responsibility of some employees to simply copy and paste between spreadsheets to create custom reports, in some cases they are unknowingly creating alternate versions of the data truth by doing so. At one company, store

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available data. Many associates will not be ready for this transition. Countering the possible financial implications of this situation can require putting the effective people in the required place for the applicable tasks and with the proper incentives to fill any knowledge gaps. More and more retailers are choosing to create analytics centers of excellence in finance, merchandising, and procurement. Such models help to create new insights, but also take forethought. This approach requires new capabilities, new job descriptions, new roles, all of which fit differently in the organization. However, if action is taken to align the organization and talent early on in the effort, the risk of the transformation can be reduced and the likelihood of realizing the full value of the transformation increased. Improving turnover rates A real-life scenario: A discount retailer wanted to more effectively understand which factors might be influencing high Store Manager turnover and what the potential benefit would be from improving turnover rates. Among the findings: A fifty percent reduction in targeted turnover could result in $10 million in additional profit. By analyzing internal organizational data, combined with external data sources, the retailer was able to identify the specific triggers for turnover and develop targeted interventions. Consider structuring the organization to take advantage of new insights The ability to deliver against business priorities may be compromised because a company is too siloed. When soiled functional areas and disparate data sources exist, it is difficult to pursue an integrated focus on operational excellence. Often the business is too fragmented to achieve the collaboration required for innovation, or too internally complex to recognize and focus on the opportunity. For example, finance planners may not be able to influence the purchasing decisions of buyers, or the real estate organization may make store location decisions without the input of merchandising, or any of these organizations may be too spread out geographically to achieve effective collaboration. Most companies can sense when an organizational strategy is not working, but are often unsure how to address the problem. Leaders may attempt quick fixes, or patches, changing some management role here or redefining some job there, rather than focusing on an integrated approach.

While analytics can help leaders make decisions more effectively, objectively and economically, the fact is, redrawing the boxes of an organization the organizational charts that make up a company cannot, on its own, deliver business results. Instead, effective organizational change begins by assessing critical drivers of organizational performance (e.g., people, process, and technology), identifying and prioritizing opportunities, and building a roadmap and for implementation. Effective/Results oriented organizational strategies also consider the need for effective decision-making frameworks (e.g., decision types, model, roles, processes and tools) across interdependent business processes, functions, regions, and business units. Finally, effective organizational strategies establish an operating model, core capabilities, and metrics necessary to align with and deliver on the business strategy. Consider aligning the workforce to realize the value of analytical insights A bad hire can cost 1.5 times his or her original salary to replace, and failing to prepare the workforce to take advantage of new analytical insights can cost much more. If an analytics initiative is providing new tools for the organization, the business should take steps now to retain talent capable of adapting to and using these tools. Where gaps exist, people who can make effective business decisions with new analytical tools should be hired. These candidates should have a demonstrated track record with such tools and be able to realize opportunities identified by insightful analysis. Finally, compensation incentives should be aligned to new metrics created by the initiative. Dont underestimate the people dimension If youve decided to embark on an analytics transformation initiative, congratulations. Soon, your organization can be more informed in areas of corporate interest, and more equipped to make business-impacting decisions. But in order to be effective, dont neglect the people dimension. Give your workforce the tools, training and knowledge necessary to be effective along with the transformation. Be prepared for their reaction, help them understand the benefits, and work with them as they adapt to new approaches, new challenges, and new opportunities.

Contacts
For more information, please contact: Jamie Clark Director Deloitte Consulting LLP Tampa, FL +1 813 3908485 jamclark@deloitte.com Rob Platt Senior Manager Deloitte Consulting LLP Seattle, WA +1 206 716 6074 rplatt@deloitte.com

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