Winning requires flawless execution on the front lines


There is a lot Canada has to offer but of all of their assets I am inclined to believe Tim Horton’s is at the top of the list – my list anyway. For those too far from the border to know about Tim’s it is a first class coffee and donut joint. As they expand into the USA, and US companies move into their home turf the competition is fierce and Tim’s has held up but taken their share of the lumps. In discussing their strategy with Wall Street the other day, CEO Marc Caira said, “The future battles are not going to be won, in my view, with who has the best strategy or who has the best innovation. The companies that win will be the companies that can execute flawlessly at the store level.” (No link – sorry – I read it in the print version of the Victoria, British Columbia Times Colonist print version.)

For my money he’s right. Like so many businesses – most businesses – the product is very good. When tooling down the 401 from Windsor to Toronto there is no question that a cup of Tim’s coffee and a box of Timbits can make all the difference. The question, however, is just how big a pain is it going to be to get some. How long is the line? How slow is the credit card authorization machine? Which Timbits are they going to be out of?

Everyone has their equivalent of the store level – the front line where customers actually interact with the business. And whether the company is succeeding or failing almost always has a heck of a lot more to do with just how smoothly – or not – that interaction goes. That interaction is almost always comes down to empowerment.

Consider the level of empowerment at retailer PacSun:

A woman by the name of Judy Cox was shopping in the local mall in Orem, Utah. Orem is described as “ultraconservative” – the town motto is “Family City USA” and most of the folks there are Mormons. Mrs. Cox, it seems, was highly offended by a display of shirts in the window with apparently fairly graphic images of women not exactly dressed as though they sang for the Tabernacle Choir. “Cox said she complained about the window display to a store manager and was told the T-shirts couldn't be taken down without approval from the corporate office.

Not be put off, “She then bought all 19 T-shirts in stock, for a total of $567. She says she plans to return them later, toward the end of the chain store's 60-day return period.”

Now it would be easy to dismiss Cox as something of a prude, but mall manager said he agrees that they were inappropriate. In fact, he said the PacSun store manager “told him she was embarrassed to put up the display but was following instructions from corporate managers.”

PacSun’s corporate response was to tell Orem and Mrs. Cox to pound salt. "While customer feedback is important to us, we remain committed to the selection of brands and apparel available in our stores," said CEO Gary Schoenfeld. Well OK then. The folks at PacSun’s corporate headquarters in Orange County, California apparently know better than the local store manager in Orem when it comes to “executing flawlessly at the store level.

If the headquarters folks do, in fact, now better about Orem customer satisfaction that would appear to be just about all they know very well. “The Company now expects non-GAAP loss per diluted share from continuing operations for the fourth quarter of fiscal 2013 to be in the range of $(0.21) to $(0.18), which after adjusting for the 53rd week retail calendar shift, compares to $(0.20) last year.” You would think that losing money last year – and now having to tell the investors they can expect to lose as much or more this year, Mr. Schoenfeld would have a little humility when told by a customer, his store manager and the mall manager that he is seriously irritating customers. You would think the thought might cross his mind that, while he is obviously a titan of business – an MBA from Stanford and a sterling career in private equity – neither Stanford nor the private equity gig would have taught him much about the specific tastes of shoppers in Orem Utah.

In a video in which he gives himself considerable credit, Mr. Schoenfeld says, “I think people can deal with the truth pretty well.” If so, then the truth he should deal with is that the Tim Horton guy is right – execution at the store level is the most important driver of success. Each store is staffed by people who know their community and their customers far better than Mr. Schonfeld and his minions at headquarters ever will, advanced business degrees and experience looting companies through private equity notwithstanding.

I am sure PacSun can use a strategy; and coming up with new stuff to sell in the stores if obviously important, but as the man at the donut sore implied, if you plug your ears to what the local employees say, and irritate your potential customers when they walk past the store front, all the grand strategy you learned at Stanford is not worth the paper you wrote it on.

It applies to everyone. For manufacturers, if you don’t ship on time, if you don’t accommodate customers with unique requirements at order entry, if you don’t get the contents of the box and the numbers on the invoice right – and then you don’t empower people to immediately fix those things on their own judgment, and you don’t listen to your employees when they tell you there are better ways to do things, just how far do you think your strategy will take you? Just how critical to your future will that grand innovation be?

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