Creating A High-Performance, High-Commitment Service Business

Service businesses are people businesses — in no other industry is a committed and engaged workforce as directly linked to financial performance. Unfortunately, in no other industry is this link so challenging — multi-unit service firms like restaurants, hotels, and retail stores often struggle to create high commitment and performance in an environment of low margins, low wages, and high turnover. Even companies that have created a winning “unit model” have difficulty rolling it out and sustaining it across hundreds or thousands of units spread across multiple geographic regions.

Performance problems in the units are often a result of a lack of alignment at the top. A store general manager may get one call from an HR leader encouraging her to invest in her people and reduce turnover, and another call from a Finance controller telling her to cut labor costs immediately. Consequently, the first step in creating a high-performance, high-commitment service company often requires building that alignment. Using the Strategic Fitness Process, TruePoint helps leaders to analyze their company as a system, uncovering and correcting misalignments that create confusion and poor performance in the units. Having “the conversations that matter” with the units helps the senior team to align all the pieces of unit performance management. This may include designing a unit planning process that correctly balances short-term performance and long-term investment, or a compensation system that provides incentives to unit managers to develop and delegate, rather than to stock shelves.

Effective unit performance improvement must align both “hard” and “soft” elements. TruePoint’s financial and statistical analysis helps leaders to first understand the key drivers of performance in their units, then create a scorecard that translates the strategy into a few key metrics that units should focus on. Rethinking the roles of the center and the units is crucial. Sustaining high performance often requires companies to move from a “center push” approach — where the corporate center tries to drive performance through numerous top-down initiatives — to a “store pull” model, where unit GMs have ownership and accountability for store performance, drawing upon the center for the resources they need.

A high-performance, high-commitment service company requires alignment not just from the top down, but also from the bottom up. Ultimately, each store in the chain must create the same combination of financial performance and employee commitment. Conventional wisdom might suggest that front-line employees don’t care about financial performance in a high-turnover, low-wage service business. TruePoint’s research shows that they do — we consistently find that everyone wants to be a part of a winning team. But the strategy and metrics must be translated into terms that make sense to front-line associates, and they must be engaged in defining issues and creating solutions. TruePoint’s Unit-Level Breakthrough (see Unit-Level Improvement), a simplified version of the Strategic Fitness Process customized for the operational level, helps leaders “learn by doing” to raise performance through engaging their employees. Unit-Level Breakthrough provides a replicable means of dramatically increasing performance on a key dimension (such as guest satisfaction or food cost), while simultaneously building capability and commitment.