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How entrepreneurial employees boost profit, customer service during holiday season

For national chains a drive toward community presents the opportunity for front-line employees and local store managers to drive sales and profits. However, to maximize the opportunity, managers and employees need to be entrepreneurial.

December 6, 2016

By Jagdip Singh 

By its nature, the holiday season is community-oriented. Consumers focus most of their attention on families, friends and neighbors. Retailers try to entice consumers into stores with sales, decorations, extended hours and other promotions.

For national chains, this drive toward community presents the opportunity for front-line employees and local store managers to drive more sales and profits for their companies. However, to maximize the opportunity, front-line store managers and employees need to be entrepreneurial to customize merchandising and service programs according to the preferences of the communities they serve.

Research has shown that empowering front-line or customer-facing employees is a good business practice. However, new studies show going beyond empowering to encouraging entrepreneurship among front-line employees can enhance a company's profits, sometimes to a significant degree.

In effect, "entrepreneurizing" front lines is the key to improved profits and customer service in increasingly competitive service markets.  And since the holiday season is the most important time of the year for many retailers, front-line employees who are entrepreneurial can have a greater impact now than at any other time.

Retailers around the world — as well as other companies — are challenged by how to grow profits by empowering customer-facing employees.  Often, they hesitate to release control to such employees, fearing that doing so puts their profits at risk. 

But corporate hesitation limits innovation and hurts the bottom line.

The stakes are high. For U.S. businesses to remain competitive in sectors such as retail, they must start thinking differently about how they empower their front-line employees.

Retailers empowering their front-line managers

Today's retail stores are run by corporations that allow their front-line store managers little autonomy.

Each store looks more or less the same, provides more or less the same customer services, presents merchandise more or less the same way and in the same order, regardless of customer variation. Customers in Vermont value goods and services in far different ways than, say, customers in Arizona. Yet, a chain store in Vermont is very likely to be run the very same way, controlled as it is by corporate planograms, as that chain's store in Arizona.

Research I conducted with colleagues from the University of Missouri and Brigham Young University indicates front-line store managers who are allowed full autonomy over just seven to10 percent of their store's SKUs, and use this autonomy to be entrepreneurial in their merchandising and service activities, generate improved profitability.

How much more profitable?

At one national retailer, we found front-line store managers who are allowed to take risks with their merchandising and customer service interactions lifted their store's profitability by $1.2 million per year.

The research leaves little doubt that entrepreneurial front-line store managers hold the potential to substantially lift store profitability.

Entrepreneurizing the front line

A prominent aspect of the labor movement of the 18^th and 19^th centuries involved empowering workers' bargaining rights. Union leaders should be proud of the progress they have made.

Future progress requires going beyond empowering. Entrepreneurizing the front line to transfer unfettered decision authority (albeit over well-defined domains) and promoting a culture of entrepreneurship overall is the next frontier.

In the 20^th century, businesses would do well to consider how to entrepreneurize front lines.

Too often, corporations run their front lines like parents who don’t trust their children. In reality, businesses have to give their children a little rope to let them grow — and what better time to do so than during the season of giving.

Jagdip Singh is the AT&T Professor of Marketing, co-director of the MSM-Business Analytics Program and a professor in the Design and Innovation Department at the Case Western Reserve University Weatherhead School of Management.