Multiply Growth Through Operational Improvement

Spiral-bananasIt is imperative for food co-op managers to have good data regarding the external forces affecting their operational bottom line. Without good information about local competition and current vitality in the marketplace (through surveys and market studies) it is difficult to plan for growth. Yet there is a flipside to that coin. While looking up and out at what’s affecting growth from outside the co-op, it’s also equally important to look inside operations for maximizing opportunity. Making growth goals manifest involves taking a deeper look at the usual factors in retailing—sales, inventory, margin and labor—and making plans to improve them in preparation for growth.

Sure, it’s been said before. But the reality is that many organizations don’t do enough internal analysis, especially when things seem to be functioning just fine. Those are often the co-ops that could expand to greater capacity if they focused more attention on continuous improvement. Now more than ever technology has made it easier for managers to get good data about store and individual department performance on myriad factors to make good decisions for improved profitability—setting the stage for further growth.

Jeanie Wells, operations, and expansion and startup consultant gave an example of a deli seeking department improvement. Wells noted that analyzing spikes in customer traffic or sales of particular items (like coffee or muffins), managers can determine, for instance, whether the deli’s main draw is bringing in people for lunch, morning coffee, or a convenient dinner. That way, managers know what to enhance if something’s a department driver (lunch), or what could improve (to-go dinners).

“By refining the subcategory reporting in different categories you can find out what is driving growth in your departments,” she said. “I’m a big fan of gathering data from a lot of sources. Data is important to narrow down a picture of what’s happening.” Another bonus is that this information can also corroborate market studies, as well as give important data to co-op managers about meeting overall plans for growth. “With this information you can set goals and monitor your progress,” Wells said. “It’s the most powerful thing you can do.”

She suggested the management team and other staff focus on working together to talk about the co-op’s performance, and build those goals and monitoring plans together. “Real-time analysis is really important,” she said. “Have meetings to measure progress.” Engaging managers and staff on meeting goals is critical, and she said monitoring doesn’t always have to be about the financial review of performance. Wells believes following the 80/20 rule is effective: 20 percent of operational energy should be spent considering historical financial trends, and 80 percent should be focused on looking forward by:

  • Setting goals.
  • Building capacity to reach those goals.
  • Structuring the organization to grow.

Mel Braverman, operational and financial improvement consultant, said that when you frame operational improvement within that 80/20 context, management’s most important function is to supervise the transitions that are necessary for growth. For example, when a small store plans for an expansion, it has to be understood that the general manager will not have the same level of access to all staff in the operation, thus requiring a strong management team. “Systems change as you grow,” Braverman said, and it’s better to put systems in place earlier rather than later.

Braverman said that one place to start improving systems is to have them written down. “Get it down on paper. You need systems in place to either critique them or change them. It’s tough to build a system from scratch.” He said that documenting systems also allows for the creation of another important system: an institutional focus on reviewing procedures to create further efficiencies in the organization. Braverman said managers and staff can ask themselves, “Can we reduce steps in doing something, or make the steps we have more efficient?”

Both Braverman and Wells note that another critical transition in food co-op growth and improvement is when an operation is poised to add more locations. That’s when it’s key to transition to a store manager system, wherein each store has someone in charge of retail departments. This transition should begin at least a year before another location opens, in order to give staff and management time to adjust to their new roles in accountability. “It’s an important milestone food co-ops pass on the road to growth,” Wells said. “It’s important to do it well.” This means being open about building capacity with managers and staff, and reaching conclusions together that it is necessary for the organization. “The benefits of doing it right are huge. It allows the co-op to grow exponentially,” she said.

Additionally, in a multi-store operation, administrative departments will likely be growing from one to two people, to potentially having a staff of five to six people. Managers of those administrative tasks, like human resources, finance, administration and marketing will have to change their approach to their work by increasing their management function and capacity. “So many people feel like they should see immediate reduction of administrative costs when they add a second or third location. But you need to plan for how you can reach efficiency and profitability as soon as possible in a multi-store operation,” Braverman said.

Armed with good data, and a dedication to the co-op principles, food co-ops can grow capacity in ways that adhere to co-op values of honesty, openness, and equality. The world and our local communities need more businesses like co-ops that make operational improvements based on values that seek the betterment of others, rather than using “improvement” as a tactic to exploit others or diminish communities. Cooperative growth promotes strong communities and ethical business practices. “We want everyone connected to our mission,” Wells said, as an operational best-practice as well as a philosophical approach to business. “We look for ways to keep people connected as we grow.”

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By |July 31st, 2012|Categories: EXPORT, Solutions|

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