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Winning Through Measurement

If Home Depot were going to try to win through its strange contractor-grade aisle workers, it might have been useful for Home Depot leaders to obsess on measuring this concept of "contractor grade" and the ratio of contractor-to-noncontractor associates in the aisles. This metric would mean that they would see a "red flag" start flapping when the ratio reached a certain critical low level. This red flag would mean they had to slow down on opening new stores until they could find more contractor-grade associates to put in the aisles—because they weren't creating anything unique anymore.

How would they know how many contractor-grade associates were needed on a shift? It might have been useful for Home Depot leaders to gather data on the percentage of customers who noticed something unique and valuable about Home Depot stores compared to other home improvement stores and correlate this with repeat business. In other words, it might have been useful to determine the contractor-to-noncontractor ratio that was financially doable but that still made customers notice a difference that brought them back again and again. This data would have allowed leaders to link workforce data to a particular competitive strategy and see whether associates were creating a competitive advantage. Figure 1.1 shows an analysis that a leader might want in order to make decisions.

Figure 1.1

Figure 1.1 How strong does the special sauce need to be to make customers notice?

Of course, actually collecting this data would be annoying and difficult. Store managers would need to agree on what the concept "contractor-grade" really meant and how it could be measured instead of just verbalized. This would mean a lot of arguing in long meetings about applicant testing and whether "contractor-grade" really meant being certified as an electrician or a plumber. Or whether Home Depot could develop its own certification process and test each new hire and then recertify once a year. Essentially, Home Depot would need to get in the business of gathering data on the concept of "contractor-grade" associates. As an intelligent reader, you say: "But this process would be very, very useful for them—after all, this is what they are basing their future on!" Ah, but this would be very, very annoying if you are a store manager and think you have a "real job" to do that doesn't include testing people.

Why else would it be annoying to collect the data in the scatterplot? Home Depot stores would need to assemble accurate data on the number of different types of associates on the floor during different shifts in order to calculate the ratios. But the hiring and the scheduling databases don't currently talk to each other. Stores also would need to collect data from customers about their perceptions of Home Depot versus Lowe's. This might mean having customers answer a question on the checkout screen while swiping their credit card. Stores might need to offer some incentives to get customers to participate, like a dollar off their purchase for answering the question. This might get expensive. Home Depot employees might try to game these numbers, telling customers how to respond or even reaching over and responding for them! As you can see, it's hard to know what to measure, and it's also hard to actually get accurate data. Given all these problems, it is very, very unlikely that these data would ever be gathered.

Unless the leaders of Home Depot were genuinely obsessed with the concept, and they had an almost-physical craving to create a strange contractor-grade workforce that solved customer problems better than anyone else. Unless leaders believed in their hearts they had to have the data in order to win—or even to stay alive long-term. Even though this type of data might be exactly what Home Depot needed to test its strategy and translate its strategy into reality, the data simply would not be collected unless store managers believed in their guts that without it, they will would lose customers to competitors and eventually go out of business. Store managers would figure out a way to get the right data when they believe they need it just as much—or more—than they need 2x4's in Aisle 12. Come to think of it, I think Lowe's sells 2x4's too.

In the example scatterplot given, you might conclude that the strategy is valid but expensive. Customers do in fact notice when Home Depot invests money into putting contractor-grade associates into the aisles, but you need a high ratio of them around for customers to notice. Since contractor-grade associates are much more expensive to hire (about 40% more than average aisle employees), the investment appears to reach its highest leverage at a 3-1 ratio with diminishing returns after that. This data would have helped validate Home Depot's strategy. Validating your strategy of workforce strangeness rather than assuming it is an important step. Don't forget, your data may show you that your strategy is wrong, and customers don't actually care about or even notice what you think is important, in which case your investments would be wasted! This data would help Home Depot manage the specific contractor-grade ratio required to cost-effectively execute its strategy.

Anybody can talk about a strategy, but it takes a workforce obsessed about something strange to execute a strategy. You will not differentiate your organization in your customers' eyes by talking about strategy in meetings—strategy must be translated into day-to-day, visible artifacts that are palpably different and valuable to customers. And this does not happen by chance or even hoping really hard. This happens through a disciplined process. For example, strategy gets translated into reality when Home Depot leaders have data to show which stores have the right number of contractor-grade associates hired and scheduled at the right times; when store managers walk job applicants through a hiring system where they are taken to a mock house and scored on their ability to locate and fix three plumbing leaks and diagnose and fix four wiring problems.

Business leaders need a way to unpack what should be strange about their workforces to give their organizations a competitive advantage. Translating strategy into reality demands measurement of the key strategic assumptions about people and what customers must notice about them. You should have a way to measure and monitor what your workforce needs to know, act like, or create so that customers notice, reach into their wallets, and say, "I'm giving you my money even though I could get this from many different companies."

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