Sport Chek Takes Store Associates Off Commission
By Tom Ryan
Sport Chek, Canada’s
leading sporting goods chain, has eliminated commission for its store associates
in favor of salaries in a bid to improve customer service. On a conference
call last week, Bob Sartor, CEO of its parent, Forzani Group, said the
chain has “really deployed those hours into making the stores look
better and taking care of the consumer,” and the move is already paying
off.
“We have abandoned the sales commission
system at Sport Chek and have worked hard to redirect our store teams from
a hard-sell mentality on commission to one focusing on the customer experience,
and by that I mean cleaner, better merchandised stores and helping the
customer,” said Mr. Sartor. “Our stores have never looked better
and consumer feedback on the service experience is overwhelmingly positive.”
The company has also
seen a significant hike in positive customer letters.
“We’ve
had a substantial increase, probably close to 100-fold, of the amount of
customer letters that have been coming into me just congratulating that
specific store on the service they’ve been getting. And prior to this year
we haven’t been getting too many of those letters into the system,” said
Tom Quinn, president and chief operating officer. “I also know when
I’m out just working and talking to the various store managers, they are
stepping up and making an exceptional effort with the business and clearly
understand the focus of customer business. So if that’s any indication,
it’s been very positive and it seems to be growing each month.”
Forzani said the shift
away from commission was partly responsible for “pretty good” third
quarter results given the recessionary climate and an unseasonably warm spell
across Western Canada for most of the quarter, as well as momentum so far
in the fourth quarter. In the first five weeks of the fourth quarter, comps
nudged ahead 0.1 percent at its corporate stores on top of comp increases
in the prior year of 4.9 percent with store margins improving on both a
rate and dollar basis.
The move by Sport Chek,
with over 120 stores across
Canada, comes as many retail sectors (autos, high-end clothing, footwear,
etc.) as well as some of its competitors find that commission-based performance
pay is the best way to motivate employees.
Discussion Questions:
What are the pros and cons of putting store employees on commission versus
straight salary? What retail channels are more suitable for commission-based
structures than others?
Back when I was on the vendor side of the business, I was hired to pioneer business with big accounts and consistently grew business from zero to multi-millions. Oops, they didn’t plan on business getting THAT good! Time to offer a big salary and take that commission down from double to single digits (or away entirely)! This demoralizing dynamic continues to get played out at vendor companies with one of two potential “lose/lose” outcomes: 1. The employee leaves for a better position at another company; 2. The employee stays on and becomes a bitter cancer within the organization. Oh, I’ll add a third–employee starts company (now, as a consultant, I sometimes help diagnose and extract the bitter pills–talk about irony!).
Back to the retailer side of the table, I shop quite a bit at Nordstrom, not necessarily because of their products and brands (which actually have seemed to be get more basic/less compelling over time) but because of the usually-terrific service I get from their commissioned employees. I believe the two are connected.
I’m a big believer in commissions; however, it is up to employers to work out the success scenarios, margins and profitability of the model in advance!
I’m in favor of a mix of salary plus commission. It sure sounds nice to build a better shopping environment, etc, but for most companies that only works well until the numbers are off for a quarter or two. Salespeople on commission move product, which is really the ultimate goal for all retailers, all the talk about improving customer experience notwithstanding.
Commission plans provide a powerful motivation for sales associates to approach customers, answer question, provide information, and sell merchandise. However, there are negative effects–it is difficult to get sales associates on commission compensation to do non-selling related activities such as housekeeping and sales associates may engage in hard selling techniques and poach customers from other sales associates–action that can jeopardize repeat visits. However, Nordstrom sales associates are on 100% commission and provide excellent customer service, work as a team with other sales associates, and perform non-selling activities.
The solution for getting the positive motivating effects of incentive compensation and minimizing the negative aspects is to have an organization culture and management that identifies and corrects inappropriate behaviors by commissioned sales associates.
Everyone should be on commission in every job. Straight salary jobs promote laziness. Even in non-selling jobs, people should be paid through profit sharing. Salary jobs promote an entitlement welfare mentality. I can guarantee that workers who receive a majority of their wages through commission or profit sharing will be harder working and more motivated.
We would all starve if farmers were paid a salary. Without profit sharing we would not have supermarkets like Hy-Vee and Publix. We would be stuck shopping at store like A&P. It would be like living in a communist country.
Given that Sport Chek operates in my ‘backyard’ here in Canada, I know them very well. They are an exceptionally resilient retailer (a few years back both Sports Authority and SportMart from the US ‘invaded’ Canada only to retreat, leaving Sport Chek as the only major player left in the game here).
I can’t say that I ever experienced a hard sell (or even great service) when they were on a commission-pay basis. Having been in the stores numerous times lately I can attest to a generally better service atmosphere. Oh, to be certain there are still too many times of complete indifference towards the customer (Is that because of a lack of commission? Probably not.). But, the stores do look better and the service, while not great, is somewhat better. I would suggest that the improvement in service has more to do with a re-focus on the issue by senior management than it has to do with the change in pay structure.
As always, what management focuses on, staff also does. Talk about improved merchandising constantly and staff will always straighten the shelves. Talk about providing a great customer experience and staff will try harder to satisfy the customer. Pay is only one component (a relatively small one) in determining customer satisfaction and overall performance.
So, look beyond the message about eliminating commission as the answer to your problems. Getting better staff performance is much more complex than that.
Best Buy makes a point to its Canadian clientele that its sales associates are not commissioned, resulting in a no-pressure environment. Ironically, BB owns Futureshop, another electronics chain, and their sales people are commissioned. What I find is huge gaps in service levels between the two brands. Getting help at Futureshop for smaller items such as computer accessories and filters is nearly impossible. Commission structures work with items that do require selling skills. I’m more in favour of an overall profit-sharing program. There is more of a priority to sell the right products to the right customers as opposed to selling any product to any person. You can always tell a commissioned outfit. Just look for a crowd of salespeople standing by the TVs or appliances. As a customer, I can never fully trust a commissioned sales person. Are they looking out for my best interests? Is this the right product for me? Unless I know there is no commission involved, I will never be 100 percent sure.
Tiered bonus programs that reward service instead of sales will improve the customer experience. I have seen almost overnight improvement at Sport Chek since the changeover. The customer experience is what will bring shoppers back in our current situation.
Straight commission and straight salaries are both bad ideas. Real people need both security and incentive. A combination of the two in any type of compensation plan is realistic and usually more successful.
I agree with Mr. Livingston. He typed just what I was thinking. Everyone should be paid on commission, based on the amount of work they put out. I know more than a few people that I work with would starve to death because they are so lazy. They have titles and salaries but only put out about an hour’s worth of actual work per day. I am truly amazed at how motivated they are to get over.
I don’t think that in the end, it matters as much how sales associates are compensated as it matters that senior management continues/begins to see their front-line people as essential to generating sales and serving their customers rather than merely as an expense item on the P&L, and that becomes/remains a core value of the organization, and is reflected in how store management and employees are managed.
The commission versus salary decision depends largely on the type of product or service the retailer is offering. Commission should work very well in the clothing business, when added service adds to the satisfaction of the customer and to the revenue of the retailer. When a man buys a suit, sell him a shirt and tie. When a woman is trying on a pair of shoes, bring an extra pair or two out that she may also be prompted to try on.
When the primary service is expertise, a commission structure is contrary to the best interests of the customer. If it is time for a new tennis racket, the issue is which racket is best for the customer. Similarly, if I am in the market for a new flat screen TV, I want the salesperson to help me compare the features, not trade me up from plasma to LCD. And, further, if I have already done my research and determined plasma is right for me, I don’t want the salesperson to try to sell me something else. I want him to help me determine which the best plasma is.
Beyond that, incentives are always valuable. In those cases where commission is a less desirable construct a bonus or profit sharing system based on the unit adds individual incentive. The right structure of compensation is always difficult. The fact that Sport Check has received such outstanding feedback is a strong indicator that they are on the right track. While feedback of any sort reflects only a fraction of what people are experiencing, positive feedback occurs much less frequently than negative feedback.
I’m in agreement with those in favor of some salary and some commission. There are people who are driven by security and others who are driven by the ability to push the perceived limit. There are those who will abuse a salary by being lazy. Conversely, there are those who will use commission as an opportunity to sell consumers on things they don’t want or need or to give a face to the retailer that is overly aggressive and not consumer-centric. So you can’t really create the right environment on too much of one or too much of the other.
Giving associates a base to live on and an incentive to work harder seems to make the most sense. But it goes beyond the payment policy. Training and company culture factor in.
I’ve been enjoying some of the insights being shared by the CEO of Zappos insofar as customer service is concerned. You can tap into some good management insight work by following him on Twitter or by going to the Zappos blog and Facebook sites.
Commission or salary or a mixture of both: compensation doesn’t trump culture. It’s just a part of the culture. One 100% commission firm (that will remain nameless) is full of folks who work 2 hours a day, and I’ve very familiar with another firm with no one on commission whose Christmas sales and margins handily beat last year’s figures. Everyone’s experienced crummy service at a sit-down restaurant from time to time, even though the staff survives on tips. Some teachers and nurses are outstanding, even though tips are unlikely and commissions don’t exist. For folks who want everyone on commission: be careful what you wish for. Do you really want every store to be run like a used car lot?