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Three Distinct Levels of Accountability in Retailing
Success in retail does not depend on “location, location, location”. Nor does selling the latest “must have” product assure success. |
In their work with retail businesses across North America, Outcalt and Johnson have identified that every retail business - no matter its size - has three levels of accountability – each with its own unique demands. OJRS has identified these three levels:
Whether Ownership is one person (perhaps the founder); several people (family members, business partners, investors); or, as in the case of corporations, represented by the Board of Directors, the job of the "Owner" is the most under-performed and overlooked job in retailing today!
It is imperative to separate the Three Levels of Issues. Owners must be held accountable to a higher standard of performance, and must focus on the "Owner-only responsibilities."
- Owner Level
- President Level
- Management Level
Whether Ownership is one person (perhaps the founder); several people (family members, business partners, investors); or, as in the case of corporations, represented by the Board of Directors, the job of the "Owner" is the most under-performed and overlooked job in retailing today!
It is imperative to separate the Three Levels of Issues. Owners must be held accountable to a higher standard of performance, and must focus on the "Owner-only responsibilities."
The answer to "Why survive?" is decidedly not the same for every retail business. And, there is no one “right” answer. |
Ownership Level:
Survival. And the Balance Sheet
Owner Responsibility #1: Survival of the Business.
The number one responsibility of the Owner is the survival of the business.
But here’s the key: the Owner must know “Why?”
Why should this business survive? Why are we working so hard? What is Ownership’s vision for the future? Or, put another way, “What constitutes success?”
Ownership’s responsibility is to address this question, gain consensus if there are multiple Owners, and then, effectively communicate this answer to “Why survive?” throughout the business. And, until the answer changes (because Ownership’s circumstances have changed), this “answer” is the foundation of all strategic business decisions within the company.
Owner Responsibility #2: Balance the Balance Sheet
The next major responsibility of the Owner is to manage the Balance Sheet. This involves Ownership’s appetite for risk.
In addition, Owners must manage all three kinds of assets in the business:
The number one responsibility of the Owner is the survival of the business.
But here’s the key: the Owner must know “Why?”
Why should this business survive? Why are we working so hard? What is Ownership’s vision for the future? Or, put another way, “What constitutes success?”
- To be the biggest, the most dominant in the market?
- The fastest growing?
- To be a way of life for the Owner, a place to go, something to do?
- To create personal wealth for the owners/shareholders?
- To be a great place for employees to work?
- To support a larger cause?
- To be readied for sale or acquisition?
Ownership’s responsibility is to address this question, gain consensus if there are multiple Owners, and then, effectively communicate this answer to “Why survive?” throughout the business. And, until the answer changes (because Ownership’s circumstances have changed), this “answer” is the foundation of all strategic business decisions within the company.
Owner Responsibility #2: Balance the Balance Sheet
The next major responsibility of the Owner is to manage the Balance Sheet. This involves Ownership’s appetite for risk.
- What debt-to-worth ratio should be targeted?
- How rapidly should assets grow?
- How leveraged should the business be?
- How liquid does Ownership want the business to be? (e.g., targeted Current Ratio and Working Capital?)
In addition, Owners must manage all three kinds of assets in the business:
- Balance Sheet Assets, i.e., inventory, furniture and fixtures, leasehold improvements, etc
- Other Tangible Assets, i.e., customer databases, key employees, locations, etc
- Intangible Assets, i.e., the vision of the Owner, company reputation, company culture, key vendor relationships, etc.
President/CEO Level of Accountability
President Responsibility: "Strategic Business Plan"
Answer "What To Do?" to Accomplish the Goals of Ownership
The President Level – the “pickle in the middle” between ownership on the one hand and management and employees on the other. The President is responsible for defining “What?” will be done in order to accomplish the goals of the Owner.
Ownership already has answered “Why survive?” The President now must devise the strategic business plan to achieve that goal. This demands energy, creativity, leadership – and a clear understanding of Ownership’s goals.
Ownership's vision – the answer to “Why survive this business?” – provides the framework for all of the President’s strategic business choices. Clearly, the President’s ability to succeed in managing the “What?” can be undermined if there is inconsistency or lack of consensus from Ownership.
Answer "What To Do?" to Accomplish the Goals of Ownership
The President Level – the “pickle in the middle” between ownership on the one hand and management and employees on the other. The President is responsible for defining “What?” will be done in order to accomplish the goals of the Owner.
Ownership already has answered “Why survive?” The President now must devise the strategic business plan to achieve that goal. This demands energy, creativity, leadership – and a clear understanding of Ownership’s goals.
Ownership's vision – the answer to “Why survive this business?” – provides the framework for all of the President’s strategic business choices. Clearly, the President’s ability to succeed in managing the “What?” can be undermined if there is inconsistency or lack of consensus from Ownership.
Management Level of Accountability
Management Responsibility: Make It Happen!
Answer "How?" to Accomplish the Goals of Ownership
Now that Ownership has answered "Why survive?", and the President/CEO has developed the strategic business plan for "What to do?", it is the Management Level of responsibilities that makes it happen. That is, "How?" will this business accomplish the goals of Ownership?
The Management Level is responsible for managing the day-in, day-out operation of the business. Management's focus is all the elements that are summarized on the income statement, or P&L: managing sales, margins, expenses, profits. And, of course, managing people.
Frankly, this level is where many Owners tend to find their own “comfort level”. Ownership can get very involved in answering "How?" the business should be run. In large organizations, this might be called “micro-managing”; in smaller ones, it’s called “meddling”! But it’s the same phenomenon, no matter what you call it.
Too often, the time spent by Ownership on these management responsibilities is at the expense of fulfilling the “Owner-Only Responsibilities”.
Answer "How?" to Accomplish the Goals of Ownership
Now that Ownership has answered "Why survive?", and the President/CEO has developed the strategic business plan for "What to do?", it is the Management Level of responsibilities that makes it happen. That is, "How?" will this business accomplish the goals of Ownership?
The Management Level is responsible for managing the day-in, day-out operation of the business. Management's focus is all the elements that are summarized on the income statement, or P&L: managing sales, margins, expenses, profits. And, of course, managing people.
Frankly, this level is where many Owners tend to find their own “comfort level”. Ownership can get very involved in answering "How?" the business should be run. In large organizations, this might be called “micro-managing”; in smaller ones, it’s called “meddling”! But it’s the same phenomenon, no matter what you call it.
Too often, the time spent by Ownership on these management responsibilities is at the expense of fulfilling the “Owner-Only Responsibilities”.
What This Means for Today's Retailing
Success in retail does not depend on “location, location, location”. Nor does selling the latest “must have” product assure success.
Today, the true retail success stories will be written by those companies whose Ownership is effectively performing its actual job; doing those things that only the Owner can do.
Retailers always are in a goldfish bowl. The public knows their stores, and has strong opinions about them.
How owners manages the “job” aspects of Ownership radiates to employees, customers, their families, suppliers, bankers, the community, and all other constituencies.
Whether "ownership" is one person (perhaps the founder); several people (family members; business partners; investors); or, as in the case of corporations, represented by the Board of Directors, no longer can Ownership's "job" be the most under-performed and overlooked one in retailing today!
Today, the true retail success stories will be written by those companies whose Ownership is effectively performing its actual job; doing those things that only the Owner can do.
Retailers always are in a goldfish bowl. The public knows their stores, and has strong opinions about them.
How owners manages the “job” aspects of Ownership radiates to employees, customers, their families, suppliers, bankers, the community, and all other constituencies.
Whether "ownership" is one person (perhaps the founder); several people (family members; business partners; investors); or, as in the case of corporations, represented by the Board of Directors, no longer can Ownership's "job" be the most under-performed and overlooked one in retailing today!
