The retail industry has one of the worst reputations when it comes to managing employees – stories abound of high turnover, poor training, bad customer services skills, and worse. But long association with the retail industry has not only taught me what I should (and shouldn’t!) do when it comes to managing my company, it has taught me why.

Retail has traditionally focused on either location or product—who hasn’t heard the retail mantra of ‘location, location, location’? And in the Wal-Mart age, if it’s not location, it’s product—how to get unique products, the lowest-price product, the latest products. Only the stores with the best products at the best prices stand a chance of competing. But as retailers are learning that they can’t compete with Wal-Mart on price, they are turning to a long-neglected part of their offering: service, and the people who provide that service.

In a world increasingly saturated by technology, it’s a little ironic that people are becoming a focus of attention. As a technology vendor, it’s easy to get swept up in the message we live and breathe every day—that technology is the solution for every problem. But no amount of technology can overcome a bad customer experience or poor execution, and the retail industry struggles with that issue more than most, providing the rest of us with important lessons on managing people in the 21st century.

Outside of product, labor is the biggest expense for retailers, and in a slow economy, one that is receiving increasing attention. At the same time that retailers are throwing technology into stores, with kiosks, self-service checkouts, RFID, and more, they are rediscovering that people are still a critical component of execution—a lesson I have carried with me to this day. The challenges are not so different: developing a productive and effective workforce, providing clear and consistent communications and expectations, and being able to coordinate multiple departments, priorities, interests and objectives. These challenges are something that every company struggles with. But retail adds some complications. When most companies think of a ‘highly distributed workforce’, they don’t think about it in terms of thousands of locations—each staffed with anywhere from 1-2 people all the way up to 250. Very few industries struggle with 100% employee turnover or higher.

But the reality is that, while not to the extreme of retail, most companies face some variation on these issues today: a telecommuting workforce that is much more fluid than we’ve ever seen. Job-hopping—once a resume destroyer—is very common, and looking to be on the rise as even minor economic improvements unleash quality employees who held tight at positions they didn’t want in order to weather the economic downturn. The nature of working relationships has also changed, increasing that fluidity—with contractors, outsourcing, and short-term employment becoming more and more common.

If you don’t adjust your management strategies to accommodate this type of working environment, the impact can be tremendous. When I was CEO of KBKids.com, I saw the impact first-hand. As the on-line operations for KBToys, my company was often placed in side-by-side comparisons with the ‘brick & mortar’ side of the business. Retail strategies would be developed and agreed to by our board of directors, myself, and my counterpart at KBToys. As an Internet company, those strategies most often impacted our web site, and within a few days whatever changes were needed had been made, and you could verify them simply by checking out the site.

On the bricks side, things were much different. Communicating what needed to be done to implement a new strategy was like throwing memos into the wind—you never knew who received them, if they read them, if they understood them, and worst of all, if they ever acted on them! What took the dot-com side 2-3 days to implement, took the bricks side 6-8 weeks just to find out that it was not implemented at all consistently. The distributed workforce, the one-way communication, and the complete lack of visibility into their activities dramatically slowed and impeded the company’s ability to move—whether proactively or reactively.

These gaps in execution—and the performance gaps they drove—inspired me to establish my current company, StorePerform. As I talk to retailers about my experience at KBToys, I’m finding that the problems there are the same everywhere. As retailers struggle to implement corporate strategies that require fast moves, constant corrections, and rapid responses to a competitive environment, they are finding that they are placing an enormous burden on their workforce—particularly the front-line people who are the company’s ‘face’ to the customer.

At the same time, retailers are learning that reaching these people is getting increasingly difficult. Each store is becoming more and more specialized to reach specific customer demographics, which creates a barrage of generic instructions that each location must wade through to figure out what’s relevant to them. And without closed-loop communication, the people who are most knowledgeable about the company’s customers are locked out of getting that knowledge back into the organization.
But the most important application of these lessons has been within my own company. We’re a fairly typical software company—while we have a main office, we also have a highly distributed workforce, with sales and professional services people scattered across the U.S. and Europe, and a development team that is split between the U.S. and India. Keeping everyone in synch with our corporate strategy and how it applies to them, as well as being able to move rapidly to take advantage of new opportunities or competitive actions has required the adoption of the same philosophies and activities that we sell to our customers.

Explicit vs. Implicit Communication
Communication is an explicit activity at our company. What does that mean? It means that we consciously think about ways to communicate what’s going on in our company and competitive environment. We have established meetings and communications processes that people know are regular avenues of information that are available to them. As we’ve seen with our customers, assuming that communication is happening (relying on implicit communication processes) is a great way for no communication to happen at all.

Two-way Communication
Just as critical is for these avenues of information to be two-way. The people in the field and in our support organization know the most about what’s going on at our customers. The people in front of prospects know the most about how effective our sales messaging and product offering is. Getting that information back into the hands of decision-makers is critical to keeping our corporate strategy on track.

Recognizing Growth-Driven Complexity
For a lot of our retail customers, realizing the gaps that are driving execution issues is something of a learning experience. The average retailer didn’t start out with 1,000 stores on day one—there was a steady progression. As more stores were added, the ability to keep track of what was going on in those stores slowly became more and more difficult, until the retailer finally realized that they didn’t really know what was going on in their stores at all—except for after the fact, when results were reported and it was too late to do anything about it.

At StorePerform, being a startup focused on exponential growth, we make conscious efforts to continually re-evaluate our processes to make sure they are scaling with the growth that we’re experiencing. Without this re-evaluation, we risk falling into the trap of assuming that everything is working well—until we experience a major breakdown, either in process, in communication, or in delivering what we’ve committed to.

Srikant Vasan is President and CEO of StorePerform, a software company providing retailers with Store Performance Management solutions. Prior to StorePerform, Vasan was most recently an Entrepreneur-in-Residence with Softbank Venture Capital and Battery Ventures. As president and CEO of KBkids, Vasan grew the company from a start-up founded in his basement to become the twelfth largest e-tailer in the world, and successfully transitioned the company from a pure-play Internet company to one of the first successful clicks-and-mortar retailers. Vasan has an MBA from the Wharton School and a BS (EE) from the Indian Institute of Technology-Delhi.