AnnTaylor Doesn’t Understand Improvement

I am all in favor of metrics. To truly become lean, a company has to constantly measure performance to identify where improvements can be made, and whether those improvements are working.

But at a company that doesn’t understand lean, data from metrics can be misused or applied in ways that may achieve some benefits while creating other problems.

An article in The Wall Street Journal describes new measurement tools available to retailers – and how those tools are being applied in controversial ways at the AnnTaylor chain.

When saleswoman Nyla Houser types her code number into a cash register at the Ann Taylor store at the Oxford Valley Mall (in Langhorne, PA), it displays her "performance metrics": average sales per hour, units sold, and dollars per transaction. The system schedules the most productive sellers to work the busiest hours…

Vendors of the systems claim they can boost productivity by 15% or more, and can help cut labor costs by 5% or more. Wal-Mart just completed a yearlong rollout of a computerized scheduling system for 1.3 million workers. It cited 12% labor-productivity gains as a key reason for improved results in its fiscal quarter ended Jan. 31…

In May 2007, after Atlas (the AnnTaylor system) was tested in some stores, James M. Smith, chief financial officer at the time, said those stores were seeing a "pickup" in comparable-store sales. Kay Krill, AnnTaylor's chief executive, reported a "very promising" increase in conversion, meaning that more browsers were becoming buyers. AnnTaylor declined to elaborate on the financial effect.

In addition to using the system to measure performance, AnnTaylor also did some research to set standards.

Before it installed the system, AnnTaylor spent a year studying labor efficiencies. It established standards for how long it should take for employees to complete certain tasks: three seconds to greet a shopper; two minutes to help someone trying on clothing; 32 seconds to fold a sweater; and most importantly, five minutes to clinch a sale. Its goal was to figure out how many employees it needed in a store at any given time, based on customer traffic.

On the surface, all this might seem reasonable. But consider the consequences.

Some employees aren't happy about the trend. They say the systems leave them with shorter shifts, make it difficult to schedule their lives, and unleash Darwinian forces on the sales floor that damage morale…

Current and former employees of the Langhorne store say that within months of the system's installation in May 2007, the culture shifted from collegial to highly competitive. "You could see people stealing sales from other people," says Julie Abrams, a former cashier at the store. Salespeople were "trying to get each other out of the way to get to the client," she says…

AnnTaylor began ranking its salespeople according to their average sales-per-hour, among other things. When Ms. Abrams's sales-per-hour dropped, so did her ranking, she says. Her schedule changed accordingly. "My hours started being less when the heavy traffic was in the store," she recalls. The slow shifts, in turn, made it harder to boost her ranking.

Her pay varied widely week to week, she says. Before the system was installed, she says, her weekly pay sometimes was nearly $300, for about 34 hours of work. Afterward, she says, "I remember some weeks when the most hours I was getting was just eight. It is hard to budget that way." She took on two other part-time jobs. In April, she quit Ann Taylor to take a job that guaranteed her 30 hours a week.

Many other Langhorne employees also saw their hours cut back, and a few of them left, according to several former and current employees.

"A lot of people would be really upset about the way [the system] would schedule," says Tim Fasnacht, who managed an Ann Taylor Factory store in Philadelphia until March. "Sometimes, people would get a three-hour shift -- and you have people coming on public transportation from far away." Because the system didn't award seniority, he says, longtime employees would sometimes be scheduled for as little as 10 hours a week. "There was this huge battle between some of the longtime workers and the management over their schedules..."

Ms. Houser, a 59-year-old retired first-grade teacher, took an $8.50-per-hour part-time job at the Langhorne store in 2006 to supplement her retirement income. "She knew everybody and she spent sometimes half an hour with one customer," says Ms. Connell, a former assistant manager at that store, who left Ann Taylor last year. "One day, she would have $750 in sales per hour, and the next day it would be $250 per hour."

The new system, Ms. Houser says, doesn't reward her style of selling. It no longer pays to spend time developing relationships with shoppers who might not buy anything on a particular visit, she says. "My client [contact] book is fatter than anybody else's in the store," she says. "Does that mean I will get a bigger raise next time? No. Not if my [average sales] numbers don't reflect that."

One key problem here is the executives at Ann Taylor are trying to get better results without making any effort to improve processes or performance. If an employee has below-average sales figures, is the company doing anything to help that employee improve, by teaching that person how to become better at selling? Not as far as I can tell. There also does not appear to be any effort to find out WHY some employees sell more than others, which could lead to improvement.

Equally important, this approach shows absolutely no respect for people, a key principle of lean. The store’s employees are being treated as cogs in a machine, not as thinking individuals who might be able to contribute ideas that would help the company. It also sounds as if customers are not treated very well, either.

AnnTaylor and the other retail chains taking this approach may see some improvement in sales as a result, at least in the short term. But any benefits they obtain will fall short of what might be achieved through a lean approach with a commitment to improvement and respect for people.