"Sales are down from last year." "The whole industry is down." "It's tough right now." "We're just trying to minimize our losses." "We can't afford to staff our stores as heavily as we used to."

In both good times and in bad, you've probably heard these comments if you haven't said them yourself. But, there are always retailers that are making their goals and many that are even exceeding them. So how is it possible for some companies to prosper while so many others are struggling to keep their doors open?

The difference lies in upper management's management style: reactive or proactive. In a reactive organization, reactive managers do just what the word implies; they react to the situation around them. You'll hear them using the sentences in the first paragraph as excuses. They react to the fact that there are fewer customers walking in their doors and that the ones that do walk in spend less money.

Proactive managers, on the other hand, are innovating. Knowing that tomorrow may not bring any more potential customers than today, they search for new ways to get more customers to walk into their stores. (One way to get more customers is to steal them from your competition.) And if they still anticipate selling less, they look closer at what they could do with their merchandise and margins to increase the bottom line. They strengthen their advertising, they tighten general operating expenses. Overall, they change the way they do business. They make it better.

When it comes to tightening expenses, there is a major mistake that reactive retailers often make. Certainly a good tightening of the belt is in order periodically. But in most cases, when cuts are called for they usually start with personnel, and personnel cuts usually start on the sales floor. This makes sense if you have unproductive salespeople. What doesn't make sense, however, is how reactive retailers make those cuts. All too often they are made based on seniority rather than performance.

What a reactive organization ends up doing is keeping Mary, whose performance for the last five years has been average at best, while Susan, who consistently meets and exceeds her goals, has to leave because she's only been there for one year. There's something seriously wrong with this picture!

If layoffs are called for, they should be based on performance. Proactive managers have systems in place by which to hold their salespeople accountable. They know who is producing and who isn't. So if they are forced to cut back they know exactly where to start. Something that we call "The Fair Share Doctrine" is a simple, yet effective, method by which you can objectively judge the effectiveness of your staff.

To illustrate how it works, let's say a store has a goal of $10,000 to meet for the week. There are four salespeople who all work an equal number of hours. According to The Fair Share Doctrine, each salesperson is responsible for contributing 25% of that $10,000. It only makes sense that if two people work the same amount of hours they should be expected to sell at least the same minimum dollar volume. Now, what tends to happen when analyzing the weekly results brings us to yet another difference between reactive and proactive managers.

We'll continue to use our example of four salespeople all working the same amount of hours in one store. Suppose one person sells $4,000, one sells $2,500, another sells $1,500 and the last one sells $2,000. The store ends up reaching the goal of $10,000. The reactive manager is happy; the store has made its goal so he has nothing to worry about. As a result, the two salespeople who did not contribute their fair share continue to exist for months, even years without ever being noticed, helped, replaced or anything. Life goes on without anyone ever realizing the impact (or lack thereof) that these two people are making on the bottom line.

The proactive manager recognizes the impact that these two people are making by falling short of their minimum. Certainly they see that the store achieved their goal; but only because one individual picked up the slack for two others. So they look at what would have happened if those two salespeople selling $1,500 and $1,000 respectively reached their minimum of $2,500. The store would have gone well over goal at $12,500. In a proactive organization these two salespeople would not be around for months or years unless they were able to improve their statistics.

We are not suggesting that you terminate all your salespeople who fall short of their minimums. You should first train them to make certain they are capable of reaching those minimums. Then, after sufficient training, there must be a process by which substandard performers are identified and replaced.

Here's another great example of the difference that a proactive manager can make: in a high-traffic store that we worked with, we found that an average of 250 transactions were made on Saturdays. The conversion rate (percentage of customers turned into buyers) in this store was approximately 20%. This means that an average of 1,250 customers came into the store on Saturdays of which only 250 actually ended up buying. What is the likelihood of a manager or district manager strategizing from a proactive viewpoint on what they could do to increase their conversion rate and make 400 sales on Saturday as opposed to 250? The chances are virtually nil in a reactive organization. A reactive manager would be unwilling to gamble staffing up on a Saturday to raise the conversion rate (which is unacceptably low) and consequently, lower the selling-cost percentage. In this case, a penny saved is not a penny earned. A penny saved is thousands in sales lost!

These are just a few examples of the many differences between reactive and proactive management styles. Take a look at the management style in your organization. Has everyone been so busy reacting to the current situation that sales may be suffering? Start taking proactive measures today. The impact it will make on the bottom line may surprise you!

POSSIBLE ADDITION TO THE PROACTIVE MANAGEMENT ARTICLE

There's a great story about Fred and his hot dog stand that will help illustrate how a reactive manager operates. Fred opened a hot dog stand that for many, many years was very successful. He served the best quality dogs he could buy. He had all of the trimmings available. He had signs all over town pointing in the direction of and indicating how far away his hot dog stand was: 3 miles to Fred's Hot Dogs, 1 mile to Fred's Hot Dogs, 30 feet to Fred's Hot Dogs. His reputation grew and business increased each year. Then his son, a businessman himself, said, "Dad, there's a recession right now. It's really bad. You can't keep operating the way you have been. You've got to cut back on your advertising and limit the amount of sauerkraut or onions you give with each hot dog. And you're paying too much for the beef, too." So Fred bought cheaper dogs, put up less signs, cut back his condiments, and went out of business. And Fred said to his son, "Boy, you were right. This recession really is bad."