Johansen's: The New Scorecard System

UV7131 Mar. 17, 2016

This fictional case was prepared by Luann Lynch, Almand R. Coleman Professor of Business Administration; Jennifer Forman (MBA ’14); and Graham Gillam (MBA ’14). It was written as a basis for class discussion rather than to illustrate effective or ineffective handling of an administrative situation. Copyright  2016 by the University of Virginia Darden School Foundation, Charlottesville, VA. All rights reserved. To order copies, send an e-mail to [email protected]. No part of this publication may be reproduced, stored in a retrieval system, used in a spreadsheet, or transmitted in any form or by any means—electronic, mechanical, photocopying, recording, or otherwise—without the permission of the Darden School Foundation.

Johansen’s: The New Scorecard System

Jill Landon’s palms were starting to sweat. It was the morning of Johansen’s annual performance summit, and she was still unsure about what overall performance rating to give Jared Clark. It was clear from the data that he deserved the highest rating on the financial, strategy, and leadership initiatives on the new scorecard. But his performance this year in customer service fell far short of the level required by the guidelines in the new scorecard system. Based on the data, she did not think she could justify more than a “meets expectations” rating of 3 for Clark’s customer service rating. As a result, she knew that Clark would be ineligible for the best overall performance rating of 5 and, subsequently, would not receive the maximum bonus possible. In fact, based on the new system, he would receive a lower bonus than he did last year if given a 4 overall this year (Exhibit 1).

Landon knew the importance of the company’s new scorecard system. Although Clark’s scorecard suggested that he should receive an overall rating of 4, the thought of giving Clark anything less than a 5 overall was difficult to stomach. Landon was Johansen’s Southwest regional manager; and Clark had been her best store manager for a number of years. She had never seen another store manager who could deliver the financial performance that he could year after year. Landon’s own annual performance evaluation was based primarily on the sales and financial performance of the Southwest region, performance that was affected greatly by what happened in Store 51; she was grateful for a manager like Clark, since her own future promotion and compensation prospects depended on continuing to turn in top results.

Landon recalled a conversation she had with Clark the previous November. When Clark informed her that one of Johansen’s largest national competitors was planning on opening a store in the same mall as Store 51, her immediate thought was, “This is our highest-performing store in the region. How will this affect sales?” Clark then proceeded to tell her that he had been approached by the competitor to be the store manager for this new store. Clark also detailed the generous increase in salary he had been offered, as well as the opportunity for larger annual bonuses. Despite the appealing offer, he shared that he loved Store 51 and Johansen’s because of the corporate culture and the positive encouragement and interest in his success as a store manager that he had received over the years. The potential for higher pay was understandably attractive, however. He also remarked that he hoped Landon would bear this in mind when evaluating his performance and when the company considered which store managers to promote within the company. Landon was concerned about the competitive threat, but relieved that Clark was forthcoming about it and seemed open to working things out so that he could remain at Johansen’s.

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Background

Johansen’s, a large high-end department store, first opened its doors in New York City in 1950. Founded on the principle of superior customer service, Johansen’s quickly found success and expanded its stores across the country. Johansen’s built its reputation and brand on putting the customer first and offering an unparalleled level of customer service. This core value was integral to maintaining its position as the premier high-end retailer for decades.

As of 2014, Johansen’s had 121 stores across 32 states. Due to its growth over the years, Johansen’s was divided into five regions: Northeast, Southeast, Midwest, Southwest, and Northwest (Exhibit 2). Each region had a regional manager who oversaw all the store managers in that region. Generally, Johansen’s promoted from within, and it was not uncommon for an associate at one store to be promoted to manager of another. At the store manager level, it was more typical for a promotion to regional manager to occur within the same region, but there were instances in which a store manager from one region was promoted to regional manager of another region.

In 2006, Johansen’s was facing financial difficulties. As a result, most of the senior executives were replaced. The new leadership team was eager to drive across-the-board improvements in financial performance. To this end, a financially based incentive system was implemented. Johansen’s store managers were the “boots-on-the- ground” employees, and were critical to driving sales; Johansen’s believed in empowering its employees, and store managers had a great deal of autonomy and control over their stores. They had little to no influence over store location—and consequently customer demographics—and other major store investments. But they had the ability to influence sales levels, and they affected the in-store customer experience, determined individual store marketing and sales promotions, handled individual store merchandising, and were responsible for training and developing employees. As a result, the leadership team considered the stores to be profit centers and decided that store managers would be rated and compensated based on three key financial metrics for their stores: same-store sales growth, gross margin, and net income.

Although Johansen’s saw a modest improvement in its financial performance early on, by 2012, the company’s financial performance had stagnated again (Exhibit 3). Management commissioned a study to figure out why Johansen’s was facing financial difficulties once more. The study provided three key insights. First, it became clear that Johansen’s industry-leading position was far from assured. It used to be that Johansen’s main competition was from other retail stores. Now, however, Johansen’s faced additional competition as more and more Internet retailers emerged. E-commerce had been growing faster than any other retail sector since 2008 and, as a result, was consuming an ever-greater share of retail spending. Exhibit 4 shows the growth trends for e-commerce and total retail sales, as well as for department stores and apparel. Like most retailers, Johansen’s did have an online presence, but only a marginal percentage of its revenue came from online sales. Nearly all Johansen’s sales came from in-store purchases due to the robust customer experience that appealed to shoppers. Moreover, given the e-commerce retailers’ cost structures, Johansen’s knew it was unlikely to be able to successfully engage in a price war, placing an even greater emphasis on its in-store experience going forward. Second—and to make matters worse—recently published market research that was reviewed as part of the study indicated that a rival company’s customer service was superior to that of Johansen’s. This news seriously jolted upper management. Certainly, improving financial performance had been essential to this new leadership team, and to varying degrees the team had succeeded in this regard. Delighting customers had always been Johansen’s key value proposition, however, and the prospect of losing this important differentiator caused great angst among senior managers. Finally, an analysis of detailed financial and employee data suggested that cost- cutting efforts that led to greater profitability may also have fueled customer service–related compromises. When the leadership team implemented the incentive program focused on financial metrics in 2006, it had assumed managers knew that customer service was at the heart of the company’s identity. Now, the leadership

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team was convinced that an overemphasis and focus on financial performance had eroded performance around its key success factor, customer service.

The leadership team was determined to make any necessary changes to restore Johansen’s position as the premier customer service provider in the industry, while also continuing its trend of improved financial performance. Superior customer service had always been associated with the company’s name, and it was an even more important success factor considering the growth in e-commerce. To ensure a customer experience that pulled patrons away from the Internet and into Johansen’s retail locations, it was imperative that the company refocus its efforts along this dimension. The leadership team agreed that incentives drive behavior, and it became clear that the financially driven incentive system needed to be overhauled.

The New Performance Measurement and Incentive Compensation System

After much discussion and analysis, the leadership team agreed that a new performance measurement and incentive system was needed. The leadership team reflected on the role of the company’s store managers and decided to implement a new assessment tool that it called the “scorecard system.” Under the new system, store managers would be assessed across four categories: financial, customer service, leadership, and strategy. The store managers would receive a rating for each of these individual categories on a 1-to-5 numerical scale: 1 conferred a “below expectations” rating, 3 a “meets expectations” rating, and 5 an “exceeds expectations” rating.

1. Financial: The regional manager worked with the corporate finance department to establish year-over- year (YoY) sales-growth and profitability targets for the individual stores.1 These targets included a baseline target that stores had to hit in order to achieve the “meets expectations” rating. These baseline targets appropriately accounted for each store’s unique demographics; as such, stores that had more favorable demographics could be expected to have more aggressive baseline goals. In addition, a stretch target was issued by the corporate finance department that, although achievable, would require an impressive performance to meet. If met, however, it would qualify stores and managers for the maximum rating of “exceeds expectations” in this category.

2. Customer Service: The company had always measured customer service through customer surveys. The surveys were developed, administered, and analyzed by a third party to preserve the integrity of the questions and the results. Every customer had the opportunity to take the survey—instructions were featured on the bottom of the receipts printed at checkout. Sales associates often circled the instructions with a highlighter to draw the customer’s attention to them. Customers who took the survey would be eligible for a monthly drawing to win a $500 gift card redeemable at any Johansen’s store. Until 2005, customers who wished to take the survey called a toll-free number and provided numerical answers to a sequence of questions using the telephone keypad. In 2005, this changed, and the receipts instead directed customers to a website so that they could take the survey online. The survey had 10 questions about the customer’s in-store experience. Each of the questions allowed the customer to answer on a scale from 1 to 5, with 5 being the best score. The scores for the 10 questions were averaged to get an overall survey score. All the overall survey scores for an individual store were then averaged to get a customer satisfaction score at the store level. In addition, customers had an opportunity to provide qualitative feedback at the end of each survey. Company-wide, the response rate of the survey in 2012 was 18.5%, and the average customer satisfaction score was 3.6.

1 Johansen’s had company-wide sales, profitability, and same-store sales-growth targets. Company sales goals could be met in one of two ways: same-

store sales growth or adding new stores. At the individual store level, however, sales growth and same-store sales growth would be redundant metrics.

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In this category of the scorecard, store managers were evaluated quantitatively and qualitatively. First, the regional manager considered the store’s survey response rate. Managers whose stores achieved less than a 12% response rate could earn a maximum of a “meets expectations” rating in the customer service category, even if the feedback was positive. This constraint was part of the system because in cases of particularly low response rates, the sample size was considered too small for the data to be meaningful. Second, the regional manager considered the average customer satisfaction score for the store. To get a 5 rating in customer service, store managers needed to get an average customer satisfaction score of 4.4 or higher. Third, the regional manager made a subjective assessment of the qualitative customer feedback that the store received.

3. Leadership: Johansen’s believed in 360-degree feedback, which the human resources (HR) department administered annually. HR forwarded the results of the exercise to regional managers so they could factor those results into a store manager’s leadership rating. HR also communicated turnover and employee complaint information to the regional managers so that this too could be factored into the leadership rating. The regional manager weighed all the information received from HR to determine what rating to give the store manager in this category.

4. Strategy: The purpose of this element of the scorecard was to achieve cohesiveness and alignment throughout the company. Store managers were subjectively evaluated by the regional manager on promotion of the Johansen’s brand and branded merchandise, and also the implementation of corporate initiatives such as inventory management, training, merchandising mix, and initiatives from corporate (e.g., inventory management and employee training).

After assigning a rating for each of the four dimensions, the regional manager gave the store manager an overall rating, also on a 1-to-5 scale. Ultimately, the overall rating determined a store manager’s bonus (Exhibit 5). Additionally, when regional manager positions became available, store managers who had the highest performance ratings were the first ones considered for promotion.

But the overall rating was not a simple average of the ratings in the four categories of the scorecard. Rather, it was a subjective rating by the regional manager that was supported by the underlying individual ratings in each category and the following corporate guidelines. In order for a store manager to receive an overall rating of a 5, he or she needed to be rated at least a 3 in all four categories, achieve a 5 in three of the four categories, and achieve a 4 or higher in the customer service category. Requiring a store manager to get at least a 4 in the area of customer service emphasized Johansen’s renewed focus on this key success factor.

The new system was rolled out company-wide and implemented beginning January 1, 2013. It initially received mixed responses from the regional managers. Those who had been with the company for several years were relieved to see that corporate management was working to restore Johansen’s original culture and character. But some regional managers resisted the new system and were quite reluctant to buy in. The skeptics, having always exceeded their financial goals, were concerned that their performance evaluation under this new system would be adversely affected by nonfinancial, “soft” metrics. Moreover, many of these managers had been promoted or hired during the period when improving financial performance was the company’s number- one goal, and they now felt vulnerable to a system that didn’t fully appreciate their unique skill sets, which were more geared toward running highly efficient, financially savvy stores.

The New Scorecard System: Early Success

The time had come for Johansen’s first annual performance review under the new scorecard system. Despite the lack of buy-in from some of the regional managers, the leadership team believed that the new system had proved successful so far. During the first three quarters, most regions showed both increased

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profitability—as a result of growth in revenue—and increased customer satisfaction scores. It appeared that Johansen’s was on its way back to the top!

The Store 51 Dilemma

Store 51, located in the Southwest region, generated annual revenue of $150 million in 2013, the highest in the region and the sixth highest in the United States (see Exhibit 6 for a financial summary of Store 51 compared with the average Johansen’s store). Store 51 typically led the region in sales due to its advantageous location in Orange County, California. The store was located in a shopping center that had numerous upscale shops and restaurants but no direct competitors to Johansen’s. Store 51 was also a flagship store, resulting in a number of advantages for it. First, given its status and history in the area, it had a very loyal customer base. This helped drive the second advantage: extensive, detailed historical customer data. This data provided Store 51 with a heightened understanding of and insight into its customers and, consequently, provided great merchandising advantages. Additionally, the surrounding neighborhoods were very affluent; this resulted in people who entered Store 51 generating higher-than-average revenue per transaction than those in most other Johansen’s stores.

Despite its continued success, Store 51 was in an interesting predicament. The store manager, Jared Clark, was known as one of the best store managers in the country. Under the old performance system, he exceeded every financial metric and received the highest store manager bonus possible every year; his record was pristine. Under the new scorecard system, Clark still exceeded the financial targets. The new system, however, revealed several issues regarding Clark’s performance as a manager that had previously gone undetected by Landon as the Southwest regional manager. In the first and second quarters under the scorecard system, Landon noted particularly high employee turnover (45%) and relatively low customer satisfaction scores of 3.2 and 3.4, respectively, at Store 51. She approached Clark to discuss these shortcomings, and was relieved to find that he was receptive to the feedback.

Clark was able to modestly improve his customer satisfaction score in the third quarter, and the latest results for the fourth quarter indicated further improvement. Per usual, Store 51’s financial performance was well above that of the other stores in the region. But Clark’s performance in customer service remained below the company average, even with his improvement throughout the year. Another complicating element that needed to be considered was the relatively low customer survey response rate (the highest it had been in 2013 for Store 51 was 7% in the fourth quarter). It was not particularly surprising that Store 51’s response rate was less than the average, since the older, wealthier demographic of Orange County was less likely to go online and fill out a survey (Exhibit 7). Landon could not help but wonder, however, whether the low survey participation rate for Store 51 was the root of Clark’s low customer service scores. Perhaps if the sample size was larger, Clark would be able to achieve a higher rating in the customer service category, making him eligible for the overall rating of 5. Or was the fundamental customer base inherently disadvantageous to Store 51’s customer service score? Based on the feedback through the survey, the majority of survey participants only took the survey when upset.

Landon was faced with a dilemma: How should Clark be rated this year? (See Exhibit 8 for Clark’s scorecard.) At Johansen’s annual performance summit, regional managers and the managers of several corporate functions (finance, customer service, and HR) discussed overall regional performance and store manager ratings (see Exhibit 9 for information about these managers). Landon knew that regardless of the rating she gave Clark, she would have to justify it to all these managers at the performance summit, as well as to Clark afterward.

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Exhibit 1 Johansen’s: The New Scorecard System

Southwest Regional Manager

Jared Clark’s Historical and Projected Annual Compensation

2012 2013 Jared Clark’s salary: $85,000 $91,000

+bonus Overall rating = 3 10% $8,500 10% $9,180 Overall rating = 4 25% $21,250 25% $22,950 Overall rating = 5 40% $34,000 40% $36,720

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Exhibit 2

Johansen’s: The New Scorecard System

Johansen’s Regional Breakdown

Source: Author adaptation of “Blank USA, w territories,” posted to public domain under Creative Commons (CC BY-SA 3.0) by “Lokal_Profil,” February 12, 2007, https://commons.wikimedia.org/wiki/File:Blank_USA,_w_territories.svg (accessed May 13, 2014).

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Exhibit 3

Johansen’s: The New Scorecard System

Johansen’s Financial Overview

2013 2012 2011 2010 2009 2008 2007 2006 2005 Net sales $8,300 $7,790 $7,800 $7,600 $6,610 $6,600 $7,000 $6,725 $6,612 Cost of goods sold (COGS) $5,400 $5,140 $5,130 $4,950 $4,350 $4,390 $4,500 $4,350 $4,166 COGS as % of net sales 65.1% 66.0% 65.8% 65.1% 65.8% 66.5% 64.3% 64.7% 63.0% Gross profit $2,900 $2,650 $2,670 $2,650 $2,260 $2,210 $2,500 $2,375 $2,446 Gross profit as % of net sales 34.9% 34.0% 34.2% 34.9% 34.2% 33.5% 35.7% 35.3% 37.0% SG&A expenses $1,950 $1,830 $1,830 $1,750 $1,650 $1,650 $1,675 $1,650 $1,621 SG&A expenses as % of net sales 23.5% 23.5% 23.5% 23.0% 25.0% 25.0% 23.9% 24.5% 24.5% EBT $950 $820 $840 $900 $610 $560 $825 $725 $825 Taxes (40%) $380 $328 $336 $360 $244 $224 $330 $290 $330 Net income $570 $492 $504 $540 $366 $336 $495 $435 $495 Net income as % of net sales 6.9% 6.3% 6.5% 7.1% 5.5% 5.1% 7.1% 6.5% 7.5%

Source: Created by author.

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Exhibit 4

Johansen’s: The New Scorecard System

Historical Retail Industry Trends

-10%

-5%

0%

5%

10%

15%

Quarter/Quarter Sales Growth by Retail Sector Total Retail (excluding food and e-commerce) E-commerce Department Stores Total Apparel

Source: Federal Reserve (FRED)

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Exhibit 5

Johansen’s: The New Scorecard System

Store Manager Compensation and Bonus Structure

2012 2013 Average store manager salary: $73,000 $76,650

Bonus as a % of salary Overall rating = 3 10% 10% Overall rating = 4 25% 25% Overall rating = 5 40% 40%

Source: Created by author.

Exhibit 6

Johansen’s: The New Scorecard System

Johansen’s Store Financials ($ in millions)

2013 Johansen’s Average Store Store 51 Sales $8,300 $68.60 $150.00 Gross profit $2,900 $23.97 $60.00 Gross profit % 34.94% 34.94% 40.00% YoY sales growth (a) 6.41% 4.49% 5.50%

(a) YoY Sales Growth for the company as a whole came from two sources: same-store growth and new stores. Source: Created by author.

Exhibit 7

Johansen’s: The New Scorecard System

Johansen’s Customer Demographics

Johansen’s Store 51 Average customer age range 24–55 32–64 Average customer annual household income $100,000 $135,000 Average sales/square foot $408 $772 Average store size 160,000 sq. ft. 195,000 sq. ft.

Source: Created by author.

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Exhibit 8

Johansen’s: The New Scorecard System

Johansen’s Scorecard for Store 51’s Manager

Store Manager: Jared Clark Evaluation Period: January 1–December 31, 2013 Store Number: 51 Region: Southwest Regional Manager: Southwest regional manager Rating Summary

Financial Customer Service Leadership Strategy Overall Rating 5 3 5 5 5

Rating Explanation and Justification: Category 1: Financial (quantitative)

Store managers must meet the “baseline target” to achieve a rating of 3. Store managers must exceed “stretch target” to achieve a rating of 5.

Q1’13 Q2’13 Q3’13 Q4’13 Profit: - Baseline target met? - Stretch target exceeded?

Y Y

Y Y

Y Y

Y Y

YoY sales growth: - Baseline target met? - Stretch target exceeded?

Y Y

Y Y

Y Y

Y Y

Additional note: This year, aggressive financial stretch targets were set for Clark’s store. Clark exceeded the stretch targets and achieved figures well beyond expectations.

Financial Rating: 5

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Exhibit 8 (continued)

Category 2: Customer Service (quantitative and qualitative)

Store manager must achieve a survey response rate of 12% to receive a rating of 4 or 5.

Q1’13 Q2’13 Q3’13 Q4’13 Response rate 3.5% 3.7% 5.5% 7.0%

Store manager must achieve a store customer satisfaction score of 4.4 to receive a rating of 5.

Q1’13 Q2’13 Q3’13 Q4’13 Customer satisfaction score 3.2 3.4 3.7 4.1

Qualitative assessment: Although Clark did not achieve the 12% minimum customer service survey response rate, his customer service performance improved throughout the year. In the first quarter, the feedback was generally negative; customers were able to find the merchandise they demanded, but were very unsatisfied with the customer service. In Q2, I spoke to Clark about the importance of customer service. He was receptive to the feedback, and saw an increase in survey response rate (from 3.7% in Q2 to 5.5% in Q3). Additionally, the feedback from customers was not overwhelmingly positive, but certainly was not as negative as it had been in the first half of the year. In Q4, Clark’s performance increased again. The survey response increased to 7%, and customers had positive things to say about Store 51.

Customer Service Rating: 3 Category 3: Leadership (qualitative)

Questions to consider when rating store manager: Were there many employee complaints? What was the nature of the complaints? Isolated incidents or ongoing issues? Was there an increase in turnover throughout the time period being assessed? What was the nature of the 360-degree feedback? Was store manager interested in developing leadership skills?

Qualitative assessment: Clark’s turnover was notably high at 45% during the first half of the year. In Q3 and Q4, however, turnover was reduced to 33%, a turnover figure better than the corporate average of 35%. There were 23 employee complaints throughout the year. 17 of them were from the same two employees, however. This does not necessarily imply that Clark’s leadership was poor; the high volume of complaints from two individuals could simply indicate a mismatch in personalities. Those two employees voluntarily left Johansen’s in November. Clark’s 360-degree review was highly positive for the most part.

Leadership Rating: 5

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Exhibit 8 (continued)

Category 4: Strategy (qualitative)

Questions to consider when rating store manager: Did store manager actively promote the Johansen’s brand? Was branded merchandise in high-visibility areas throughout the store? Were corporate initiatives implemented? Was store manager proactive in seeking corporate guidance and initiatives?

Qualitative assessment: Clark exceeded my expectations in this area. He regularly asked me about new corporate initiatives and how he could best implement them in Store 51. Clark also worked hard to enhance the Johansen’s brand. He engaged members of his team and store managers across the Southwest region to brainstorm ways to promote Johansen’s as a whole and also Johansen’s branded merchandise. Clark is the strongest Johansen’s corporate ambassador in the Southwest region.

Strategy Rating: 5 OVERALL RATING: ____________

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Exhibit 9

Johansen’s: The New Scorecard System

Managers Attending the Performance Summit

Corporate Human Resources Manager Don Harold

Last year, Harold was ready to leave Johansen’s. After six years, his job had become monotonous, the company was struggling, and morale was low. He was just starting to look at opportunities elsewhere when senior management announced an overhaul of the existing performance measurement system. The company had been too focused on financial performance, and had lost sight of its strong customer service value proposition. The new scorecard system was an effort to bring the company back to its core values. Harold was offered a promotion within human resources to develop and implement the scorecard system. This was exactly the type of opportunity that he was looking for, so he eagerly accepted the promotion and stopped looking for other positions.

As much as the change in responsibilities was refreshing, it was challenging to develop the new system. While crafting it, Harold had his own performance assessment in mind. He would be evaluated and compensated based on the successful implementation of the new system, buy-in from employees, and changes made after system implementation. He wasn’t sure exactly how those factors would be measured, but he did know that his boss would do the evaluation after seeking input from other constituents to get their assessment about the implementation process and general support of the system design, as well as reflecting on the extent of changes needed after the first year under the system. Harold was eligible for a one-time bonus of up to 30% of his salary based on the outcome of that review. He worked hard to come up with the best system possible, and he thought it was truly a stellar system.

Corporate Customer Experience Manager Mitch Dougan

After several years at Johansen’s, Dougan was given the opportunity to become the company’s first customer experience manager. This position was created alongside the development of the new scorecard system, and was considered instrumental to Johansen’s return to its core value of premier customer service.

In this role, Dougan’s main objective was to improve customer service across the company. He would be evaluated and would be eligible for a bonus based on the increase in customer service survey response rates, and also the customer satisfaction scores and qualitative feedback received through the surveys. He hoped that the new scorecard system would help boost the scores. He was very enthusiastic about the company’s renewed focus on customer service, as well as his new opportunity to shine in this role.

Corporate Finance Manager Marjorie Thompson

This year, Thompson was celebrating her 15th anniversary with Johansen’s. She started as a finance intern when she was in college and had moved up the finance ranks over the years. During her tenure with the company, she saw several years of stellar financial performance. In 2005, however, she watched the company’s financials, as well as her bonus, start to stagnate. Johansen’s began to recover after implementing a financially based incentive system, but that recovery was short-lived. Then the company implemented the new scorecard system, and Thompson was worried about what would happen as a result. She just wanted to see the company return to an exceptional financial standing.

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Exhibit 9 (continued)

Although Thompson was in finance, she was quite in tune with the stores in the different regions, and she had strong relationships with the regional and store managers. She recently caught wind of a rumor that a Johansen’s competitor tried to recruit Store 51’s manager, Jared Clark. Given that Clark’s financial performance exceeded that of any other store manager’s performance in the region, she was deeply concerned about the possibility that Johansen’s could lose Clark to a competitor. Thompson saw Clark as a real star, and few store managers had been able to turn in the stellar financial performance that he had over time. Thompson believed that the company needed managers like him, particularly since her performance evaluation depended on the company’s financial performance.

Other Regional Managers (Northeast, Midwest, Southeast, Northwest)

The annual performance evaluation of the regional managers was based in large part on the sales and financial performance of each region, and these regional managers considered themselves fortunate to have these top performers managing stores in their regions. They knew that these star performers were counting on the new scorecard system to rate them fairly.

The top-performing store manager in each of these regions excelled in all areas of the scorecard, including customer service. Depending on the region, the top store manager achieved a customer service survey response rate from 18% to 19%, had an average customer satisfaction score from 4.4 to 4.6, and received positive qualitative feedback from those responses. Each of them truly deserved an overall rating of 5.

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