VendingMarketWatch Blog

Last quarter we discussed the fact that while employee performance management has been a mainstay of most organizations, the process is fraught with imprecision and dissatisfaction. 

Rather than serving as opportunity for providing direction, growth and alignment, Performance Management is more often seen as a necessary evil.  An Aberdeen Group study indicated there is clearly a disconnect between the concept of performance management and it’s successful execution, since 95% of study reported giving performance reviews but only 11% felt the reviews actually improved performance levels.

In our June post we discussed the two key performance criteria that defined ”Best in Class” Companies with regards to performance management:

1. Improved bottom line results: best in class companies experience a minimum profitability growth of 10% or move over last 12 months.
2. Increased employee retention rates: 94% of best in class companies increased or maintained stable employee retention rates over the last 12 months.

This quarter, we would like to discuss WHY focusing on performance management is seen as more important a project than ever.

According to Aberdeen, industry pressures are forcing all companies to adapt to change in two primary elements of their business.  First, the labor pool is shrinking and second, the pressure to perform more profitably is unceasing.

The study show the top five (5) pressures driving performance management within a company were:

1. Pressure to improve overall company performace indicated by 57% of group.

2. Pressure to improve employee productivity indicated by 46% of group.

3. Pressure to increase employee satisfaction indicated by 31% of group

4. Pressure to gain visibility of goals, metrics and ratings indicated by 30% of group

5. Pressure to add structure to the process indicated by 20% 0f the group.

Key takeaway?  Employee Performance Management used by best in class companies as method to increase company performance.

Key disconnect? 31% of group indicated they were dissatisfied with their Employee Performance Management Solution.  Bottom line? The review process is anticipated by both managers and employees with a great deal of dread and trepidation. 

 Aberdeen’s study showed:

• Best In Class:  in the top 20% of companies, 94% improved employee retention and 88% increased profit at least 15%.

• Industry Average: in the middle 50% of companies, 74% improved retention and 4% increased profit at least 15%. 

• Laggard: in the bottom 30% of companies, 59% improved retention while 0% increased profit at least 15%. 

Key Takeaway?  Companies that successfully use Employee Performance Management are much more likely to retain more employees, leading to significant profit growth. 

The key to success?  Hire employees that fit their jobs, and make sure they are capable of doing the job, doing the job how you want it done, and being interested in doing a good job.

 Coming next Quarter: What IS the connection between productivity, turnover and job match?

Thank you for taking the time to read about Employee Performance Management.  Your employees are your company’s largest asset; with workforces shrinking, employee retention will be key factor impacting success of any company.

Hope to see you in St. Louis at NAMA National October 15-17, 2008. 

 Sincerely,

Dave McCaffrey

MTA (New York’s Metropolitan Transportation Authority) recently announced that they would hike fares by .25 cents because “vending machines can only dispense dollar coins and quarters.”  This has Big Apple straphangers’ up in arms (no pun intended) saying “It is not acceptable to say the vending machines made us do it.”  Following closely behind this news, is an admission by MTA that a “software glitch” has allowed vending machines to dispense free train tickets in the amount of $800,000.00.

This example suggests to me that outsourcing opportunities for the unattended sale of non-food and beverage products may exist.  Many hi-tech savvy, full line vending companies could do better than MTA in managing the process of unattended sales of train tickets.

Sources of new revenue from the vended sale of food, snacks and beverages are vanishing and will continue to do so.  It is time to get serious about searching for new revenue sources.  Take a look around your market place and note any unattended sale of any product and service.  It might be worthwhile to approach government agencies or private locations with a respectful proposal outlining the strong advantages of your experience in the management of unattended sales.

An absolute prerequisite for soliciting this channel will be the need to meticulously study state-of-the-art software systems and machines used in the sale of non-food and beverage items.  It will require plenty of hard work and lots of new learning; is it worth the effort?

I am not sure, but it certainly beats the alternative.

According to a new study by Leadership IQ, 47% of high performers are actively looking for other jobs (they’re posting and submitting resumes, and even going on interviews).  

While it’s terrible that almost half of high performers are thinking about quitting, what’s perhaps even worse is that low performers want to stay.  Only 18% of low performing employees are actively seeking other jobs, and 25% of middle performers are actively looking around.  (DHM note: why would they be seeking other jobs; they’ve found a home! They have figured out how to stay below the radar and collect a check for minimal contribution.  How long can you afford non revenue producing employees that usually make up 80% of your total workforce?). 

 Leadership IQ surveyed 16,237 employees on a range of workforce and retention issues, and then divided them into high, middle and low performer categories based on their annual performance appraisal scores.  There were 3,896 employees identified as high performers, 8,607 identified as middle performers, and 3,734 low performers. “High performers keep companies in business,” says Mark Murphy, CEO of Leadership IQ, “so every company is at risk if these people leave.  If you lose some low performers, you might actually be better off.  But when your best people quit, revenue drops, quality suffers, and snafus increase.  Even large companies can take a big hit with the departure of just a few key employees.” 

Murphy continues “The worst part of this is that we typically cause our high performers to quit by how we treat them.  Frankly, we treat our high performers worse than any other employee.  When a manager has a tough project upon which the whole company depends, to whom do they turn?  Who gets the late hours and the stress?  It’s not the low performers, because managers want the project done right.  Instead managers turn to their handful of high performers.  Over and over we ask our high performers to go above and beyond, making their jobs tough and burning them out at a terrible pace.  Meanwhile, low performers often get easier jobs because their bosses dread dealing with them and may avoid them altogether.”

So what can you do to keep your top performers happy?  Make sure you know WHY they are your top performers, not just that they are….because of sales or collections or new business. 

If you understand WHY your top performers do what they do, you can improve performance of your middle and lower groups, reducing strain on top performers while improving profitability and reducing turnover. 

The old adage…..”you cannot manage what you cannot measure”….has never been so true as it is when talking about improving performance.  There ARE tools available to help you make sure you retain your top performers and improve the rest of your team at costs FAR less than replacing a top performer…or paying a full salary to a low performer that is a non-revenue expense. 

Your employees are your company’s single most important asset: are you investing in them as much as your other assets?  If you want to be around tomorrow, investing in employees today is a good bet!

Dear Tom Britten:

Gosh, I didn’t mean to demean the mom & pops of the vending industry. I try to choose words carefully, but maybe I bungled it by using the words of the vendor this particular time.
I think his larger point was that he believes it is unfair competition when some vendors don’t get their businesses licensed and insured.  It is overhead they don’t pay, which he does. Also, lacking insurance can have devastating consequences for a lot of people if something goes wrong. This can happen in any business.

It might be easier to skip these costly legalities if the business operates “under the radar,” say from a garage. That doesn’t mean that every garage-based vendor does this.
Thanks for sending me your counterpoint. It made me think hard. I think it will make be a better reporter. And, thanks for reading,
Laura L. Ruane
Business reporter
The News-Press
Voice (239) 335-0392
Fax (239) 335-0265
Visit us on the Web at www.news-press.com 

A portion of a recent article in the Fort Meyers, Florida News-Press described Garage Vendors as the unlicensed, uninsured, unaffiliated “bane” of the vending machine industry. To portray these hard working men and women in this way is unfair and in the vast majority of instances entirely unwarranted.

The term Garage Vendor is a vending industry term used to describe a small vending company that operates out of their garage or a small rental storage facility.  Other industries often use the term “mom & pop” operation.

Most of these companies are family businesses with only 1 or 2 maybe 3 people working long, hard hours desperately trying to compete with larger vending companies who have advantages that they don’t have or may never have.  They have their life savings wrapped up in their fledgling companies and are struggling to stay afloat.  I know lots of Garage Vendors; they are some of my favorite people.  I help them whenever I can, usually at no cost. 

Many of the largest and most respected companies in the vending industry started as lowly Garage Vendors.  Nathanial Leverone (Canteen’s founder) and Davry Davidson (one of Aramark’s founders) both started as Garage Vendors in the 1930’s.  The prosperous dot com companies existing today that were started in garages are legendary.

Let’s be sporting. Give these folks the respect they deserve for risking their capital and making the effort to build something from nothing, it’s the American way.

Tom Britten
 Analyst . Intermediary . Consultant 
Phone 813.469.5437
E-Mail tombritten@msn.com

You’ve tried everything else……….. Try lowering your prices

Before you accuse me of being totally off my rocker, read on:

Mr. Client, I know you have read all the same stuff that I have about employers helping their employees’ cope with the dramatic rise in prices at the gas pump.  Some employers are giving stipends based on commuter mileage, offering work at home Fridays and company sponsored car polls. I was wondering if there was a way I could help you help your people and I came up with an idea I would like to explore with you.   What if you agreed to a reduction in commissions and I agreed to a corresponding reduction in the retail price of vended food and beverages?

Not everywhere, but, at some accounts this could be a win-win. 

As same store sales continue to slide most folks I talk to blame lack of discretionary dollars.  This is only part of the cause of lost sales.  Consumer resistance to higher prices is a big factor here.  Even if the amount of the commission reduction is exactly equal to your drop in the price, I am betting that the vending operator will experience increased sales as consumers return to lower priced products.

Tom Britten
Analyst . Intermediary . Consultant
3922 Bubba Drive, Zephyrhills FL 33541
Phone 813.469.5437
Fax 813.783.7908
E-Mail tombritten@msn.com

With out question the cost of fuel and the greening initiative is changing the way we live. 

In our industry, we clearly see the effect of declining disposable income in our same store sales analysis. Now a new element threatens to take a bite out of revenue.

There is a rapidly growing movement underway to take a new the workweek. Employees all across the country are currently submitting petitions to employers in attempt to gain approval of four-day weeks and telecommuting. They are citing more the just gas savings, here are just a few points that are being laid out very convincingly.

The 4-Day Work Week would mean less traffic congestion.

The 4-Day Work Week would mean fewer auto accidents each year.

The 4-Day Work Week would mean a reduction in absenteeism

The 4-Day Work Week would give us more time for family

The 4-Day Work Week would decrease labor costs

The 4-Day Work Week would decrease operational costs

The 4-Day Work Week would mean a reduction in the cost of childcare

These employee proposals also stress the use of internet as a tool to scrap the antiquated notion we should all be at the office from eight to five on Monday through Friday.

The revenues in the business and industry channel for food service, vending and OCS will decline in direct proportion to the decreased time employees spend in their traditional work place. This is an iron-clad certainty.  I suggest that you keep your ear to the ground at all accounts; you may have to adjust your revenue forecast and identify actions needed to protect the bottom line now.

Employee performance management has been mainstay of most organizations, yet is fraught with imprecision and dissatisfaction.

Rather than serving as opportunity for providing direction, growth and alignment, it is more often seen as a necessary evil.

The Aberdeen Group surveyed over 600 individuals: while 95% indicated conducting regular performance reviews, only 11% indicate satisfaction with the process in their organization.  There is clearly a disconnect between the concept of performance management and it’s successful execution. 

Aberdeen reported that two key performance criteria defined ”Best in Class” Companies (BiC) with regards to performance management:

1. Improved bottom line results: BiC companies experience a minimum profitability growth of 10% or move over last 12 months.
2. Increased employee retention rates: 94% of BiC companies increased or maintained stable employee retention rates over the last 12 months.

Coming in future postings:

• What are top five (5) pressures driving performance management?
• What are strategic actions necessary to achieve performance management goals?
• What is the connection between productivity, turnover and job match?

Have a great week; back to you soon!

Sincerely,

Dave McCaffrey

PredicitiveAssets

(866) 584-9551 (toll free)

Dennis

I agree that the quality and variety of vended products has vastly improved since the 60’s.   Too bad the industry lost most of the ideal venues for the application for vended food and beverage services.  Ironic isn’t it?

While my Dear Friends in the traditional full line vending business are agonizing over how to sell candy bars, potato chips and soft drinks profitably, something is going on in the background.

The self Service Revolution:

* 97% of consumers would use self-service to handle a transaction or service.
* 86% of consumers say they are more likely to do business with a company
   that offers the flexibility to interact using self-service.
*66% of consumers say the availability of self-service technologies
  creates a more positive perception of the brand.
*56% say their likelihood to use self-service has increased over the last
  12 months.

Speed, convenience and ease of use are identified most frequently by respondents when asked why they would choose self-service over personal assistance in each of four industry sectors:

* financial (faster-70 percent, more convenient-67 percent, easier-52 percent);
* retail (faster-68 percent, more convenient-64 percent, easier-52percent);
* travel (faster-63 percent, more convenient-61 percent, easier-60percent); and
* healthcare (faster-53 percent, more convenient-50 percent, easier-47percent).

Our industry was once the leader and innovator in the “unattended sale” concept.  Are we to be left behind in this major shift in retailing?

 *Sources of statistical data:Time Magazine, March 2008NCR Self Service Consumer Survey, 2008 

Timmy

Do not look for a vending machine that cooks from scratch (as in, peels the potatoes, slices the carrots and braises the beef) anytime soon I foresee a couple of barriers this type of device:·        

Sanitation, temperature control and related food safety issues. ·        

Extended processes, even though automated, mean longer delivery cycles and the vending advantage is fast and convenient delivery. 

Vended products are not usually served up with candlelight and violins. Frankly,  I do not see the need anyway.  There are lots of vendable microwaveable packaged meals and sandwiches available that are of excellent quality.  

 Advances in the packaging microwavable foods have been a big plus factor for the quality of vended foods. Absence of clear, concise cooking instructions on the package can be an issue.  Failure to follow the heat and time instructions will adversely affect finished product quality.  

A little consumer education is always beneficial when new products are introduced.

Keep the new ideas coming……Best RegardsTom