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[18 comments]

Home Depot's New Plan to Get Employee's ''Juiced'' for Customer Service

June 26, 2006

By Rick Moss

Home Depot is taking an unusually direct approach to the challenge of getting superior customer service out of its employees. Its new "Orange Juiced" program (re: employees' signature orange aprons) earmarks rewards of up to $25,000 per quarter for stores that provide the best customer experiences. Individual employees can receive bonuses of as much as $2,000 per month or $10,000 per quarter, according to MarketWatch. That adds up to a $30 million commitment from the head office.

Most experts would stand behind the idea of "incentivizing" workers to get the results you're looking for, and doing so based on sales objectives or other quantifiable performance measures is standard practice. However, it gets thorny when judging something as subjective as how you treat customers.

Home Depot's answer involves a three-tier assessment that attempts to balance out multiple views on the situation: "voices of customers" via phone and internet surveys (there's contact information printed on store receipts); pier reviews; and manager reviews. Rewards are given for the biggest improvements in customer service and keeping service levels at their peak.

Jose Lopez, Home Depot's chief customer officer, says that it's ultimately customer loyalty that they're after. "Overall satisfaction translates into loyalty. We want to make sure that when people are having to make a decision about where to shop, they will cross over many lanes to come to us vs. anywhere else."

Despite some nods to the progressive thinking behind the initiative, industry experts interviewed by MarketWatch said the program was sidestepping some long-standing issues.

"It doesn't solve the basic, core problem of having knowledgeable people working in your stores," said George Whalin, founder of Retail Management Consultants and RetailWire BrainTrust panelist. "In recent years, Home Depot has spent very little educating people."

However, Marshal Cohen, chief industry analyst for the NPD Group, points out that, for better or worse, the new program could shift emphasis from operational tasks to serving the customer. "It's easy to ignore the customer because no one's keeping track of that, but they are keeping track of whether the racks are stacked and all the other additional duties are completed," he said. "This is a very aggressive move for Home Depot."

Moderator's Comment: Is it possible for retailers, or any employer for that matter, to set up a fair incentive program for something as subjective as customer service? Will the workers that wind up feeling overlooked ultimately outnumber the ones that get "juiced"?

I appreciate George Whalin's concern about the lack of training and how that could hamstring the program, but one could argue that if this program can pump up worker enthusiasm enough, it could actually cause the "tail wagging the dog" effect of creating an employee-driven desire for better training.

And what should not be discounted is the simple motivating power of hard, cold cash. It's not that workers don't appreciate the intangibles...good working environment, flex-time, a nice pat on the back every now and then...but, as Mr. Lopez says so eloquently, it doesn't have to be all that sophisticated sometimes.

"We want to be juiced about serving our customers. I know it sounds a little corny, but trust me, it plays well. The response has been phenomenal." - Rick Moss - Moderator

Discussion Questions:

While we value unfettered opinion, we urge you to show respect and courtesy for people or companies about whom you comment. Keep in mind that this is a public, professional business discussion. RetailWire reserves the right to edit or refuse the publication of remarks that we deem unsuitable. We may also correct for unintended spelling and grammatical errors.

Instant Poll:

Will Home Depot's new ''Orange Juiced'' incentive program be a success?

Comments:

It's impossible for any company to set up a totally fair incentive program. However, you have to give Home Depot credit for at least admitting they have a problem and doing something about it -- unlike other retailers who never admit anything is wrong. The real value in the incentive program will only come if they maintain it for several years and continue to keep it fresh for the associates, and if they combine it with other initiatives such as training, management support, etc. It certainly continues to demonstrate the different problems retailers face in dealing with people; we can now see wide differences in how three of the largest retailers address employee issues differently, with Wal-Mart and its low-pay model; Costco with its high-pay and now Home Depot using incentive programs.

Mark Hunter, President, TheSalesHunter.com

No, it bothers me too, Ian. If behaviorism were a religion, business people would be fundamentalists. Rewards and punishments are almost the only answer anyone can seem to come up with, we love them so much. But as you suggest, Ian, and as dozens of our studies have shown, incentives create an interest in the reward, NOT in the behavior the the incentive is to produce. This is all extrinsic motivation. Our studies show how intrinsic motivation can be triggered and promoted, but to keep my reply brief and interesting, I shall not go into details here. Bottom line: this is a poor solution that will yield poor results, but a solution that many will likely applaud.

Race Cowgill, Principal, Zenith Management Consulting

Several retail chains use third party mystery shopping services to rate customer service. They use behavioral-based assessments that are less likely to be politically-based. Anything not readily provable will make the reward program a demoralizing force not a motivating force.

Mark Lilien, Consultant, Retail Technology Group

Right idea, maybe the wrong company. As was mentioned earlier, Home Depot's customer service problems go deeper than just incentivizing its employees. Training them would be good. Having a few more on the floor would be good. Overall, the company has to make good on its brand promise. If HD is now promising customer centricity - boy do they have a long way to go.

For one thing, I'd love to get the rebate for the washer and dryer I sent in over 4 months ago. The company's helpful web site tells me "the rebate is being processed." That's just one story in a litany of customer service failures.

I think of it as an identity crisis. The company isn't quite sure what it wants to be, or what it stands for anymore. The obvious question: Why do I keep shopping there? The obvious answer: no Lowe's nearby.

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Paula Rosenblum, Managing Partner, RSR Research

Another thing wrong with this is idea is that Home Depot's clientele is over 50% contractors. They need very little customer service as they are in the store all the time and usually know where the item is that they need. Also, getting them to follow-up with and IVR or internet survey - good luck with that. Actually, this is better suited for Lowes, as they have 70% or more consumer-centric customers.

Michael L. Howatt, Retail and Shopper Insights Consultant, Ascension Growth & Innovation Strategies

When I have to go into a HD and I can find a Home Depot employee - I do talk to them about why the store is so understaffed and apathetic employees and boy do I get an earfull!

This campaign will juice a few employees. But the reality is the $25,000 per quarter is usually split between the entire store. In a store with 100 employee thats $250; minus tax, thats $170 per employee: IF it's split evenly. If the store has a staff of 200 then its $125per employee or about $98 after taxes. Wow.

Employees take the money but still have that gnawing contempt or apathy for another "Company" program and as a result, these attitudes are passed onto the customer.

Based on what I have heard what might juice the full time "experienced" employee and (decrease the high turnover rates)is:
1.a higher hourly wage more like $20 per hour than the current average of $7-9per hour.
2.A set weekly schedule.
3.Elimination of the Mandatory Monthly Sunday Meeting.

'esaz'

My husband and I shop at Home Depot quite often. We are not contractors but we own several rental properties and do a lot of our own work. My husband's frustration starts with his inability to find the item required to complete the job. He then cannot find the expertise required to give him some alternative solutions. He has to look through the aisles to find someone to help him and most times that person has to find someone else who may or may not have more expertise. I think the people working there want to do good a job but just don't have the knowledge required. This makes them frustrated and it comes across in their response to my husband who then in turn thinks they have an attitude. He leaves the store in a bad mood without any products vowing to go somewhere else, but Home Depot has more of the products he needs than anywhere else so he does return. He has gone to Lowes but they do not have the quality/quantity of products that Home Depot stocks. I think if he had a viable alternative to Home Depot, he might not return. What I think would help is an increase in the level of expertise on the floor and more people on the floor. Of course, money is always a good incentive but education is far more valuable.

'racford'

While it's a nice step in the right direction, I'm not certain this program has enough reach and continuity to make the difference that HD needs.

Shoppers who get superior service and attention shop more often at the stores that treat them well and help them fill their needs. When your mantra is "You Can Do It, We Can Help..." you're telling your customers "we're all about service," which means EVERY TIME a shopper needs help, you have the people there that can really help them with the solution they are looking for.

Incentivizing employees is not the total answer. Unless you have knowledgeable people that can really provide the shopper with the right information, you won't meet their expectations and live your mission. That leads to investing in hiring the right people, and training them to really understand DIY "solutions" so they can consult the shoppers with professional recommendations.

Engaging the shopper more is good, but you better be able to give them the right answers to fill their needs.

Dan Nelson, CEO, Leadership Resources

It's obviously a sign of intent and good intent at that but I can see a couple of major pitfalls besides the obvious one of how to measure something so subjective. First, customers may not respond well to being asked their opinions either in person or on the phone. Secondly, if the objective is to build customer loyalty, you have to take into account that frequency of shop depends on frequency of need and Home Depot doesn't necessarily have the items that the average shopper needs week in and week out. So excellent customer service isn't the only factor that will make people visit the store again and again.

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Bernice Hurst, Contributing Editor, RetailWire

Kudos to Home Depot for a) being proactive and b) putting their money where their mouth is in relation to customer service. While customer service is different to different people and customer service is whatever the customer perceives it to be, it is not as subjective as people think it is.

Our company, for the past 26 years, has helped some of the nation's largest retailers define, measure, analyze and improve customer service and customer experience. It appears that Home Depot has defined, is measuring, is analyzing and looking to improve. Additionally, it is our experience that management must do something with all the data and analysis. Home Depot is doing just that. They are making a statement.

The $25,000 per store does number of things: 1) it shows that management is committed to improving customer service, 2) it acts as incentive for the employees (without them there is no customer service), 3) it shows the consumer that customer service and the customer experience are important to the company and 4) it applies extra pressure to succeed upon store managers, DMs and RMs.

It has the beginnings of a winning program. If successful, this could become a case study for other retailers to follow.

Bernie Slome, VP of Business Development, ICC/Decision Services

This is certainly better than doing nothing. I like the programs Publix and Hy-Vee have. They offer employees stock in the company based on performance and it is fair to all employees. They have been doing this for years. A small $25,000 bonus budget per store will not go too far and my guess is that it will be handed out to popular employees. The pot is just too small to make an impact.

David Livingston, Principal, DJL Research

Mazlow where are you? Speak to us from beyond.

Wouldn't it be a breakthrough to find employees who serve customers superbly because they actually want to? Wouldn't it be amazing to have a company where everyone is so thrilled with its vision and purpose that they naturally go above and beyond the call?

Every once in a while at Home Depot I run into an employee who just loves doing what he or she does and it just makes you want to buy something. Most of the rest just point and grunt. Or pretend they know what they're talking about. Well, the reasoning is, if they won't serve people out of their own pride and love of a job well done - let's give them money to do it. Who cares what they're real motivation is.

We've known forever that external rewards soon come to be 'expected' and behavior reverts to the lowest common denominator. To change the behavior you've got to ante up more stuff. Then the added costs make the company cut back on the number of employees and around we go. The only real sustainable solution is that you find people who love doing what they're doing, see meaning in their work, continually learn to do it better - and you pay them well.

Does Mr. Lopez's thinking bother anyone else - or is it just me? Regarding this 'throw money at the problem because our employees won't serve customers otherwise' plan he says: "It plays well." It plays well? Something just doesn't feel right about that, does it?

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Ian Percy, President, The Ian Percy Corporation

It's not about the money, folks! It's about the unity that comes from a team being focused on something larger than themselves. We humans are, by nature, competitive. Put us together and tell us that we are a team, give us a greater good and we actually might help each other out. we might become more supportive etc. This is a very smart idea of HDs. Can you just imagine where service levels might go when it doesn't matter which individual gets the recognition? You may be interested in building a deck but the person you are talking to knows about paint. What would encourage that sales person to walk you to someone who does know about building decks? Unity, camaraderie, the spirit of being part of the team! That is what would do it and exactly what Bernie and Arthur instituted when they created HD. That spirit has been lost but I am thrilled to see it being re-instituted and I am certain. And by the way, if you have ever worked in a store, you know that $25,000 can make a huge difference. Maybe what they want is a break room overhaul, or to make a donation to a favorite local charity with their name on it! Now that is something to work for!

Lee Kent, Brings Retail Executives Together to Meet.Learn.Profit, RetailConnections

Home Depot is a perfect example of a major, dominant retailer that had superior customer service! Interestingly, like most corporations, the new Executive Management thought it could ride on the coat tails of its sales associate education program, and stop investing in it.

What does that convey to the store level associates? Right now, we have little interest in furthering your knowledge on our business, but carry on...be motivated.

So, here comes a new "big dollar" contest program with a new education effort to rejuvenate the most valuable assets, the store sales associate. Do you think money speaks louder, or does showing interest in your workforce everyday of the year... year, after year?

Stephan Kouzomis, Faculty and Staff Member, University of Louisville's College of Business

After reading through everyone's comments, perhaps it might just be easier for Home Depot to follow Costco's labor model of hiring people who are a step up in class and just paying them more money.

David Livingston, Principal, DJL Research

Axiom:

"Inspect what you expect."
Author Unknown

Truth:

"You get activity around that which you manage. You get results around that which you reward."
Benjamin Franklin

I fear I'm on thin ice disagreeing with pro's like Ian and Race in this one, but my money is on a positive result for Home Depot. And it doesn't take a lot of money to make a real difference when it is used as a periodic, tangible and accessible reward. Employees focus on achieving the rewards that they can most directly influence. Assuming this incentive is offered at the individual level, a relatively small reward can go a long way.

With regards to the comments on increasing product knowledge of the HD associates, we would point out that it is the willingness to SHARE that knowledge with the customer, and the enthusiasm with which one does so, that has a much greater impact on a shopper's perception of "good customer service." Knowledgeable curmudgeons abound!

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Ben Ball, Senior Vice President, Dechert-Hampe

racford is perfectly correct. Money, who will say no to it? But strong education is always good.

Ganapathy Subramanian, Senior Manager Operations, Odyssey India Limited

I work at Home Depot 7244 in Huntsville Canada, and since we've opened in May 2006, we have gotten "JUICED" every month until they went quarterly and have got JUICED for the quarterlies as well. Our SM, Chuck, is and should be very proud of all the associates working with him for this achievement. I know we all enjoy the extra bonus that comes with getting Juiced. I think it's a great program. It enables the social committee to hold functions for the associates on a regular basis which in turn motivates them to do their best all the time.

Rose Janes, head cashier, Home depot

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