Mind the (information) gap

It’s something of a ‘light bulb’ or eureka moment: a board of directors discover a new way of looking at their business, and in doing so are able to unlock tangible and far-reaching benefits—and ultimately deliver significant, incremental shareholder value.

Dubbed business intelligence, the field of analytics is one that leading companies are devoting increasing resource to, in pursuit of a competitive edge. Think of the data that boards and businesses typically use to analyse their operations. First came financial data—sets of historic numbers that told an important but limited story, via the till, of what had happened the previous week, month or quarter.

Then companies discovered that there was often a close and meaningful correlation between financial figures and other data sets. A fairly recent example that graphically illustrates this concept is the work that companies such as Mitchells & Butlers have undertaken with firms like Empathica, comparing the financial performance of outlets versus the customer satisfaction scores of the same outlets. The comparisons revealed a compelling picture: those with the best customer satisfaction scores almost always had a correspondingly high performance when it came to like-for-like sales and profit growth. Not because one automatically came with the other but in the longer-term the two KPIs are inextricably linked. Both sets of numbers speak of the quality of the management, team and culture that exists, in-venue.

As a consequence, businesses are now relatively well-versed in overlaying financial performance with customer satisfaction KPIs. Now a key third information “pillar” is emerging—one that leadership companies in the eating and drinking-out market are grasping. Alongside financial and customer data, companies are starting to join the dots with key data on their own workforce. In isolation, people-derived intelligence can be of limited value, but it brings new insight when overlaid with financial and customer KPIs.

In multiple-site organisations like pubs and food chains, granular ‘people’ information from the frontline—when assimilated across an entire business and overlaid with other data sets—can give executives powerful information that informs key decisions and shapes strategy.

For example, consider a restaurant KPI such as number of covers, per server, per shift. Depending on the type of operation, 30 covers per server per shift may be a desired benchmark. If one particular restaurant is hitting 36-40 covers, it may look like a stand-out performance and, from a financial and productivity perspective, time to break out the bunting. But the smart operators know that if this number goes too high, at some point you cross a line where productivity gains start to have a detrimental impact on the guest experience and satisfaction scores. If not addressed this ratio may drive up staff turnover as people who don’t want to work in a stressful or stretched environment amid unhappy customers, leave the business, and recruitment costs escalate. The short-term financial gain comes at the expense of long-term damage to the business.

Another important measure may be the impact staff training has on customer satisfaction and financial performance. For example, on any one shift how many hours of training does a company need to have invested into its shift team to keep customers happy or to hit its financial targets? Put another way, what level of seniority or capability does a restaurant group need to ensure is present on site at any one time to deliver a good customer experience? Is there received wisdom or a benchmark number in your organisation for this?

There are many other people-derived KPIs that pub and restaurant organisations are capturing to deliver greater insight in the boardroom, such as sales per labour hour or employee headcount per trading session. The role of the HR department is shifting from compliance, individual performance management and disciplinary procedures, to talent management and understanding what must be delivered to a workforce in order to deliver for the customer. If an organisation has not developed, or is not developing, an ability to analyse people metrics and an understanding of the relationship between people, the customer and financial performance, alarm bells should be ringing.

Of course it doesn’t end with people. Industry-leading companies and boards appreciate that the quest for more information—and for new and better ways of joining the information dots—to reveal a clearer, more deep-seated understanding of their organisation, is a constant quest, or “journey”. The level of sophistication when it comes to analytics is constantly moving forward.

The fundamental point—and call to action—is that businesses pursuing an analytical approach are more likely to succeed. A 2010 MIT Sloan surveyof 3,000 executives, Analytics: The New Path to Value, found that top-performing organisations use analytics five times more than lower-performing ones.

James England is a director at Fourth Hospitality. Email james.england@fourthhospitality.com.