The Insanity of Retail Audits

August 29, 2016

The Insanity of Retail Audits

Despite their limited usefulness, annual retail audits have become the cornerstone of store evaluations. These audits promise you an accurate depiction of how your employees adhere to policies, execute procedures and meet other requirements. But when you read an actual retail audit report, you’ll find that the information collected isn’t necessarily the information you need to shape your business.

Why Annual Audits Are Ineffective

Having a yearly audit is like holding a big final exam at the end of the year without any other tests during the semester. Some of your good employees, like good students, will easily pass with flying colors because they’ve mastered the skills they need. Meanwhile, some mediocre employees will be able to avoid notice, just like poor students, by cramming so they can pass. And just like bad students, once they pass the audit they’ll return to their poor habits.

No matter how carefully an audit is designed, it cannot give you an accurate assessment of what your employees know and how they regularly perform. Instead, it provides an overview of your business that could give you a false sense of security for four main reasons:

1. Audits provide a single data point.

Think of each audit as a snapshot in time. It’s a single data point that shows you everything about your store at a particular moment. What an audit can’t do is help you determine trends. It’s difficult to know whether an audit catches a genuine problem with your employees or a one-off mistake caused by extenuating circumstances. And if your audit does catch a significant issue with your retail employees or policy executions, this problem could have been occurring for months without you knowing it.

2. Audits become performances for the visiting auditors.

From the moment auditors arrive, all of your employees will be focused on impressing the auditors. This natural urge to impress the auditors will give a skewed picture of how your company regularly operates. Employee productivity may artificially increase. Workers may become too concerned with following proper procedures to deliver an unforgettable experience to your customer base.

3. Audits create fear among your retail employees.

Even if you intend to use your annual audit as one of several ways to evaluate your staff, audits negatively impact staff morale. Most audits are inherently punitive, and employees may fear what will happen if their audit uncovers a problem. This fear can lead to employees obscuring problems with retail procedures or daily operations.
Good employees may also worry that a few bad employees could put their jobs in jeopardy. This fear causes good workers to cover for poor performers, which impacts your company’s overall productivity.

4. Audits drain valuable resources.

Hours of planning and implementing are required before you begin an audit. Once the audit is completed, you should also expect spending hours turning raw data into reports and other actionable information. Then you’ll need to decide exactly how to respond to the data you’ve received. Since an audit is such a large undertaking, it can take weeks to identify and address fundamental problems.

Advantages of Shifting Away from Annual Audits

Don’t make the mistake of thinking that any type of performance review is inherently ineffective. Instead, try to shift your goals by identifying ways to constantly gauge progress and adherence to retail best practices. Start looking for ways to give your employees the equivalent of regular pop quizzes that allow your management team to see how they work. Also find ways to routinely evaluate each individual employee.

By focusing on daily and weekly performance goals, you gain the ability to constantly optimize your retail store’s operations. Here are three other advantages of eliminating yearly audits:

1. Compliance is an everyday goal.

Eliminating the specter of the yearly audit allows your managers to shift towards improving employee compliance each day. Employees are taught that what they do every day matters, and their overall track record is more important than excelling during a routine audit. Therefore, the daily focus of your employees remains on the customers they serve.

2. Issues are quickly identified and eliminated.

Once you’ve gotten into the habit of regular mini-audits, you’ll have plenty of data points to analyze. Under scrutiny, patterns and general trends should emerge. You can use these trends to identify underlying issues and address them before they become problems. By regularly collecting information about your store’s performance, you’ll also be able to quickly assess whether your solution works.

3. Employees are treated as individuals.

Regular small-scale audits allow employees to distinguish themselves from the group. This ability allows your managers to target good employees for extra development and rewards while identifying other workers who may need more remedial training. It also allows you to create a culture of individual accountability in your retail establishment.
Annual retail audits remain appealing because they give you the illusion of a tidy, yearly summary of your company’s operational health. Unfortunately, they don’t provide enough accurate or timely information to help you make the changes necessary to help your business thrive. At best, annual audits give you some basic information you can use to make decisions about your business. At their worst, annual audits can give you information that comes too late or leads to poor decisions.

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