A company’s activities in planning, monitoring, analysis, and assessment of its resources are its strategic management. Therefore, for such an organization to be profitable in the long run, its strategies need to change with the changing operating environment. As such, strategic management requires a company’s management team to be constantly aware of their internal and external changes to address them effectively. This paper will discuss the strategic management measures taken by Reyes Fitness Centers, Inc.
In May 2009, John Reyes launched Reyes Fitness Centers, Inc. (RFC). The first center was a success and included a wide range of services: exercise classes workout equipment, an outdoor pool, personal trainers, daycare as well as a restaurant. From this center, growth for RFC was rapid for the next three years. By end of 2012, the company was grossing $51 million and $1 million in revenues and net income respectively. At this point, John Reyes had managers to oversee the day-to-day activities, which prompted the board to hire other senior management team members and a CEO, Mike Lowe. Focus on member enrollment and retention were stressed upon by Lowe. With 20 years of experience in the fitness industry, he understood that to achieve this goal, his staff would have to proactively align their work with customer retention in mind. At the time, member retention was 20% lower than the industry average, prompting Lowe to maximize Lori Patrick’s HR expertise.
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Issues
One of the major causes of low customer retention numbers is that most employees do not know their specific role in retaining numbers. Though they know it is important, a survey of the employees highlighted that most were only aware that the strategy was to make money. Besides, it was not clear to them how they specifically contributed to FRC’s strategy. This then would be the likely reason why member feedback reported low customer service.
Another cause of low retention levels at RFC is its work culture. As fewer people are aware of how they directly contribute to the company’s strategy, the result is that they do not accomplish this goal. Besides, to serve members well means that the organization needs to assess complaints and make necessary adjustments. Currently, no formal data has been collected, yet the expectation is to have 90% member satisfaction. With no tracking mechanism in place, this would be hard to achieve.
Alternatives
Lori identified that some strategies within the company were working towards achieving the company’s goal to bring in new members and retain older ones. Vice president of sales and marketing Alex Garcia was doing this through special promotions and advertising. Furthermore, he motivates his sales representatives through and an incentive compensation program that has gone a long way to motivate them.
Performance goals are currently focused on job description activities. According to Lori, they should be focused on results that contribute to customer retention. Staff should be aware of their responsibility to ensure customer retention and be equipped with the right customer service training and skills. Besides, HR has the mandate to ensure that employees are aware that member retention is a part of their job.
A culture change would be essential in ensuring that customer retention is understood and implemented by everyone at RFC. For this to happen, it needs to be a core value within the company and can be realized by managers incorporating retention activities into the staff’s annual performance plans. Additionally, to ensure that employees are motivated throughout the process, an analysis of the compensation system should be done. As suggested by Lori, profit-sharing programs as those undertaken by other organizations could be implemented. When employees are fully aware of what the company’s strategy is, they can relay this to customers. This results in more customer acquisitions and retention, as well as more profit.
Recommendation
It is clear that for RFC to achieve its strategic goal, employees will play a major role. Therefore, arming them with the right information, skills and motivation will make the process quicker. The business strategy should be more descriptive for staff to understand their role in achieving it. Once they are aware that they play a central role in communicating the same to members, they will be in a position to offer better customer service. Additionally, there is a need to have an individual with the primary responsibility for ensuring retention measures are taken. As customer feedback is important for RFC, creating avenues in which to receive, analyze and manage such information is of utmost importance. Therefore, RFC should come up with a system where such information is collated to gauge the effectiveness of the strategy. Further, the company should increase advertisements and special promotions efforts in a bid to have more new members. As this strategy is already working, it would be a profitable avenue to explore.
For any company to succeed, managers need to realize a few key factors. One of these is the ability of employees to align their work with the organization’s objectives. When staff members are well informed on how their input is detrimental to the success of the company, they feel the need to do their best. Similarly, when employing new strategies as a result of changing business environment, employees must be on board. Besides, as seen in RFC’s case, when employees are unaware of their impact on the company strategies, performance goes down. It is no wonder that customers complain about customer service quality. Despite having all the right equipment and a good strategy, more factors need to be considered. Compensation strategies are a good way to motivate employees and increase job satisfaction. Furthermore, a motivated employee is more productive and open to ideas. It is therefore imperative, that for strategic management to be effective, both managers and other staff should be aware of their roles in affecting an organization’s strategies.
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