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Lululemon staff at SeaWheeze, a Vancouver half marathon designed to get staff and guests ‘to take a moment and enjoy life.’ (Pat Young/lululemon athletica)
Lululemon staff at SeaWheeze, a Vancouver half marathon designed to get staff and guests ‘to take a moment and enjoy life.’ (Pat Young/lululemon athletica)

Strategy

How Lululemon gets high returns Add to ...

When Chris Brumwell walks into Lululemon Athletica Inc. headquarters in Vancouver, he sees his life goals posted on a wall next to those of his colleagues. To Mr. Brumwell, this exercise in self-improvement makes his job a truly positive experience.

And the company gets a good return on its investment in him and all its staff, say those who look at the bottom line.

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“This is a fantastic company to work for,” the company’s communications manager says. “It brings people to work.”

Lululemon has posted extraordinary results at a time where many retailers have struggled. Despite a sputtering global economy, the yoga apparel company reported a near 50-per-cent jump in profit in the second quarter of this year, and saw revenue soar to nearly $283-million, an increase of 33 per cent over Q2 2011.

Analysts like to point to traditional markers – strong branding, effective marketing, good customer relations – but if you talk to Margaret Wheeler, senior vice-president of people potential, it’s all about employee attitudes.

“We teach employees how to create a vision for their life … in their personal life and their career. We feel if you love your life, it’s a benefit for you, and it’s a benefit for Lululemon.”

Keith Farlinger, chartered accountant and CEO at accounting firm BDO Canada, sees a direct link between the enthusiasm of employees, and customer satisfaction. “At BDO, we have found that, as our employee engagement increases, so, too, does our client service levels, which leads to better financial returns and growth,” he says.

Citing recent conversations at a global human resources conference in Michigan, Ms. Wheeler believes executives are getting the message about strong work cultures. Furthermore, investors are starting to ask questions about work-force capability: “Do you have an engaged workforce, do they understand your customer, are they passionate about your product, are they driving innovation?” she says. “That’s going to take you where you want to go in terms of delivering value to the customer and your shareholders.”

Ms. Wheeler sees financial professionals taking more interest. Lululemon’s chief financial officer, she says, is one of their greatest advocates, and believes that the capabilities of their people will drive them forward.

Tim Sothern, CA and partner at BDO, agrees. His company conducts an annual internal survey to help identify key engagement drivers, and ensure they deliver on them. “The new buzzword these days is engagement,” he says, “and we’re doing all sorts of things to try and raise it.”

Employee retention, especially in industries that require specialized skillsets, is one of the key benefits, says Mr. Sothern.

Maurice Mazerolle, associate director of student affairs at the Ted Rogers School of Management at Ryerson University, agrees. “Employee retention is the key to customer retention.”

According to Richard Skippon, senior manager, people and organization change at Ernst & Young, while the exact costs of employee turnover vary with every company, one of his organization’s clients determined that every 1-per-cent increase in retention led to $1.5-million in savings.

For Lululemon, high employee turnover is a reality of doing business in retail, where young, part-time workers are a major source of talent. Nevertheless, Ms. Wheeler sees great value in forming long-term relationships with employees, even after they leave the company. Their passion attracts like-minded people, she says.

In contrast with many other companies, Lululemon puts less emphasis on annual employee satisfaction surveys, and more on qualitative measurements. Its educator advisory board, for example, features a rotating group of people who provide feedback on targeted topics.

The company also puts emphasis on exit interviews, and there are many situations in the course of the day where employees can provide feedback. “It would seem funny in a way for someone at Lululemon to receive a survey,” says Therese Hayes, vice-president of communications and sustainability, “because we’re always in conversation.”

Ms. Hayes says that Lululemon measures and rewards the performance of its managers based on the development of the people they work with. “In order to develop your people, you need to be having that conversation,” she says.

Financial professionals can play a greater role by providing metrics to measure cultural capability, and aligning it with the company’s strategic goals, says Ms. Wheeler. “The cost of people is pretty much the highest number on the balance sheet. There are so many benefits to helping an individual achieve their goals, as well as the massive value that this creates for the business, for the shareholder.”

Five benefits of more employee engagement

Engaged employees impact the bottom line of their companies through:

Increased productivity: Engaged employees are more likely to go the extra mile.

Employee retention: Engaged employees help reduce costly turnover.

Customer satisfaction: Nothing makes a better impression than committed personnel.

More innovation: Ideas from employees who care can transform a company.

Recruitment: Work culture is contagious, and reduces recruiting and hiring costs.

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