2016 fithabits case study - tncpe

2016

FitHabits Case Study

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May 2016 FitHabits is a fictitious Baldrige Award application prepared for use in the 2016 Malcolm Baldrige National Quality Award Examiner Preparation Course and the 2016 Tennessee Center for Performance Excellence (TNCPE) Examiner Training course. TNCPE appreciates having the Baldrige Performance Excellence Program as a business partner and is grateful that the Baldrige Program shares this material with us at no cost. The fictitious case study organization is an online distributor of unique and high-end active wear clothing and athletic shoes that promotes a customized, high-touch shopping experience for its customers. The case study illustrates the format and general content of a Level 4 TNCPE award application. However, since the case study serves primarily as a tool for training examiners to evaluate organizations against the 2015–2016 Baldrige Excellence Framework and its Criteria for Performance Excellence, it may not address all Criteria requirements or demonstrate role-model responses in all Criteria areas. This case study is a work of fiction, created and produced for the sole purpose of training regarding the use of the Baldrige Excellence Framework. There is no connection between the fictitious FitHabits and any other organization, named either FitHabits or otherwise. Any resemblance to any specific organization is purely coincidental. The names of several national and government organizations are included to promote the realism of the case study as a training tool, but all data and content about them have been fictionalized, as appropriate; all other organizations cited in the case study are fictitious or have been fictionalized. BALDRIGE CRITERIA FOR PERFORMANCE EXCELLENCE®, BALDRIGE PERFORMANCE EXCELLENCE PROGRAM®, CRITERIA FOR PERFORMANCE EXCELLENCE®, MALCOLM BALDRIGE NATIONAL QUALITY AWARD®, and PERFORMANCE EXCELLENCE® are federally registered trademarks and service marks of the U.S. Department of Commerce, National Institute of Standards and Technology. The unauthorized use of these trademarks and service marks is prohibited. Images of athletic and business men ©2015 Clipart.com, a division of Vital Imagery Ltd.

CONTENTSE1

. O12016Intent to Apply Form . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . OrganizationChart . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2016AwardApplicationForm . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A1GlossaryofTermsandAbbreviations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . G1

Preface: Organizational ProfileP.1 OrganizationalDescription . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . iP.2 OrganizationalSituation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . iii

Category 1: Leadership1.1 SeniorLeadership . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11.2 GovernanceandSocietalResponsibilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3

Category 2: Strategy2.1 StrategyDevelopment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .62.2 StrategyImplementation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8

Category 3: Customers3.1 VoiceoftheCustomer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 113.2 CustomerEngagement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13

Category 4: Measurement, Analysis, and Knowledge Management4.1 Measurement,Analysis,andImprovementof

OrganizationalPerformance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 164.2 KnowledgeManagement,Information,and

InformationTechnology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18

Category 5: Workforce5.1 WorkforceEnvironment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 215.2 WorkforceEngagement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23

Category 6: Operations6.1 WorkProcesses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 256.2 OperationalEffectiveness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28

Category 7: Results7.1 ProductandProcessResults . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 307.2 Customer-FocusedResults . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 367.3 Workforce-FocusedResults . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 387.4 LeadershipandGovernanceResults . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 447.5 FinancialandMarketResults . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48

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2016 Intent to Apply/Eligibility Form

Tennessee Center for Performance Excellence • (800) 453‐6474 • www.TNCPE.org

Intent to Apply/Eligibility Form Section I: Applicant Information Please type or print

1. Applicant

____________________________________________________________ Organization name as it will appear on award

____________________________________________________________ Address

___________________ ______ City

_________________________ Zip

2. Size and LocationsTotal # of employees (full‐time equivalent) _

Total # of sites _

3. Industry SectorPlease check the sector that best describes your organization

Manufacturing Education Service

Government Health Care Nonprofit

4. Industrial ClassificationList up to three NAICS codes that best describe your organization. (See page 5 of this form.)

____________ ____________ ____________

5. Official Contact

____________________________________________________________ Name

____________________________________________________________ Title

____________________________________________________________ Mailing address

____________________________________________________________ Street address (no PO Box)

FitHabits

12501 R&D Boulevard Bldg. 101

Richmond, VA 23223State

889

3

X

454 448 423

Grace Lee

Director, Performance Excellence

12501 R&D Boulevard , Bldg. 101, Richmond, VA 23223

Same as above

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___________________ ___________________ ____________ City County Zip

____________________________________________________________ Telephone

____________________________________________________________ Email

6. Alternate Official Contact

____________________________________________________________ Name

____________________________________________________________ Telephone

____________________________________________________________Email

7. Return Applicant? Yes __ No __

Application year(s):

____________________________________________________________

8. Highest Ranking Official

_________________________________________________________ Name

_________________________________________________________ Title

_________________________________________________________ Address

_________________________ ___________________ ___ City Zip

_________________________________________________________ Telephone

See mailing address

804-555-5102

[email protected]

Mr. Alex Fixx

804-555-5112

[email protected]

Ms. Stacy Brubaker

CEO/President

12501 R&D Boulevard, Bldg. 101

Richmond VA 23223

804-555-4800

State

X

2009-2014

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__________________________________________________________ Email

9. Application Level(See award level descriptions on pages vi‐vii of the TNCPE 2015‐2016 Baldrige Excellence Framework book)

Check One: 2 3 4

10. One‐Sentence Organization DescriptionPlease provide a one‐sentence description of your organization to be used for publicity and recognition.

11. Intent Fee and Mailing AddressEither call to pay with a credit card or enclose a check for the $250 Intent Fee (non‐refundable) made payable to TNCPE to cover initial processing and eligibility determination. With your Intent Fee, mail one printed copy of your Intent to Apply/Eligibility Form and Organizational Profile to:

Tennessee Center for Performance Excellence 2525 Perimeter Place Drive, Suite 122 Nashville, TN 37214‐3773

(800) 453‐6474

[email protected]

X

E3

FitHabits is a boutique distributor, selling unique and high-end active wear clothing and athletic shoes, from running to yoga to baseball, for both men and women. Women’s clothing is the largest product line, followed by men’s clothing. FitHabits sells exclusively on the Internet, which allows it to ship products to both domestic and international customers (the only limit the organization has in terms of market is whether a shipper can accommodate the customer’s location).

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2016 Level 2, 3, & 4 Award Application


Level 2, 3, & 4 Application Form Section I: Applicant Information Please type or print.

1. Applicant

____________________________________________________________ Organization name as it will appear on award

____________________________________________________________ Address

___________________ _________________________ ______ City County Zip

2. Size and LocationsTotal # of employees (full‐time equivalent) _

Total # of sites _

3. Official Contact

____________________________________________________________ Name

____________________________________________________________ Title

____________________________________________________________ Mailing address

____________________________________________________________ Street address (no PO Box)

___________________ ___________________ ____________ City County Zip

____________________________________________________________ Telephone

____________________________________________________________ Email

FitHabits

12501 R&D Boulevard Bldg. 101

Richmond VA 23223

3

889

Grace Lee

Director, Performance Excellence

12501 R&D Boulevard, Bldg. 101, Richmond, VA 23223

Same as above

Same as above

804-555-5102

[email protected]

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4. Alternate Official Contact

____________________________________________________________ Name

____________________________________________________________ Telephone

____________________________________________________________ Email

5. Application Level and Criteria Response

A. Identify the application level for which you are applying.

Check one: 2 3 4 (See Award level descriptions on pages vi–vii of the TNCPE 2015‐2016 Baldrige Excellence Framework book)

B. Attach Organizational Profile and Criteria response to the Application Form.

C. Check the Criteria you have used to write your response.

Business Health Care Education

6. Application Fee

An Application Fee is required for all award levels, based on workforce size and TNCPE Membership status.

Please refer to the table on page 59 of the 2015‐2016 TNCPE Baldrige Excellence Framework book to determine your application fee.

Turn to page 74 of the TNCPE Baldrige Excellence Framework book for information about becoming a TNCPE Member.

Total Application Fee __________________

7. How did you hear about TNCPE?

____________________________________________________________

_________________________________________________________________

_________________________________________________________________

Mr. Alex Fixx

804-555-5112

[email protected]

X

X

$10,250

NIST.gov website

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8. Release Statement and Signature of Highest Ranking Official

My signature states and attests that: I have reviewed the information provided by the Organizational Profile in this application package. To the best of my knowledge, no untrue statement or omission of a material fact has been made in this application package. Based on the information herein and the current eligibility requirements for the Tennessee Center for Performance Excellence Award, my organization is eligible to apply. I understand if information is found not to support eligibility at any time during the Award Process cycle my organization will no longer receive consideration for the Award and will only receive a Feedback Report.

_________________________________________________________________ Signature Date

_____________________________________ __________________ Name Title

4/25/16

Stacy Brubaker CEO/President

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G1

AB ��AccountabilityBoardADA ��AmericanswithDisabilitiesActAFPM ��AgencyforPeopleManagementAOS ��availableon-siteAP ��actionplanAPR ��annualperformancereviewAR ��accountsreceivableATE ��AssociationforTrainingEmployeesBOD ��BoardofDirectorsBSC ��balancedscorecardchallenged ��peoplewithphysicalchallengeswhopursueathletes activelifestylesthroughphysicalfitness

andcompetitiveathleticsCOI ��conflictofinterestDZMT ��DazzzleMeFitEEOC ��U.S.EqualEmploymentOpportunity

CommissionEMS ��EmergencyManagementSystemEOP��EmergencyOperationsPlanEPA ��U.S.EnvironmentalProtectionAgencyFHLS ��FitHabits’LeadershipSystemFIT ��FuturisticInnovativeTechnodataFitKM ��FitHabits’knowledgemanagementFitMeasures ��BSCmeasuresFITTESS ��Focus,Innovate,Test,Train,Execute,Share,

SustainFMEA ��failuremodeandeffectsanalysisFTC��U.S.FederalTradeCommissionFTE ��full-timeequivalentHazCom ��hazardcommunicationsHEALTH ��Health,Exercise,Attitude,Training,

andHealingHVA ��hazardvulnerabilityanalysisIEC ��InternationalElectrotechnicalCommissionIP ��InternetprotocolIR/BS ��InternetretailersandboxstoresIRS ��U.S.InternalRevenueServiceIS ��informationsystems

ISO ��InternationalOrganizationforStandardization;ISO27001:2013isaninformationsecuritystandardpublishedin2013byISOandIECunderajointsubcommittee

IT ��informationtechnologyKSP ��keysupportprocessKWP ��keyworkprocessKWS ��keyworksystemL&D ��learninganddevelopmentLMS ��LearningManagementSystemLT ��LeadershipTeamM&Ps ��mom-and-popsuppliersMSP ��MeasurementSelectionProcessMVV ��mission,vision,andvaluesNYRs ��NewYearresolutionersOFIs ��opportunitiesforimprovementOSHA ��U.S.OccupationalSafetyandHealth

AdministrationP2P ��person2personPAPs ��proposedactionplansPCI DSS ��PaymentCreditIndustryDataSecurityStandardPE ��performanceexcellencePES ��PerformanceExcellenceSystemPI��performanceimprovementQCPs ��QuarterlyCoachingPlansRAW ��revisedactionworkplanRCA ��rootcauseanalysisRNA ��resourceneedsassessmentROI ��returnoninvestmentRRF ��resourcerequestfunnelSKU ��stock-keepingunitSO ��strategicobjectiveSOPPs �� standardoperatingproceduresandpoliciesSPP ��StrategicPlanningProcessSWOT ��strengths,weaknesses,opportunities,andthreatsT2Bs ��thread-to-bodysuppliersVOC ��voiceofthecustomerYTD ��yeartodate

Glossary of Terms and Abbreviations

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Organizational Profile

P.1 Organizational DescriptionFitHabitswasstartedin1996byStacyBrubakerandJillNassauoutoftheirgaragesinRichmond,VA.Tobeginarecentweightlossandfitnessregimen,Stacyhadusedanexercisevideoathome.Onceshelostsomeweight,shewantedtogotothegymwithherbestfriendJill,atriathloncoach,butfeltasifherathleticclotheswerewornandscruffy,notgym-ready.Whenshehadtroublefindingattractiveexerciseclothesthatfit,hersisterinLosAngelessentanoutfitthatwasjustwhatshewaslookingfor.Shefeltgreatandsoonbecamea“gymrat.”Friendsandotherwomenatthegymwereinterestedinpurchasingsomethingsimilarintheirsizes.Withinweeks,StacyandJillsignedadistributorshipwiththemanufacturerofStacy’soutfitandstoredallthemerchan-diseintheirgarages.Beforelong,tomeettheircustomers’needs,theyweresellingshoesandotherbrandsofathleticclothingfromsmallandregionalmanufacturersthatdesignedandcreateduniqueathleticclothinglines.

Withinayear,StacyandJillhadasmallboutiquebusinesssupplyingathleticwearfortheirfriendsandthroughgymsacrosstheircity.Theyrentedastoragelockerandhiredtwoteenagerstohelpstorethestockandfillorders.Theysawthepotentialtoreachouttoothercities,andoneoftheteenagerstalkedtothemaboutsurfingtheInternetforathleticclothingandshoes.Fast-forward20years,andwehaveFitHabits,thepremierInternet-basedathleticclothesandfootwearboutiquedistributorintheUnitedStates.

P.1a(1) Tomeetcustomerneeds,FitHabitsisproudofthewideportfolioofboutiqueproductsitoffers:(1)activewearclothingand(2)athleticshoes,fromrunningtoyogatobaseball,forbothmenandwomen.Women’sclothingisthelargestproductline,fol-lowedbymen’sclothing.Athleticshoesforbothwomenandmenaremuchsmallerproductlinesbutprovetobeadifferentiatorformanycustomers.FitHabitsbrieflyconsideredmanufacturingorbrandingclothingin2000butrejectedthoseapproachestoremainaboutiquedistributor,sellinguniqueandhigh-endactivewearandshoes.FitHabits’ teammembersaremostproudthatafterinitialface-to-facesalesintheearlyyearsofthecompany,theynowsellcompletelyonline,directtocustomers,andwithgreatservice!FitHabitshasanexcellentrelationshipwithSendPIxandshipsover90%ofitsproductsthroughthisdeliverysystemdirectlytobothdomesticandinternationalcustomers.

P.1a(2) Themission,vision,andvalues(MVV;FigureP.1-1)establishthefoundationofFitHabits’cultureofexcellenceandfocusthecompanyondeliveringthehighestlevelsofcustomerservice.Themissionputsitconcisely:Clothingourcustomersforafitlifeanddelightingthem,always.Thevisiontobethe#1Internet-preferredactivewearandshoeresourceinthenationhelpsinspiretheworkforcetohigherlevelsofperformance.Thevaluesarebothinternally—Fun,Innovative,Team-based—andexternallyfocused—Healthy,Agile,Balanced,Integrity,Timely,andService—tocreateFitHabits.

Forthecompanytoliveitsmissionandachieveitsvision,FitHabitshasacultureofperformanceexcellence.FitHabitsusesanintegratedsystemofperformanceexcellence(FigureP.2-4)toprovideever-increasingvaluetocustomerswhileimprovingorganizationaleffectivenessandprovidinglearningfortheworkforceandcompany.

FitHabitshasidentifiedthreecorecompetencies:

■ relationships(CC1)■ innovation(CC2)■ fitness(CC3)

Acorecompetencyinrelationships(CC1)helpsthecompanyfulfillitsmission.Evidenceofthiscorecompetencycanbefoundinthepoweroftheserelationships,developedandsustainedbyFitHabits’excellentteammembers,withcustomerswhoneedproductadviceorhelpwithtransactionsorresolvingproblems.Itisthefeedbackgeneratedbytherelationshipswithsuppliersandcollaboratorsthatleadstohavinggreatproductsininventory.Itistherelationshipsbuiltwithcolleaguesthatleadtoimprovementsinprocessesandservices.

Innovation(CC2)isfoundthroughoutFitHabits.Thewebsite, FitWeb,isdesignedtomeetcustomerneedsforeaseofnaviga-tion,toprovideanamazingproductdisplay,andtoofferuserprofilesforsmoothtransactions(3.2b[1]).Inaddition,tofinduniqueandcustomizedclothing,FitHabitshasdevelopedaninno-vativeapproachtoworkingwithlocalandregionaldesignersandmanufacturersofvariousathleticproductlines(6.2b)todesignandmanufacturecustomizedproducts.Toprovideforinformationsecurity,FitHabitsisproudofbeingoneofthefirstwebretailerstobecertifiedISO9001andIEC27001.Tomaintainitsmarketleadership,FitHabitshasdevelopedaninnovationprocess(6.1c)touseinbothnewproductpromotions(3.2a)andimprovementefforts.TheseeffortsaresupportedbyamultidisciplinaryInnova-tionCounciltoensureaconsistentandsystematicapproachtomanagingandsustaininginnovationacrosstheorganization.

Fitnesstouchestheheartofthecompany—it’spartoftheworkforceandwhatthecompanyisabout.Fitness(CC3)isthethirdcorecompetencyandunderscoresthemission.AlloftheteammembersintheCallCenterarefitnessenthusiastswhocanspeakknowledgablytocustomersabouttheirfitnessregimens.TheCallCenterteammembersholdavarietyoffitnesscertifica-tionsincludingpersonaltraining(58teammembers),yoga(33),Pilates(16),indoorcycling(8),wateraerobics(6),andtriathlontraining(3).

Figure P.1-1: Mission, Vision, and Values

Mission Clothingourcustomersforafitlifeanddelightingthem,always

Vision Bethe#1Internet-preferredactivewearandshoeresourceinthenation

Values Fun,Innovative,Team-based,Healthy,Agile,Balanced,Integrity,Timely,andService

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P.1a(3) The FitHabitsworkforceincludes889highlyengagedandcompetentteammembers.TheyworkinaculturedefinedbythevaluestobeFun,Innovative,andTeam-based.Theyaremoti-vatedtomeetthemissionanddelightcustomers.IntheFitHabits’culture,employeesarecalledteammembersandmanagersarecoaches.Seniorleadersarereferredtoasseniorcoaches.Therehavebeennorecentchangesinworkforcecompositionorneeds.FitHabitshasnobargainingunits.Theteammemberprofile,showingsegmentsandeducationalrequirementsbyjobcategory,tenure,andethnicdiversity,isshowninFigureP.1-2.

Besidesthebasichealthandsafetyrequirementsofanofficeenvironment,nospecialsafetyrequirementsareneeded.Inthewarehouseandfulfillmentareas,allteammembersarerequiredtocompletetraininginhazardcommunications(HazCom),lockout/tagout,lifting/handling,andportablefireextinguishers.Teammemberswhodriveforkliftsmustbecertifiedinforkliftsafety.

ThekeyelementsthatengageteammembersinachievingthemissionandvisionareshowninFigureP.1-3.

P.1a(4) Thecorporateheadquartersislocatedona24-acrecampuswithoffices,CallCenter,trainingfacility,teammemberwellnesscenter(includingFitCenter),andawarehouseoutsideRichmond.LeasedwarehousesarealsolocatedinIrving,TX,andPortland,OR.Aneedtoexpandwarehouseandstockcapaci-tiesledtoamajorShapeItUp(P.2c)LeaninterventioninthewarehousesinRichmondandPortland,whichledtoadoublingofcapacity.Inearly2017,asimilarinterventionisplannedfortheIrvingwarehouse.

Aspartoftheinnovationcorecompetency,FitHabitsutilizesleading-edgeandvalidatedsoftwareandapplicationtechnologiesfromleadersinthefieldsuchasRBR,DrmQuilter,PIII,and

SimblLogic.Anin-houseapplicationdevelopmentcapabilityalsoallowsthecompanytointegratemultipletechnologiestocreatevalue-addedinnovationforcustomers.Inthepastsixyears,FitHabitshasinvestedover$5milliontocompletelyrewriteFitWeb,thecorporatewebsite.Tofurthermaintainthetechnologyadvantage,theCallCenterreceiveda$2millionupgradein2014.Capitalinvestmentssuchasthesearetiedtothestrategicobjec-tives(SOs)andaredeterminedthroughtheSPP.Eachwarehouseusesstate-of-the-artbarcodetechnologytotrackproductsandshipments.

P.1a(5) FitHabitscomplieswithstateandnationalOccupationalSafetyandHealthAdministration(OSHA)requirementsandhasbeenrecognizedwiththeGREAT!Awardin2014forthedramaticdeclineinwarehouseinjuriesasaresultofimprovedforklifttraining.FitHabitsalsohasbeenrecognizedintheEnvironmentalProtectionAgency’s(EPA’s)WasteWiseProgramwithGoldAchievementin2013forRecyclingintheWorkplaceandin2015forIndustrialMaterialsRecycling.In2006,FitHabitswasoneofthefirstonlineretailerstobecertifiedtoISO9000andthenISO/IEC27001foritsinformationsecurityframework.

P.1b(1) FitHabitsisaprivatelyownedcompanywithastructureandgovernancesystemconsistingofaseven-memberBoardofDirectors(BOD)andtheLeadershipTeam(LT).TheLTiscomprisedoftheCEO/president(Stacy),COO(Jill),andthefiveotherCOs(ChiefOfficersofFinance,Strategy,MarketingandSales,People,andInformation).TheBODservesasthechiefpolicy-makingbodyandexercisesoverallcontrolandmanage-mentofthecompany’saffairs.TheCEO/president,anex-officiomemberoftheBOD,reportsdirectlytotheBODandsupervisessixunits,eachofwhichisledbyachiefofficer.

P.1b(2) Thekeycustomergroupsare(1)engagedcustomers,(2)lurkers(thosewhobrowsethewebsitebutneverpurchaseanything),and(3)NewYearresolutioners(NYRs;thosewhosetupprofiles,browse,andmaybepurchasesomethinginJanuarytokickstarttheirweight-lossgoalsbutarenotactivetherestoftheyear).

Figure P.1-2: Team Member Profile

Job Category %Minimum Educational Requirement

by Job Category

CallCenter 28 HighSchoolDiploma

WarehouseandFulfillment 36 HighSchoolDiploma

CorporateAdministrative 18 BachelorDegree

Marketing/Sales 4 AssociateorBachelorDegree, asappropriate

Purchasing 3 AssociateorBachelorDegree, asappropriate

InformationTechnology 6 BachelorDegree,asappropriate

OperationsSupport 5 BachelorDegreeorCertification, asappropriate

Tenure % Ethnicity %

#1year 11 Black 42

1–2years 25 White 38

3–5years 18 Hispanic 11

6–10years 27 Asian 6

10years 19 Other 3

Figure P.1-3: Key Workforce Engagement Factors

Job Category Key Requirements Results

CallCenter TeamworkRecognitionPrideinworkOpportunitytogrow

7.3-14,7.3-16,7.3-17,7.3-19,7.3-22

WarehouseandFulfillment

CommunicationTeamworkRecognitionPrideinwork

7.3-14,7.3-15,7.3-16,7.3-17,7.3-19

CorporateAdministrative,Marketing/Sales,Purchasing

CommunicationTeamworkRecognitionOpportunitytogrow

7.3-14,7.3-15,7.3-16,7.3-19,7.3-22

InformationTechnology,OperationsSupport

ProfessionalDevelopment/ TechnicalTrainingCommunicationRecognition

7.3-14,7.3-15,7.3-19,7.3-23

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Engagedcustomersaresegmentedfurther:

■ Frequentpurchasers—thosewhopurchaseproductsonanearlymonthlybasis

■ Persistentpurchasers—thosewhopurchaseproductsseasonally

■ Occasionalpurchasers—thosewhopurchaseproductsatleastannually

Keystakeholdergroupsincludecustomers,theAdvisoryBoard,collaborators,suppliers,andthecommunity.

P.1b(3) KeysuppliersandcollaboratorsareoutlinedinFigureP.1-6withtherolestheyplayinworksystems,inenhancingcompetitiveness,andincontributingtoinnovation,aswellasthemechanismstocommunicatewiththemandtheirkeysup-plychainrequirements.Withinnovationasacorecompetency,FitHabitsworkscloselywithitssuppliers.

CollaboratorsareanimportantfeedbackresourceforFitHabits.Whilethecompanydoesnotmanufactureproducts,itreliesontheadviceandcounselofthecollaboratorsonthelatestresearchand

trendsinthefitnesscommunity.Thisinformation,forexample,helpedFitHabitsbeaheadofthecurveinZumbaclothingin2008,beforethisfitnesstrendtookoff.

P.2 Organizational SituationP.2a(1) FitHabits’boutiquemarketspacerequiresittomeettheincreasingdemandsfromconsumersforbetterandmorepersonalizedcustomerservice,personalizedproductofferings,andincreasedofferingsthatare“MadeinAmerica.”FitHabitscontinuestostrivetomeetthatdemandasevidentinitsCC1ofrelationships,customerengagement(Figure7.2-9),andpercentageofproductsofferedandshippedthatare“MadeinAmerica”(Figure7.1-19).Inaddition,FitHabitshasprideditselfindevelopingkeyrelationshipswithnationalorganizationstooffertheirmembersspecializedproducts,asevidentinspecializedproductsforchallengedathletes(Figures7.1-6,7.5-7).

FitHabitshasfourkeycompetitorsinitsInternetmarketspaceforaboutiqueclothing/shoesretailer,withtheirmarketsharebynetannualsalesshowninFigureP.2-1.FitHabitscurrentlyenjoysan8%marketsharebasedonnetannualsalesand9%marketsharebasedonoverallnumberofproductssoldinitstwokeyportfoliogroups:activewearclothingandathleticshoes.

Theremaining“non-boutique”market(73%Internetnetannualsales)iscontrolledbynumerouslargeInternetretailersandboxstores(IR/BS)inFitHabits’twoportfoliogroups(activewearand

Figure P.1-5: Key Customers and Requirements

Requirements/ExpectationsEngaged

Customers Lurkers NYRs

Products:Widevarietyofstyles,sizes,andfunctions

Yes Yes Yes

Delivery:Free,overnight Yes n/a Yes

Customersupport:24-hourhotline,onlinechatw/support,calltakersempoweredtofixproblems

Yes Yes Yes

Operations:Onlinepresencewitheasyaccessandsmoothtransactions,usingcustomers’profiles

Yes Yes Yes

Figure P.1-6: Suppliers and Collaborators

Examples of Roles In Suppliers Collaborators

Ahihas,Celjer,FastBonce,Luminous,Olympian, NawrkPartners,localandregionalM&Ps(momandpops),T2Bs(thread-to-bodysuppliers),SendPIx

UniversityFitnessCenter,LooperClinic,Fit Magazine,URAthlete

WorkSystems Inventorytowarehouses Productdevelopment

CompetitivenessandInnovation

Pricing,salestrends,develop-mentsinfabrics,materials,products

Newtrendsinfitness

Two-WayCommunicationMechanisms

E-mail,PartnerPortal, quarterlymeetings

E-mail,PartnerPortal,regularmeetings

SupplyChainRequirements

Delivery:On-timeandaccurateQuality:MeetingsizingandqualityspecificationsPortfolio:Products“MadeinAmerica”Packaging:Useofrecycledmaterialspecification

n/a

Figure P.1-4: Key Regulations, Requirements, and Standards

Agency Process Measure Results

FederalTrade Commission(FTC)

Mail,Internet,orTelephone MerchandiseOrder

%Compliant 7.4-9

FTC Anti-trust #ofViolations 7.4-9

ConsumerProductSafetyCommission

ProductSafety #ofProductRecalls

7.1-32

EPA WasteManagement

#ofViolations 7.1-26

OSHA WorkplaceSafety #ofLost-TimeInjuries

7.3-7

VirginiaDepartment ofTaxation

QuarterlyFilings %On-time%Complete

7.5-8

InternalRevenueService(IRS)

QuarterlyFilings %On-time%Complete

7.5-8

EqualEmploymentOpportunity Commission(EEOC)

TeamMember Processes

#ofViolations 7.3a(2)

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shoes).ThesemajoronlineretailersincludeVoluminous,Yoxxo’s,andDistinguished,aswellas“big-box”retailerssuchasPaulie’sSportingGoods,LaneRunners,LolybirdSports,andActionAuthority.Overthepastfiveyears,FitHabitshasincreasedandsustainedasecuremarketpositionrelativetoitsdirectcompeti-torsinitsboutiqueclothing/shoesspace.Comparativestothefourdirectboutiqueathletemarketcompetitorsareprovidedthrough-outthisapplication.FitHabits’marketdataasofDecember2015areshowninFigureP.2-1.

P.2a(2) DuringFitHabits’FY2015strategicplanningretreat,theLTidentifiedthreeemergingchangesthatwillaffectFitHabits’competitivesituation:

1. Inlate2014,FitHabitsbegantheexpansionofitsproductstomeetthespecialactivewearclothingandathleticfootwearneedsofchallengedathletes.IthassecuredsinglesourcecontractswithtwosuppliersprovidingproductsinFitHabits’twoportfoliogroupsandhasseensignificantgrowthwiththisadditionalfocusarea(Figures7.1-3,7.5-3).FitHabitsbelievesthisexpansionwillleadtothecreationofevenmoreopportunitiesforinnovationandcollaborationwithorganiza-tionssuchasExtraceptionalOlympics,USATriathlon/Cycling,andtrackandfieldorganizations,aswellaslocalcommunityandfitnesscenters.

2. By2017,FitHabitsplanstodoubleitswarehousecapacityto a. manageanincreasingnumberofSKUs(inventory)inboth

ofitsportfoliogroups,and b. cutorder-to-shiptimeinhalf(Figure7.1-20)tocompete

withthelargerIR/BSstores. Thiscompetitivechangewillenablethecompanytocontinue

toprovidea24-hour-or-less(ContinentalUnitedStates),product-to-door,on-timedeliveryguarantee(thefirstinthenationfortheboutiqueathleteindustry),outpacingeachofFitHabits’fourkeyboutiquecompetitors(7.1).

3. FitHabits’nearestcompetitorTiptheScalesiscurrentlyinnegotiationswithLeanMuscleforaconsolidationandmerger.Thiswouldchangethelandscapeoftheboutiqueathleticindustry,andFitHabitscouldlosemarketprominenceinitsportfoliosgroups.Seniorcoachesaremonitoringthisrelationshipcloselyandanticipatethesecompanieswillmakeadecisionbylatesummerorearlyfallonthesenegotiations.Inresponse,FitHabitsisconsideringseveralstrategicopportunitiestosecureitscompetitiveposition(see2.1b).

P.2a(3) ComparativedatasourcesaresegmentedinFigureP.2-2bytypesofdatarequiredforeffectivelyassessingFitHabits’marketpositionandthatofitskeycompetitors.

LikemanyotherInternetcompanies,FitHabitshastwokeychallengesinsecuringcompetitiveandcomparativedata.Thefirstisobtainingtimelycomparativedataasthemarketisinarapidgrowthmode,andthesecondissecuringvolumeandprocessdatafromtwoprivatelyowned(TiptheScalesandDZMT)andtwopubliclyowned(LeanOutandLeanMuscle)keycompetitors.In

addition,FitHabitshaschosennottopursuethecomparativedataofthemajorretailerssuchasVoluminousandPaulie’sSportingGoodsasthesearenotkeycompetitors,comparable,orreadilyavailablebysimilarsegmentationsthatarekeytoFitHabits’businessmodel.

P.2b TheFY2015strategicadvantagesandstrategicchallenges(FigureP.2-3)wereidentifiedandvalidatedduringthe2014stra-tegicplanningretreat(2.1a[1])andarereviewedmonthlytoassessFitHabits’abilitytocapitalizeonadvantagesandtomitigatechallengesasitdeploysSOsandactionplans(APs;Figure2.1-3).

P.2c FivefoundationalelementscomprisethePerformanceExcellenceSystem(PES;FigureP.2-4).Eachelementplaysapiv-otalroleinensuringthatFitHabitsstaysfocusedonsustainingitsorganizationalandbusinessfitnessandidentifyingopportunitiestosystematicallyimproveitsorganizationalandbusinessfitness.Thefirsttwoelementsprovideguidance(criteriaandstandards)fortheperformanceimprovement(PI)framework,themiddleistheculturalfocusonperformanceexcellence(P.1),andthelasttwoelementsprovidetoolsandmethodologiesforPI.

Figure P.2-2: Comparative Data and Sources

Comparative Data Type

Sources Within Industry

Sources External to Industry

BusinesstoConsumer Sratsa.com

SupplyChain Turnit.org,SCMCompare

Financial Baseline&Rich

Customer PurchasezillaCS JWStrength

Workforce AssociationforTrainingEmployees(ATE),ExpertBestPlacestoWork,OSHA,U.S.DepartmentofLabor,U.S.BureauofLaborStatistics

Regulatory FTC,ISO9001:2015

Leadership TheInsightBoard

Societal/Community InspiredbyISO26000

Figure P.2-1: Market Share FY2015

% Internet Net Sales

Activewear Clothing

Athletic Shoes

% in Total Products

FitHabits 8% #1 #3 9%

KeyCompetitors(Boutique)

TiptheScales 7% #2 #1 10%

LeanOut 6% #2 6%

LeanMuscle 2% #4 3%

DazzzleMeFit(DZMT)

4% #3 #4 2%

AllOthers(LargeIR/BS)

Numerousmajorretailers

73% 13%

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ThefirstfoundationalPIelementistheBaldrige Excellence FrameworkanditsCriteriaforPerformanceExcellence,whichFitHabitshasusedforthepast10yearstocomprehen-sivelyalignandintegrateallelementsofitscompany.Inthefirstsevenyears(2004to2010),FitHabitsutilizedcategoryteamstodothisworkandaddresstheopportunitiesforimprovement(OFIs)identifiedinfourstateapplicationfeed-backreports.By2011,category-basedteamswerenolongernecessaryastheBaldrige-basedsystemsandprocesseswerehardwiredintoeveryaspectofthebusinessandculture.Suchintegrationwasvalidatedandrecognizedasabestpracticefromthe2014statesitevisitandStatePerformanceExcel-lenceAward.

ThesecondfoundationalelementistheadoptionandcertificationinISO9001:2015forprocessintegrity,ISO26000forsocietalresponsibility,andISO/IEC27001fortheinformationsecuritymanagementsystem(4.2b).UtilizingtheISOstandardsandsustainingcertificationsenableFitHabitstodemonstratetokeysuppliersandcustomersitsadherencestoquality,whileatthesametimeengagingtheminquarterlymanagementreviewsandimprovementefforts,asappropriate(6.2b).

ThethirdfoundationalPIelementisaculturalfocusonperfor-manceexcellence(PE).FitHabits’valuesandcommitmenttoPEareparamounttoitsorganizationalsuccess,anditsteammembersmakeitrealeverydaywitheverycustomer.Onanannualbasis,teammembersreaffirmtheircommitmenttoPEduringtheAllTeamRetreatandtheirindividualperformancereviews.Addition-ally,FitHabitsreceivesteammembers’assessmentsofthePEcultureandcommitmenttoitintheirteammemberengagementscores(Figures7.4-1–7.4-3and7.3-12).

Inkeepingwiththefitnesstheme,in2012,FitHabitsfocusedteammembers’effortsofitsPIsystemtotwokeyapproaches“ShapeItUp”and“SustainIt,”thefourthandfifthfoundationalPIefforts.

■ ShapeItUp:FitHabits’approachistouseLeanandFIT-TESS(Focus,Innovate,Test,Train,Execute,Share,Sus-tain)toolsandmethodsforprocessandPIefforts(6.1b[3]).Thecompany’sPItoolboxcontainsacomprehensivesetof

LeanandFITTESStools;allteammembersareprovidedone–fivedaysofPItrainingbasedontheirengagementwithvariouscross-functionalteams.ShapeItUpinitiativesaddressOFIstoor(re)designofsystemsorprocessesengagingacross-functionalteam,consistingofone–twocoachesandfive–tenteammembersandutilizingLeanandFITTESStoolsandmethodstoaddressaparticularissue.Innovation(the“I”ofFITTESS)issupportedintheseeffortsthroughtheInnovationCouncilandsystematicstepstoensurethatinnovationisintegratedandeffectivelyidentifiedandmanagedacrossthecompany(6.1c).

■ SustainIt:ThefifthfoundationalPIelementistheuseofLeanmanagementtoensuredailyreviewofprogresstowardsmeetingorganizationalimprovementtargetswithineveryunitandshift.KeyelementsoftheSustainIteffortsincludedailyhuddles,theSustainItPortal,andstandardworkthroughtheuseoftoolssuchas5Sandprocessmapping.SinceincorporatingSustainItintocoaches’andteammembers’dailyworkin2012,FitHabitshasseenamarkedimprovementinteammembers’engagement(Figure7.3-14)andcustomerloyalty(Figure7.2-10)scores,aswellasareductioninreturn-on-orderedproducts(Figure7.1-13),whichisadirectcorrelationtogettingtherightproducttotherightcustomereverytime.

Obtaining and sustaining ISO

certification

Engaging our efforts through

ShapeItUp

Sustaining our efforts through

SustainIt

Incorporating Baldrige into our everyday work Culture of

Performance Excellence

Figure P.2-4: Performance Excellence System

Figure P.2-3: Strategic Advantages and Strategic Challenges

Strategic Advantages Strategic Challenges

Business SA1SA2

• Superiorcustomerservice• InnovativeReverseProductIdentificationandCaptureProcess

SC1SC2SC3

• Emergingcompetitorsandmergers• Cybersecurity• Maintaininganadequateprofitmargin

Operations SA3SA4SA5

• FIT(FuturisticInnovativeTechnodata)platform• Focusoncontinuousimprovements• ISO9001:2015certificationandISO/IEC27001compliance

SC4 SC5

• Currentwarehousespace/inventoryconstraints• Maintainingandsecuringrobustinventoryselection

SocietalResponsibilities

SA6 • HEALTH(Health,Exercise,Attitude,Training,andHealing)comprehensiveportfolio

SC6 • Changingcustomerdemandsandexpectations

Workforce SA7 • Highlyengagedteammembers SC7 • Retainingskilledteammembersincompetitiveboutiqueathletemarket

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Category 1 Leadership

1.1 Senior LeadershipAsFitHabitsquicklygrewbeyondthegarage,thefounders,StacyandJill,hadaclearvisionofthekindofcompanytheywantedtocreate.Theysawthereturnandrewardindelightingtheircustomersbyprovidinggreatcustomerservice.Theyrecognizedthatengagedteammembersatalllevelsofthecompanywerekeytodelightingcustomers.StacyandJill’sjobsweretobeservantleaders,providingprocessesandtoolstosupportteammembers.

Today,asthecompanycontinuestogrow,FitHabits’seniorcoaches,theLT,guidethecompanythroughtheFitHabitsLeader-shipSystem(FHLS;Figure1.1-1).Thissystemwasdesignedin2009toarticulateleadershipattributesandexpectationsandhasundergoneseveralcyclesofevaluationandimprovement.Forexample,whileFitHabitshasusedtheBaldrigeCriteriaasafoundation,in2011,theLTadded“Align”to“OrganizeandPlan”tobemoreintentionalabouthowimportantalignmentwasforthecompany.Additionally,in2013,theleadershipdevelopmentcurriculumwasrefinedtofullyaligntotheFHLS(5.2b[1]).TheFHLSleverageseachofthecorecompetencies:relationships,innovation,andfitness.It(1)beginswiththeSPPand(2)contin-uesthroughdeploymentoftheSOs,astheLTbuildscommitmentandalignmentacrossthecompany.FitHabits(3)executesitsstrategicplan,andtheresultsaremeasured.Developmentandrecognition(4)helpensureteammembersfeelacknowledgedandengaged.Asperformanceisreviewed,theLT,othercoaches,andteammembers(5)usetoolsinthePIsystemsuchasShapeItUp

andSustainIttoidentifyprocessestoimproveandtoinnovatenewopportunities.Thisraisesthebarasthenextcyclestarts.

1.1a(1) FitHabits’MVV(FigureP.1-1)werefirstcreatedin1997andhavebeenrefinedseveraltimes.Mostrecently,in2014,thevisionwasaudaciouslychangedto“bethe#1Internet-preferredactivewearandshoeresourceinthenation”;anindividualatateammemberrallyproposedthisstatement.ItwasreviewedbytheLTandvettedthroughvariousfocusgroupsofkeystakehold-ers(e.g.,customer,collaborators,andsuppliers)andadoptedthroughtheSPP.Thenewvisionwasthendeployedbackthroughtheteams,whoembraceditwholeheartedly.FitHabitsreviewsandaffirmstheMVVannuallyduringtheStrategicPlanningProcess(SPP).Valuesareusedashiringscreensforallpositions,presentedduringonboarding,andreinforcedinstaffmeetingsandthroughquarterlyperformancereviews.

TheLTdeploystheMVVtoteammembers,suppliers,andcollaboratorsthroughnewsletters,e-mails,teammeetings,newhireorientation(FitWelcome!),andnumerousothercom-municationsmechanisms(Figure1.1-2).TheLTdemonstratesapersonalcommitmenttothevaluesbyrolemodelingtheexpectedbehaviorswithallstakeholders;carryingatorchforthe“ValueoftheMonth”andweavingitintopresentationssuchasthequarterlyteammemberforums;andintegratingthevaluesintoquarterlybusinessreviewswithsuppliersandcollaborators.LTmembersareevaluatedagainsttheirpersonaldemonstrationofthevaluesaspartoftheirindividualQuarterlyCoachingPlans(QCPs).

Perform to plan

Organize, plan, and align

Set direction and establish goals

Learn, improve, and innovate

Develop, reward, and recognize

Coaches and motivates to deliver results

Inspires and raises the bar

Determines accountabilities and collaborates

Communicates and engages

Role models and builds commitment

Team Members

CustomersStakeholdersCollaborators

MissionVisionValues

Fitness Innovation

Relationships

Figure 1.1-1: Leadership System

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1.1a(2) TheLTiscommittedto“leadingbyexample.”Toaccom-plishthis,theLTsetsthetoneandcultureofwhatisexpectedandguidesbehaviorby(1)communicatingwithfulltransparencyinalllegalandethicalmatters;(2)annuallysigningtheCodeofConductandFitFulPledgeanddeployingthemtoallteammembersandsuppliers;and(3)ensuringaccountabilityforlegalandethicalbehaviorbyall(1.2b).TheLTpromotesthevalue“Integrity”(doingtherightthingatalltimes)duringFitWelcome!aswellasinothervenues,includingannualfinancialaudits(Figure7.4-6)andquarterlycyber-securityauditstotheorderingandpaymentprocess(4.2b).TheLTmemberssignannualConflictofInterest(COI)statements.In2016,theLTstartedannualteammembersurveystodetermineteammembers’perceptionsofethicalbehaviorandtheiropinionregardingtheethicalconductoftheLT(Figure7.4-5).

1.1a(3) Buildingasuccessful,enduringcompanyistheaspi-rationallegacyofthefoundersandtheLT.Havingavisionofbecomingthe#1Internet-preferredactivewearandshoeresourceinthenationinspiresteammembers,suppliers,andcollaboratorstostriveforever-improvingperformance.Theannualprocessofsettinggoalstolevelsofexceptionalperformance(4.1a[2])andthereinforcementoftheQCPProcess(5.2a[4])establishtheexpectationofachievingthevision.

ExecutingtheprocesseswiththeFHLS,theLTcommunicates,aligns,andkeepsasystemwidefocusonthemissionandvision.TheLTusesseveralmethodstoachievethis:

(1) cascadingSOstofosteralignmentandaccountabilityforallteammembers;

(2) holdingaseriesofperformancereviewsofalignedandcascadedmeasurestodriveorganizationallearningthroughthePIsystemimprovementeffortsdetailedontheAccount-abilityBoards(ABs)presentineachdepartment;

(3) usingthecommunicationsmechanisms(Figure1.1-2)toreinforceachievementoftheMVV,andhighlightingtheroleseachteammemberplaysinthecompany’ssuccess;and

(4) aligningthestrategicgoalswiththeQCPProcesssoteammembersarerewardedforhighperformance.

EachmemberoftheLTrecognizesthat“delightingcustomersalways,”buildingtheirengagementandloyalty,beginswithcreatingapositiveexperienceforeachteammember,whetherworkingintheCallCenter,awarehouse,accounting,oranypartofthecompany.Tobuildastrongculturetocreateandsustainthesepositiveexperiences,theLTfocuseson(1)listeningandrespondingtoteammembers’driversofengagement;(2)develop-ingandaligningsystemsandprocessestosupporttheirworkandexceedteammemberexpectations;(3)recognizingandrewardinghighperformance;(4)providingaculturewhereteammemberscanshareandactonideasforbothimprovementsandinnova-tions;and(5)communicatingchallenges,changes,andsuccessestokeepanopenandtransparentenvironment.

LTmembersrecognizedearlyinthehistoryofFitHabitsthattosucceedasanonlineboutiquedistributorintheathletemarket,theywouldhavetofindnewandinnovativewaystooperate.Thefocusonthevalue“Innovative”wassupportedbybenchmark-ingwithworld-classorganizations(4.1a[2]),accesstorobustdatawarehousesofbestpractices(4.2a[1]),thecreationofan

InnovationCounciltocreatesystemsandprocessestosupportinnovationandintelligentrisktaking(6.1c)andtoensureeffec-tivealignmenttoSOs,andsupportoftheInnovator-of-the-Quarteraward.Fosteringanenvironmentinwhichideasarevaluedandteammembersfeelcomfortablechallengingthestatusquoandtryingnewthings,theLTfoundthatinnovationhadbecomeembeddedinthewayFitHabitsoperated.Inacycleofrefinementin2008,theLTrecognizedthatinnovationwasnowoneofitscorecompetencies.

SuccessionplanningatFitHabitsisfocusedondevelopingtalentinthepipelinetobepreparedforplannedaswellasunplannedopportunities.ItisanongoingprocessofpreparationthatispartoftheTalentDevelopmentProgram.Leadershipcompetencieshavebeenidentifiedattheteammember,coach,andseniorcoachlevels.TheLTalsoidentifiedspecificcompetenciesrequiredforeachmission-criticalrole.Usingacustomizedsuccessionplanningtool,whichispartoftheTalentDevelopmentProgram,candidatesareidentified,andeachseniorcoachworkswithpotentialsuccessorstomentorthecandidate’sdevelopment.TheLTparticipatesintheleadershipdevelopmentcurriculum.Leadershipdevelopmenthasbeenevaluatedandimprovedseveraltimes;thelatestrefinementwasin2013,whenacomprehensivecurriculumwasalignedwiththeprocessesandattributesexpectedofleadersasdefinedintheFHLS.

1.1b(1) TheLTcreatesanopenandtransparentenvironmenttofacilitatecom-municationatalllevelsofthecompany.Avarietyoftwo-waymethodsareusedtoshareinformationandgatherinputs(Figure1.1-2).Inaninnovative,technology-drivencompany,communicationofferingshavegrownandimprovedbasedonneedsandtechnology.TheseincludetheweeklyFitHabitsBlog,startedin2009,thatcoversinformationonfitnessandhealthtrendsandhighlightsnewprod-ucts.ThemyFitHabitsportalwascreatedin2011andprovidesteammemberswithaccesstoonlinetoolsusefulintheirdailyjobs,aswellasinformationoncompanynews,teammemberrecognition,andhumanresourcesbenefitsandprograms.

TheLTtakesanactiveroleinrewardandrecognitionprogramstoreinforcehighperformanceandacustomerandbusinessfocus.LTmembershostandparticipateinmanyrecognitionevents;forexample,they

■ Providebudget-appreciationdollarsforcelebrations,including

○ Teammemberbirthdays ○ Teammemberworkanniversaries ○ Themeetingofquarterlydepartment/corporategoals■ Establishannualcustomer-andbusiness-focusedgoalsfor

theTeamMemberVariablePayProgram■ Recognizeteammemberscompletingcertifications

ordegreesatall-team-membersmeetingsandprovidecashbonuses

■ Provideabonusstructuretorecognizeexcellenceinpostcallsurveys

■ Recognizeteammemberswhosupportthevalueoffitnessinthecommunity

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■ RecognizetheInnovator-of-the-Quarter■ Sendthankyounotestothehomesofteammembers

1.1b(2) TheLTcreatesafocusonactionsthrough(1)consistentlyfocusingonMVVachievement;(2)settingandfullydeploy-ingcleardirectionandtargets(expectations)thatdrivehighperformanceacrossabalancedportfolioofobjectivesdevelopedthroughtheSPP;(3)engagingteammembersindesigning,managing,andimprovingkeysystemsandprocessesthroughShapeItUpandSustainIt;(4)sharingofperformancethroughtheFitHabitsscorecard(Figure2.1-3)andABs;(5)aligningperfor-mancewithincentivesthroughtheQCPProcess(5.2a[4]);and(6)nurturingacultureofexplorationtotakeintelligentrisksandtoimprovewiththesupportoftheInnovationCouncil(6.1c).

Thesemethodsprovidearobustprocesstoensurethatthecom-panyisalignedtotheSPP;thatacultureisfosteredwhereideas

aresoughtandnewapproachesaretested;andthatteammembersbecome“owners”throughintentionalinvolvementinprocessdesign,management,andimprovementefforts.Keydecisionsthatimpactteammembersaresharedthroughmultiplechannels(Figure1.1-2)includingsocialmedia,whicharealsousedtoshareFitHabits’eventsandknowledgebaseswithcustomers.

1.2 Governance and Societal Responsibilities1.2a(1) FitHabitsisacloselyheldcorporation,withstockowner-shipby22teammembersofthecompany.TheBODiscomprisedofsevenpeople,withtheCEO/presidentex-officio.AsacompanythatstartedinagarageinRichmond,FitHabitsselectsBODmembersprimarilyfromthecommunity.Inaddition,acollaboratororsupplierisrecruitedtositontheboard.Occasionally,expertsinspecificareasarealsobroughtintostrengthentheboard.Boardmemberscurrentlybringfinance,e-commerce,cybersecurity,and

Figure 1.1-2: Key Communications Mechanisms

Method

Frequency O—Ongoing, M—Monthly, W—Weekly, Q—Quarterly,

D—Daily, P—Periodic Two-WayCommunicate Key Decisions

Audience TM—Team Member, B—Board Member,

S—Supplier, C—Collaborator

All-TeamForums Q ● ● TM

AnniversaryBreakfasts M ● TM

BoardMeetings Q ● ● B

CascadingMessages P ● ● TM

CEOE-mailUpdates M ● TM

CommunicationBoards M All

ContributepointCollaborationSites O ● TM,S,C

CustomerE-mails D ● ● C

DepartmentMeetings M ● ● TM

DepartmentNews W ● TM

E-mail/QuarterlyMeetings O,Q ● All

FitHabitsBlog W ● All

FitWelcome! M ● TM

FocusGroups P TM

HiringProcess O ● TM

LeaderThankYouNotes O ● TM,C

myFitHabits O ● TM

OnlineNewsletterforTeamMembers O ● TM

Open-DoorPolicy O ● All

OperationsMeetings M ● ● TM

PartnerPortal O ● S,C

QCPs Q ● TM

SeniorCoachRounding O ● TM

Supplier/CollaboratorCommunications P ● TM,S,C

TeamMeetings W ● ● TM

WebsiteUpdates D All

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performanceexcellencebackgrounds,aswellasoverallbusinessknowledge,totheirdeliberations.

AccountabilityforLTactionsistransparentandcommunicatedthroughscorecardsandtheperformancereviewcycle.Thereportingofkeyresultsisreviewed,analyzed,andmanagedduringthemonthlyboardmeetings.Inacycleofrefinementin2012,informationwasmadeavailableviathewebsitefortheBODcontinuousaccesstoallowforgreaterandreal-timeanalysisandmonitoringforbalancedscorecard(BSC)andAPaccomplishments.InadditiontotheBODreviewofperformance,adeeperanalysisisdonebytheLTandduringStep1oftheSPP,whereperformanceandotherdataareusedtodetermineimprovementopportunities.BODmemberssignCOIstatements.Independentauditsareconductedbyanexternalaccountingfirm.AuditfindingsarereviewedwiththeLTandBOD.InternalauditsareconductedandresultsarereviewedthroughtheFitTrackingProcess(Figure4.1-1).

Figure1.2-1demonstrateshowFitHabitsachieveskeyaspectsofitsgovernancesystem.

1.2a(2) TheLTmembersareevaluatedusingmultiplemethods.TheBODevaluatestheCEO/president’sperformanceannu-allybasedonachievementoforganizationalgoals.In2014,theBODrefinedtheexecutivebonustobebasedonfinancialperformanceandkeyqualitymeasures.Atthesametime,theLTrefinedtheteammemberbonustobecalculatedbytheuseofadecisionmatrixbasedonorganizationalgoalsandexternalrecognition(ExpertBestPlacestoWork,Baldrigeachievement,andcommunityengagement).TheCEO/presidentevaluateseachLTmember’sperformance,basedonQCPsthatincludevalues,organizationalanddepartmentgoals,andindividualgoals.LTmembersusetheseevaluationresults,teammembersurveys,andinformalinputstofurtherdeveloptheirleadershipeffectiveness.EvaluationtoolsandtheFHLS(Figure1.1-1)arereviewedeachyearduringtheSPPandduringBaldrige-basedself-assessments.

TheeffectivenessoftheBODinfulfillingitsrolesandrespon-sibilitiesisassessedthroughasurveycompletedbyeachBODmember.Thesurveyaddressesboardmemberpreparationandknowledgeandtheeffectivenessoftheboardinmeetingitsobligations.TheboardchairmanandtheCEO/presidentreviewtheresultsandmakerecommendationstothefullBODforimprovements.TheCEO/presidentassignsresponsibilityforimplementingapprovedrecommendations.Improvementsin2012includedonlineaccesstoallboardlegaldocumentsandmonthlyboardpacketsand,in2014,aformalorientationfornewboardmembers.

1.2b(1) FitHabitsworkscloselywithitssuppliers,fromclothingmanufacturerstoSendPIx,toavoidanyadversesocietalimpactsofitsproducts.UsingtheListeningandLearningMechanisms(Figure3.1-2),theLTdefinespotentialimpactsandconcernsandincludesthemindiscussionsduringthemonthlyorquarterlysup-pliermeetings(6.2b).Asanexample,in2014,FitHabitslearnedthatitscustomersdidnotwantsemitransparentmaterialsusedintheiractivewear;thisrequirementwasthenwrittenintoapparelmanufacturers’contracts.

Duetothecustomerbaseandthetypesofproductssold,publicconcernsareminimalandhaveneverbeenanissue.Inthepast,customersexpressedconcernaboutproductscomingfromoverseasandthepotentialuseofslaveorchildlaborinfactories.FitHabits’resultingHumanRightsPolicyisutilizedtoselectandannuallyreviewTier1andTier2suppliers.

FitHabitshasbuilttheconservationofnaturalresourcesintoitsprocessesandoperations.First,suppliersmustshipproductsinrecyclableormade-of-recyclablematerials.FitHabitsthenshipsallordersinpackagingmadeofrecyclablematerials.AttheFitHabits’campusinRichmond,lightingandheating/coolinginofficesandthewarehousearetriggeredbymotiondetectors.Recyclinggoalsaresetforeachdepartmentforpaperandmetal.Acorporateprizeisavailableforanydepartmentexceedingitsgoal.

1.2b(2) EthicalbehaviorisexpectedatFitHabits.TheLTrolemodelsethicalbehaviorandsupportsaculturethatpromotesandensuresethicalbehaviorinallinteractions,startingwiththevalueof“Integrity.”TheLTdeployssystematicprocessesincludingStandardOperatingProceduresandPolicies(SOPPs)onethicalandlegalbehavior,leadsannualtraining,andtracksperformance.AllteammemberssignaFitFulpledgeinbusinessethicsduringFitWelcome!,newteammemberorientation,andthenannually

Figure 1.2-1: Key Aspects of Organizational Governance

Key Aspects Processes

Accountability forLTactions

PerformancereviewcyclesInternalandexternalauditsBaldrigeassessmentsQCPs

StrategicPlanAccountability

AlignmentofgoalsthroughthecompanyEachSOassignedtoamemberoftheLTBSCPerformancereviewcyclesBODreviewofdashboardmeasuresandperformance resultseveryothermonth

FiscalAccountability

BODmonthlyfinancialreportsCFO-ledfinancialmanagementmeasuresandresultsBODreviewofmajorvendorcontractsandlease agreements

Transparency ofOperations

PostingofprogressonSOsondepartmentABsCEO/PresidentreviewoftheBSCandprogresson APstwice/yearatall-team-membersmeetings andlocationsCOIstatementsBODreviewofdashboardmeasuresandperformance resultseveryothermonth

BODDisclosurePolicies

COIstatements

IndependenceandEffectivenessofInternalandExternalAudits

AnnualselectionofexternalauditfirmMultipleinternalauditsStateandnationalBaldrigeassessmentsAuditresultssharedwithBODalongwithany neededAPs

ProtectionofStakeholderInterests

StakeholderrepresentationonBOD

SuccessionPlanningforLT

TalentDevelopmentProgramandsuccession planningtoolQCPsLeadershipdevelopmentcurriculum

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duringrefresherethicstraining.TheLTandBODsignFitFulaswellasCOIstatements.AllsupplierssignaStandardsofBehavioraspartoftheircertificationprocess(6.2b).

KeyprocessesandmeasuresofethicalbehaviorareincludedinFigure1.2-2.TheLTenforceszerotoleranceforsignificantbreachesinethicalbehavior.TheChiefPeopleOfficerorthelegalcounselinvestigatesallreportedpotentialbreachesinethicalbehavior.Whenaninvestigationrevealsthatanethicalbreachhasoccurred,progressivediscipline,uptoandincludingtermination,isinitiated.

1.2c(1) Duringthe2012SPP,theLTlookedatallsocietalrespon-sibilityandcommunitysupportprogramsrecentlycompletedandplannedforthecomingyear.LTmembersrealizedthatmostoftheworkfitunderaHEALTH(Health,Exercise,Attitude,Training,andHealing)comprehensiveportfolio.Inacycleofrefinement,thisledtotheevaluationofnewprogramsagainsttheHEALTHcriteriaandbecameastrategicadvantageforFitHabits.

Providingthecommunitywithaccesstounbiasedfitnessinforma-tionandeducation,rangingfromacademicstudiestobreakingnewsinnutritionandexercise,istherightthingtodo.FitHabits’onlineeducationinitiatives,underHEALTH,provideastrongdifferentiatorinthemarketplace,supportthebrand,andbuildcustomerloyalty.

Tofurtherthecontributiontosocietalwell-being,FitHabitsworkswithsupplierstomaintainafocusthatthemajorityofproductsandpackagingare“MadeinAmerica.”

FitHabitspridesitselfinbeingagreencompany,havingtakenthesteptoadoptaboard-approvedGreenPolicyStatement.Thecompanydeploysasystematicapproachtobeinggreen,usingimprovedtechnologiestodecreaseenergyconsumptionandcarbonoutput(1.2b[2]andFigure1.2-2).Asaresultoftheseefforts,FitHabitshasbeenrecognizedbothlocallyandnationallyasaleaderingreeninnovation(Figure7.4-11).

Tofurthersocietalwell-being,FitHabitshascreatedaspecialfocusonchallengedathletes.Thisstartedasanefforttosupportdisabledveterans.Asthecompanystartedlookingatspecialactivewearandathleticshoesforthem,theLTsawtheneeds

presentinthelargerchallengedathletepopulation.FitHabitsmadeacommitmenttohiringandsupportingchallengedathletesinitsheadquartersgeographicarea;thisincludedtherecenthireofamarketingspecialistfromtheranksoftheseathletes.Inaddition,FitHabitsisfinalizingseveralpartnerships(inalignmentwithCC1andCC3)withnationalassociationssuchastheExtraceptionalOlympics,SteelWoMan,andOurCountryTriathletes.

1.2c(2) FitHabitsevaluatesitskeycommunitiesannuallythroughtheSPP.KeycommunitiesareidentifiedasthecommunitiessurroundingtheFitHabits’facilities.ThecoachforcommunityrelationschairsateamofmembersrepresentingeachsitecalledtheHEALTHTeam,whichannuallyselectseventsandcompaniestosupportwithfundsand/orvolunteers.TheHEALTHTeamconsiderstheHEALTHcriteriainevaluatingopportunitiesforsupport.EachproposedopportunityhastomeetatleasttwooftheHEALTHcriteria.

TheHEALTHTeamisresponsiblefordevelopinganannualplanandbudgettopresenttotheLTforapproval.InadditiontoannualsupportforJoinedPathateachsite,asampleofrecenteventsandorganizationssupportedcanbefoundinFigure1.2-3.

In2008,FitHabitshasalsoidentifiedanearbyRichmondneighborhoodasakeycommunityandannuallytakesongoingstepstostrengthenit.RepresentativeLTmembersparticipateinthelocalCommunityActionCommittee,leveragingCC1,the

Figure 1.2-3: Community Support

When Where Event/Company

2000–16 Allsites JoinedPathCampaigns

2010–16 Allsites WalkforBreastCancer

2008–14 Richmond RichmondNowTriathlon

2012–16 Richmond RiverSplashandDash5kTrailRun/FunRun

2013–16 Richmond PondsandGrapesCenturyRide

2010–16 Richmond FitShoeEvents

2011–16 Richmond Children’sHospitalRide-a-thon

Figure 1.2-2: Key Regulatory and Legal Processes

Area Risk Process Measure Goal

WasteManagement Landfill Recycleprocesses Tonsofmaterialrecycled 98%ofallwaste

ConservationofMaterials Sustainability Suppliermanagement %ofSKUscomprisedofrecycledmaterials

20%

EnergyConservation Globalwarming Minimizeusage Equipmentuseefficiency 90%

RespectingTeamMembers Turnover,disengaged teammembers

Annualtrainingforallteammembers

EEOCcomplaintsfiledLawsuitsfiledTrainingcompletions

00

100%

Ethical,Legal Sustainabilitycompliance

Compliancetracking #ofsuitsfiled%ofcompliancetraining

0100%

CreditCardSecurityWebSecurity(TruthSign)

Sustainability TrackingTracking

#ofbreaches#ofbreaches

00

ISO(9001,27001,and26000forIT)and14001forenvironmentalcertification

Compliance Compliancetracking Auditfindings 0

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timeoff.Thisprogram,consistentwiththeFitHabits’valueofService,allowsteammemberstopursuevolunteeropportunitiesandsupportorganizationsandprojectsthatinterestthem.Teammembersenterthevolunteerhourstheycontributeinanonlinesystem(seeFigure7.4-12),andtheyarerecognizedbytheLTforexceptionalvolunteerismwithcertificates,communityserviceawards,andEveningofExcellencerecognition.

FitHabitscontinuouslyevaluatesandimprovestheHEALTHapproachtocommunitysupporttofocusoncausesimpactingfit-ness(CC3)andhealth,especiallyinthecommunitieswithFitHab-its’facilities.Thewebsitealsoprovidesinformationonfitness,health,andnutritionforcustomersandthegeneralpopulation.

Figure 2.1-1: Strategic Planning Process

Phase Step and Description When Who Participates

PhaseI:BusinessAnalysis 1. Businessanalytics January MarketingandSalesTeammembers,ChiefPeopleOfficer,COO,allchiefs

2. Planningretreat EarlyFebruary

LT,BOD

PhaseII:StrategyDevelopment

3. StrategyDevelopmentWorkshop LateFebruary

LT,BOD

4. SOassignmentandinitialresourceneedsassessment(RNA) March LT,allchiefs

PhaseIII:APDevelopment 5. APdevelopment(finalizedRNAsandAP) April LT,allchiefs,APowners

PhaseIV:APDeployment andImplementation

6. APdeployment May–June Allteammembers

7. APimplementationandreview July–June Allteammembers

PhaseV:StrategyProcessEvaluationandImprovement

8. Evaluationandstrategyimprovementprocess(ShapeItUp) October LT,APowners

corecompetencyofrelationships,tostayabreastofcommunityneeds.In2010,anevaluationofcommunityneedsledtothedevelopmentofOperationFitShoe.AnexampleofFitHabits’commitmenttotheneighborhood,OperationFitShoe,nowinitsseventhyear,providesanopportunitytomakesurechildrenhavenewshoestostartschool.FitHabitsworkswithitsshoesupplierstoprovideshoestoFitHabitsatcostorforlesseachyear.LTmembersparticipateinFitShoeevents,providinglemonadeandhealthysnacks,tohelpchildrenbefittedwithfree,newshoes(Figure7.4-13).Teammembersvolunteertheirtimetomakethisanannualsuccess.

FitHabitsengagesteammembersinsupportofcommunitiesbyprovidingeachteammember16hoursofannualpaidvolunteer

Category 2 Strategy

2.1 Strategy Development2.1a(1) FitHabits’five-phaseSPP(Figure2.1-1)isoneofthemostvitalfunctionsusedbytheLTandBODtoensurethattheyareproactiveandmeetingtheneedsofkeystakeholders.PhaseIisFitHabits’innovativeBusinessAnalyticsScanningProcesstoaddresstherapidlychangingfashionandtrendsinactivewear,customerandworkforcerequirements,andinfrastructurerequire-ments.Thisapproachtranslatesintotwokeyplanninghorizons,whichaddresstheprimaryelementsofFitHabits’organizationalenvironment:

■ Shortterm,upto24months:Primarilyfocusedonfashiontrends,thecompetitorlandscape,workforceandcustomeroverallrequirements,andsupplierrelations;and

■ Longerterm,greaterthan24months:Primarilyfocusedoninfrastructureandcapitalinvestments.

Becauseofthenatureoftherapidchangesintheactivewearindustryandtoremainagileandretainorganizationalreadinessforshiftsintrendsandthedemandsofcustomers,theLTandBODidentifiedearlyinFitHabits’historythattwoplanning

horizonsprovidedthecompanywiththecriticalassessmentpointstorapidlyandeffectivelyrespond.Thesehorizonsservethecom-panywelltorespondeffectivelytocustomerandmarketsshifts.

Phase I: Businessanalysiscomponentsconsistoftwokeysteps.

Step1:Acomprehensive,robustbusinessanalyticsprocess,comprisedofthreeparts,occurstwiceayear,withupdatesfromvariousgroupswithinFitHabits.Everysixmonths,MarketingandSalesTeammembersperformacomprehensivescanofthefashionandactiveweartrendsandprovideanextensiveanalysisofindustrytrendsinretail,Internetshopping,andactivewearclothingandfootweardesign,aswellasofanyshiftsinthecompetitivelandscapeandmarketforces.ThisanalysisisinputintoPhaseII:StrategyDevelopment.Annually,theChiefPeopleOfficerconductsanextensivereviewandsummaryofworkforcechallenges,needs,andexpectations,asthefirststepintheCapa-bilityandCapacityPlanningModel(Figure5.1-1).MarketingandSalesTeammembersperformacomprehensiveanalysisanddatagatheringfromfivekeyfocusgroups(activewearsuppliers,athleticfootwearsuppliers,teammembers,trainers,andfitness

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coaches)forkeycollaboratorsandcustomers.TheyanalyzetheresultsfromtheVOCmethods,suchastheGuppolsurvey,customerfocusgroups,andsocialmedia(Figure3.1-2).Inaddi-tion,datagatheredfrommonthlyandquarterlysupplierreviews(6.2b)areanalyzedtoidentifysupplierrequirements,advantages,challenges,andopportunities.TheseanalysesareinputsintoStep2(below).Annually,thecapitalandinfrastructuralneedsassessmentsareconductedbytheCOO,CFO,andothers,asappropriate,toprovideinputstothecompany’sabilitytomeetthedemandsofkeyareasincludinginventorymanagement,informa-tiontechnology(IT)/webordering,andCallCentersupport.ThisanalysisisinputintoStep2.

Step2:InanannualFebruarytwo-dayplanningretreat,theLTandBODworkthroughStep2oftheSPP.TheyreviewthebusinessanalysesfromStep1;theyalsoreviewthecurrentyear’sBSCwithstrategicchallenges,advantages,priorities,andsuc-cessesandassesstheirrelevancetothecurrentmarketconditionsandFitHabits’BSCgoals.Basedonthisinformation,theLTandBODperformastrengths,weaknesses,opportunities,andthreats(SWOT)analysisandidentifyanyemergingcriticalchallengesandopportunities,threats,orweaknesses,includingorganizationalrisksorpotentialblindsspots,andanyshiftsinorganizationaldirectionsandcompetencies.Annually,theparticipantsvalidatethefourstrategicfocusareas(customers,inventory,teammem-bers,andfinance/growth),whichhavebeenconstantforthepastsixyears.ThekeyoutputsprovidetheinputsfortheLTandBODtomoveintoPhaseII:StrategyDevelopment.

Phase II: StrategicdevelopmentisconductedinSteps3and4.InStep3,theLTandCEO/presidentmeetinlateFebruaryforaone-dayfacilitatedStrategyDevelopmentWorkshop.Inputsfromearlierretreatsarereviewed,andparticipantsdiscussandvalidatekeyorganizationalfactors,includingthevisionandmission,currentcorecompetencies,potentialfuturecorecompetencies,thethreekeyworksystems(KWSs;Figure2.1-2),anytrendsinworkforcerecruitmentorretention,anyshiftsormodificationstothestrategicchallengesandstrategicadvantages,planninghorizons,andthefourstrategicfocusareas(above).Thepartici-pantsdevelop(new)orupdateand/oradjustpreviousSOs(basedonthefocusareas).

Step4:Followingthisworkshop,eachSOisassignedanLTmem-bertoconductaformalizedresourceneedsassessment(RNA,see2.2a[3]).RNAsareconductedwithinarobustsoftwareprogram,inwhichdataareaggregatedandanalyzedtoensureresources(bothinternalandexternal)areaccountedfororputintotheresourcerequestfunnel(RRF)forfutureresourceneeds,suchastheidentificationofanewsupplierand/ornewproductoffering.TheRNAsarefurtherrefinedwiththeAPdevelopments(2.2a).

DatafromcompetitiveanalysesareupdatedeverythreemonthstoensurethatFitHabitsismonitoringitsmarketpositionandaddressinganysignificantchangesinatimelyfashion.Priorto2013,FitHabitsonlyreviewedthesedataannually,butinlate2013,itidentifiedthatarelativelynewboutiqueretailer,DZMT,hadrapidlytakenabout3%ofthemarketinbothactivewearandathleticshoesinjustsixmonths.Toimproveitsmarketknowledge—andavoidthistypeofsurprise—FitHabitsmovedtoaquarterlyupdate.

Phases III and IV: APdevelopmentandimplementation(deploy-ment),Steps5,6,and7,areaddressedin2.2aand4.1b.

2.1a(2) Thecomprehensivebusinessanalyticsapproachprovidestimelyinformationandanalyticstocriticalcustomer-andspecificindustry-focusedstrategicopportunitiestostimulateinnovationinFitHabits’productlines,technology,andworkforcesupportpro-cessesandinbeingproactiveinmeetingandexceedingtheneedsofcustomers,whileatthesametimestayingaheadoftherapidlychangingactivewearfashionrequirements.Strategicopportunitiesarevettedandtheintelligentrisksarestratifiedbasedonasetofstandardizedfactorsforbothexternalopportunities(productstosell)andinternalopportunities(e.g.,infrastructureinvestments)toensurethatappropriateandinformedrisksareassessedandduediligenceconductedbeforepursuinganidentifiedstrategicopportunity.Forexample,forthemid-2014businessassessment,basedoninputsfromsocialmedia,customers,theactivewearmarket,andsuppliers,theLTassessedthegrowingdemandsfromchallengedathletestohavefashionable,practical,andreasonablypricedactivewearandathleticshoes.

Bylatefall2014,twokeysupplierswereidentifiedwhocouldmeetboththeproductrequirementsandthemanufacturingtimeframetoeffectivelyaddressthisnewstrategicopportunity.A2016strategicopportunityforFitHabitsinvolvesenteringintoseveralsustainablefashionactivewearproductlinesfromtwoemergingminority-ownedmanufacturers.

2.1a(3) StrategicconsiderationsarepartofthecomprehensiveanalysisconductedinPhasesIandII.BasedoninputsandanalysesconductedinPhaseI,goingintotheFebruaryworkshop(Step3),theLTmemberssynthesizedataandusethemasthebackdropforthedeterminationsofstrategicchallengesandstrategicadvantagesandaddressanyknownorpotentialrisks,includingchangestotheregulatoryenvironment,toorganizationalsuccessandsustainabilitythatFitHabitsneedstoconsiderandaddressinitsnextstrategicplanningcycle.Theexecutionoftheplanisaccomplishedthroughdiscussionsofthestrategicfocusareas;inaddition,afullRRFisconductedtoensurethatresourcesareavailable.ThroughannualShapeItUpcycles,potentialblindspotsareassessedandmitigated.Forexample,priorto2013,keysupplierrequirementswerenotakeyconsiderationinPhaseI’sbusinessanalytics.Basedonthe2012ShapeItUpevaluation,thiswasidentifiedasamajorflawintheSPPandthusbusinessanalyt-icsforthetop-supplierrequirementwererefinedin2013.

2.1a(4) FitHabitshasthreeKWSs(Figure2.1-2).

TheseKWSsareannuallyreassessedandvalidatedinStep3.Duringthisstep,theLT(re)assessesFitHabits’capabilitiesandcapacitywithineachKWSandalignsthosetoensurethatthethreecorecompetencies(relationships,innovation,andfitness)aresustained.ProcessesthatarenotprimarytothebusinessandcorecompetenciesofFitHabitsareevaluatedforoutsourcingreturnoninvestment(ROI)andsupportivefunctionstothecorebusiness.Forexample,themanagementofCustomerRelationsisaprimarybusiness;thustherearenooutsourcedprocesseswithinthisKWS.However,inOperationsandSupport,FitHabitscurrentlyhastwooutsourcedprocesses.ThefirstistheProductShipmentProcess,managedthroughkeysupplierSendPIx.On-timedeliveryandproductshipmentareSendPIxcorecompetencies,andthrough

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anexclusivecontractandsuperiorrelationshipwithSendPIx,FitHabitsisguaranteed24-houron-timedelivery(ContinentalUnitedStates),withfewexceptions,toitscustomers(Figure7.1-16).Thesecondoutsourcedprocessisthemaintenanceandupkeepofthestructuresandhousekeepingservicesinfacili-ties,managedbyAFM.Allotherkeyworkprocesses(KWPs;Figure6.1-1)areperformedbyandprimarytothecorebusinessofFitHabits.

AspartofStep3,futurecorecompetenciesandKWSsareassessed.Forexample,in2013,theKWSswerere-structuredfromtwosystemstothecurrentthreetocreateaseparateSup-plier,Manufacturer,andCollaboratorRelationsSystemtofurthercapitalizeonthecorecompetenciesofrelationshipandinnovationwiththesekeystakeholders,whileatthesametimenotlosingthemomentumofthesecorecompetencieswiththecustomersandworkforce.

2.1b(1) GoalsforSOsareseeninFigure2.1-3.Keychangesidentifiedinthe2016strategicplanincludeashifttotwonewsuppliersforsustainablefashionsandactivewearproductlinestargetedforchallengedathletes.

2.1b(2) DuringStep4oftheSPP,theLTandBODconductanexercisetoensurethattheidentifiedSOsstrengthenthestrategicadvantages,leveragecorecompetencies,andhelpmitigatestra-tegicchallenges.EachSO,asappropriate,isassignedshort-andlong-termgoalstoensurethattheconsiderationsandneedsforeachcustomergroupandstakeholdersarebalancedandalignedtotheFitHabits’missionandvision.

2.2 Strategy Implementation2.2a(1) Phase III:InStep5oftheSPP,theLTandcoachesdevelopcomprehensiveAPstoaddresseachSOandensurethattheappropriateAPsaredevelopedtoeffectivelyaddresseachoftheplanninghorizons.TheAPDevelopmentProcesstypicallytakesfourweekstocomplete.ThiscompressedtimeframeenablestheLTandcoachestoensurethatallofthevariousconsiderationsarefullyevaluatedandresourceassessmentsmade(2.2a[3])toensureachievement.Thisshortenedtimeframewasacriticalchangethe

LTmadein2014totheAPDevelopmentProcesstoinstillagility,whileatthesametimeenhancingtheabilitytomakedecisionsbasedonfactsandcriticalconsiderationsforeachplanninghorizon.

Forexample,eachSOisassignedanLTowner.EveryMay,duringweek1oftheSPP,eachSOowneristaskedwithassem-blinghis/herteamtoidentifyanddevelopproposedactionplans(PAPs)byhorizontoaddressthatSOandcompletetheRNA(see2.2a[3];availableon-site[AOS]).Week2,thePAPsandRNAarecompiled,vetted,anddiscussedtoensurethattheentireLTunderstandsandsupportsthePAPsandtheRNAimplications.Iftherearequestionsoradditionalworkrequiredtoensurebuy-inbytheentireLT,theSOownergoesbackandrefinesthePAPsandrevisedactionworkplan(RAW),andthosearebroughtbackinweek3forfinalvalidationandalignment.Week4,theLTreviewsandapprovesorrejectsthePAP;allapprovedPAPsareconvertedtoAPsandbecomereadyfordeployment.

ThephasesofFY2016APsareshowninFigure2.2-1.APsarefurtherrefinedtoensurespecificityoftactics.Forexample,someAPsareownedattheLTlevel;othershavemorespecifictacticsandmilestonesmanagedbyindividualcoaches;andsomeAPsareveryspecificwithfront-linetacticsandmilestonesmanagedbyindividualteammembersand/orteams,asappropriate.ThedelineationofkeyAPsensuresclearlinesofaccountabilityandownership.

2.2a(2) Annually,allAPinformationiscapturedandcollatedintoaone–two-pagedocumentcalledtheFitPlan,whichissharedwiththeentireworkforceandotherstakeholders(Step6),usingtheKeyCommunicationsMechanisms(Figure1.1-2).TheannualFitPlanprovidesforconsistentmessagingandintendedworkforthenextyear.TheFitPlanisdeployedinlatespringofeachyeartotheworkforcethroughthreekeymethodsandisspecificallyalignedtoaddressthespecificityofAPs.

Thetwo–threeweeksfollowingtheannualall-team-membersmeeting,eachcoachisrequiredtofurtherdiscusstheFitPlaninhis/herweeklystaffmeetinganddailyhuddlesandaddressanyadditionalcommentstodevelopLevel2tactics.Allteam-memberfeedbackiscapturedandreviewedattheearlyJuneLTmeetingtoevaluateopportunitiesforrefinementsand/orchangestotheFitPlan,aswellastoalignallocatedresources(2.2a[3]).Intheeightyearsthesedeploymentstepshavebeeninplace,onlyinthefirsttwoyearswastheFitPlanmodifiedpriortothestartofthefiscalyear,andbothtimesthesemodificationswerebasedonteammembers’insightstotechnologyadvances.Thus,in2010,thebusinessanalyticsphasewasenhancedtoincludeadditionalworkforceandotherstakeholders’inputs,furtherreducinganopportunityforblindspots.

Inthethreeweeksleadingtothestartofthenewfiscalyear,becauseoftheplanninghorizontimeframes,thespecificAPsareaddressedasfollows:

■ Short-termAPownerworkswithhis/herteamstomapoutthefinaltacticsandmilestonestoaccomplishtheAPwithinthenext6–24months.IftheAPisacarry-overfromthepreviousyear,theAPownerupdatestheAPandalignsworktacticstoensurethattheAPwillbeaccomplishedintheallottedtime.Ifit’sanewshort-termAP,theAP

Figure 2.1-2: Key Work Systems and Functions

Work System Functions

1 CustomerRelations

Primarilysellingandmarketingtocustomers,includingtheorderingprocess(CallCenterande-ordering)

2 Supplier,Manufacturer,andCollaboratorRelations

Securingandqualifyingsuppliers,andmaintain-ingongoingsuppliercommunications.Maintain-ingeffectivesupplychainmanagementtoensureappropriateinventoryofproductstomeetthedemandsofcustomersandbalancetheneedsofthecompany

3 Operations andSupport

Providinginfrastructuresupport,includingfacilitiesandIT,andhumancapitalmanagement

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•Totalcostperinvoice

Key:

StrategicA

dvantages:SA1:Superiorcustomerservice;SA2:InnovativeReverseProductIdentificationandCaptureProcess;SA3:FITplatform;SA4:Focusoncontinuousim

provem

ents;

SA5:IS

O9001:2015certificationandISO/IE

C27001com

pliance;SA6:HEA

LTHcom

prehensiveportfolio;SA7:Highlyengagedteam

mem

bers

StrategicChallenges:SC1:Emergingcom

petitorsandmergers;SC2:Cybersecurity;SC3:M

aintaininganadequateprofitmargin;SC4:Currentwarehousesp

ace/inventoryconstraints;

SC5:M

aintainingandsecuringrobustinventoryselection;SC6:Changingcustom

erdem

andsandexpectations;SC7:Retainingsk

illedteam

mem

bersincom

petitiveboutiqueathletemarket

CoreCom

petencies:CC1:relationships;C

C2:innovation;CC3:fitness

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ownerworkswithhis/herteamstomapoutthetacticsandmilestonestoaccomplishtheAPwithinthenext12–24months.

■ Long-termAPownersreviewquarterlyAPsthataregreaterthantwoyearsinscope.Occasionally,long-termAPsarecarriedoveranadditionalyear(uptofiveyears),aswasthecaseforthenewwarehouseimplementation.

APachievementisevaluatedthroughperiodicreviews(4.1b,Figure4.1-4),andachievementovertimeisshowninFigure7.4-17.Annually,aspartofPhaseV,theentireSPPisevaluatedforitseffectiveness,efficiencyofresources,andengagementofteammembersandotherstakeholders.

2.2a(3) ForeachAP,aRNAiscompletedbytheAPownertoensurethatappropriatefinancial,workforce,andotherkeyresourcesareavailable.TheRNAsarestartedwithinPhaseIIIduringweek1andarefinalizedbytheendofweek3(2.2a[1]).AlloftheRNAsareelectronicallyaggregated(inweek2)toassessanddetermineoverallfinancialandotherresourcerequirements.

EachRNArequirestheAPownertoprioritizerequestedresourcesagainstsixkeycriteriaelements:

StrategyImpactMarketImpactOperationalImpactWorkforceImpactFinancialImpactTechnologyandInnovationImpact

TheRNAisweightedandscoredusinganImpact/ResourceDemandMatrix(AOS)todetermineanoverallRNAscore.Duringweek2oftheAPprocess,theLTreviewsandworkswiththeappropriateAPownerstomakeresourceadjustmentstosupporthigher-scoringAPaccomplishmentsandappropriateplanninghorizons.Financialrisksforavailableresourcesand/orthereallocationofresourcesisevaluatedbasedontheoverallRAWscores.APswithRNAscoresthatdemonstratehighimpact

areprovidedthemostresourcesandoversight;thosescoringlowestarere-prioritizedand/orremoved.Byweek4oftheAPprocess,RNAsareincorporatedintothefinalAPdeployment,andteamsaremadeawareoftheirresourceallocationsandbudgetaryconstraints.

2.2a(4) AsRNAsaredeveloped,theAPownersidentifythestaffinglevelsandskillsrequired.ThePeopleTeamaggregatestheseforecaststodeterminecapabilityandcapacityrequirementsacrossthecompany(5.1a[1]).Thestaffingandskillsaretranslatedintorequirementsforadditionalheadcountorre-deployedteammembers.TheyalsogeneraterequirementsforLearningandDevelopment(L&D)stafftosupportskilltrainingonneworrefreshedcompetencies.

TheentireFitPlanforthenextyearissharedatanall-team-membersmeetingintheMaytimeframe.ThisisfollowedupwithbreakoutsessionsanddepartmentmeetingswhereteammemberscanaskquestionsspecifictotheirareasorjobstoensuretheircomprehensionandexpectationsforeachoftheAPsandtactics.

2.2a(5) ExamplesofFitHabits’keyperformancemeasurestotrackAPsareshowninFigure2.1-3.TheseAPmeasurescascadeuptotheoverallSO,arereflectedontheBSC,andarealignedtoappropriateplanninghorizons.Forexample,APmetricsforthelonger-termhorizonsareprimarilytrackedonaquarterly-to- semiannualbasis,aschangeinthedataislessfrequent.APmeasuresareidentifiedthroughtheMSP(Figure4.1-2)andappropriatecomparatives(Figure4.1-3).

2.2a(6) PerformanceprojectionsfortheappropriateplanninghorizonsareshowninthefigurescitedinFigure2.1-3.FitHabits’projectionsarebasedonhistoricaltrends,anticipatedchangesinthemarketplace,andsupplierinputs.Performanceprojectionsareaddressedineachsupplierquarterlydiscussiontoevaluateforshiftsand/oradjustments.Quarterly,theLT,throughdataanalytics(4.1a),runsasimulationofeachcompetitor’sperfor-mancebasedonmarketandcustomerdata,andnewprojections

Figure 2.2-1: Phases III and IV: AP Development and Implementation

Phase III, Step 5: Annual AP Development (April)

Week 1 Week 2 Week 3 Week 4

1. SOownersassembleteam. • DevelopPAPs. • Developandidentify

RNAsbasedonPAPs.

1. TheCOO’sofficecompilesthePAPsandRAWs.CompiledRNAsareinitiallyreviewedbyappropriateareas(e.g.,HR,finance,facilities,IT).

2. LTreviewsthePAPsandRAWsandidentifiesquestions,duplica-tionofresourcesorefforts,and/oranyotherissues.

1. SO/APownersmakenecessaryadjustmentstoRNAsand/orPAPs,andresubmit.

2. PlanningrecompilestheRNAs andPAPs.

3. SO/APownersinconjunctionwithdataanalyticsteammembersidentifyAPmetricsandprojec-tionstotrackAPachievementandcompetitorperformance.

LTapprovesorrejectsPAPs;approvedPAPsareconvertedtoAPs.APmetricsaresetinplacethroughtheMeasurementSelectionProcess(MSP;Figure4.1-2).

Phase IV, Step 6: Annual AP Deployment (May–June)

• Annually,allteammembersmeettoreviewtheFitPlanforthenextyear.• Feedbackisincorporated,andtheLTrefinestheFitPlanandalignsresources.• Eachplanninghorizonisaddressed.

Phase IV, Step 7: Annual AP Implementation (July–June)

APsaremonitoredandreviewed(4.1b).

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ofbothFitHabits’performanceandkeycompetitors’projectedperformanceareadjusted.Ifperformancegapsareidentified,theSOownerconductsathoroughevaluation,andthosefindingsmaywarrantrevisinganAPand/orstayingthecourse.

2.2b FitHabits’APscanbemodifiedfortwobasicreasons.ThefirstisbasedontheassessmentandevaluationofAPachievement(perthereviewprocess,4.1b);ifthecurrentAPisnotwithin25%oftheexpectedlevelofachievementattheendofeachidentifiedreview,theLTand/orAPownerwillevaluatewhytheAPisoffplananddoacoursecorrectiontobringitbackintoscopewithinthenext1–2reportingcycles.Ifafterthattime,theAPisnotyetbackontrack,aformalAPModificationTeamwillbeformed,andmoreremedialstepswillbeassessedandimplemented.FitHabitshasonlyhadtodothistwotimesinitshistory,andbothtimes,theAPhasbeenbroughtbackintoexpectedlevelsbytheendofitsoverallplannedhorizon.

ThesecondreasonformodifyinganAPisformajorshiftsinthemarketplacesuchascompetitoracquisitionsand/orsuppliercomplications,whichareoutsideofFitHabits’controlorinflu-ence.Inthethreetimesthatthishasoccurred,FitHabitshasbeenabletorecoverfromoneofthosebyrapidlybringingadifferentsupplierintofillthevoidininventory;however,theothertwoeventsinvolvedvariationsofcompetitorand/orsupplierconsoli-dation,whichbothresultedincustomersshiftingawaytootheroptions.ThisresultedinamajorupswingindemandforFitHabits’productsthatoutpacedexpectations,andthecompanyfounditwasachallengetofindthecapabilitytoadjustthespecificAPsforinventoryfastenough.Thus,agapinprojectedsalesandinven-toryintworeportingcyclescouldnotbeadequatelyabsorbed,andAPmodificationscouldnotadjustfastenoughtomeettheincreaseddemands.Whileseveralkeyactivewearcategoriessoldoutbecausethecompetitorandsuppliersshifted,FitHabitsalsosawaslightdecreaseincustomersatisfactionuntiladjustmentscouldbemade.Akeylearningfromtheselasttwoevents(in2010and2013)resultedinimplementingaBrowsingTransaction

SurveyintheFitHabits’ListeningandLearningMethods(Figure3.1-2)toenableordersforhotitemstobeflaggedsothatcustom-ersaregivenpersonalizedserviceandoptionsforalternatives.

Phase V:TheevaluationofthecompleteSPPisconductedannuallyduringtheFallLTretreat.ThelastStep(8)intheSPPisanannualevaluationoftheeffectivenessandefficiencyoftheentireSPPaspartofFitHabits’ShapeItUpcycleofevaluationandimprovement.Ineachofthelastsixcyclesofimprovement,theSPPhasbeenimproved.Forexample,inthefollowingyears,thecompanymadetheseimprovements:

■ 2010,formalizedandstandardizedStep5,APDevelop-ment,andmodifiedthebusinessanalyticsTier1processtoabiannualassessment

■ 2011,differentiatedtheplanningprocess(PhasesIandII)fromthedeploymentandimplementationprocess(PhaseIV),andincorporatedanevaluation/improvementphase(PhaseV)

■ 2012,enhancedtheenvironmentalscanandSWOTanalysis(PhaseI)toensurethatblindspotswereaddressedandcomprehensivecompetitoranalysiswasconductedsemiannuallyversusannually

■ 2013,incorporatedthetop-10suppliersintotheSPPtoaligntheirrequirementstoFitHabits,andspecificallytotheSOstoensuresuccessacrosstheproductareas

■ 2014,cycleinvolvedapplyingSustainIttoleanoutnon-value-addedSPPstepsandtightenthetimeframesbetweenhandoffsforeachofthefirstsevensteps,reducingtheprocessfromninetosixmonthsandenablingittostartinearlyJanuaryandbefullydeployedbytheendofJuneforthestartofthenewfiscalyear

■ 2015,cycleofevaluationandimprovementresultedinarefinementoftheSPPvisualtomirrorthatofa2010BaldrigeAwardhealthcarerecipientthatwasbenchmarked.Figure2.1-1providesaclearvisualtoensureamoreconsistentmessageoftheeightstepstoallstakeholders

Category 3 Customers

3.1 Voice of the Customer3.1a(1) ThroughtheVoiceoftheCustomer(VOC)Process(Figure3.1-1),FitHabitsintegratestheVOCListeningandLearn-ingMechanisms(Figure3.1-2)(1)withtheSPP(Figure2.1-1)tousecustomerinputstosetprioritiesand(2)withtheperformancereviewcycle,calledtheFitTrackingProcess(Figure4.1-1),forreviewandimprovementthroughShapeItUp,asneeded.

Step 1: Listen and Learn from the VOC—FitHabitsusesanintegratedapproachtolistento,interactwith,andobservecustomers,leveragingformalandinformalmechanisms.Someofthesemechanismsvaryacrossdifferentcustomergroupsandsegments,ashighlightedinFigure3.1-2.Dataandinformationobtainedareusedasdescribedin3.2aand4.1a(3).Forexample,theAdvisoryBoard,selectedfromacrosssectionoffrequentlyengagedcustomers,providesnotonlyearlyfeedbackoncataloguelayoutsbutalsoinputsonproductstylesandcolors.

AsanInternetretailer,FitHabitsrecognizedthatitishighlydependentonsocialmediaforitssuccessandcharteredaSocialMediaTeamin2012.TeammembershavedevelopedandexpandedtoallkeyavenuesincludingHowIlookbook,Witter,Zolp,Wckler,Meowsuite,andWitterDeck(3.1a[1]).Inearly2011,anonlineRatingsandReviewsplatformwascreatedandintegratedintotheFitWebonlinecatalogueandCallCenter.Aftereachcustomerexperience,arequestforRatingsandReviewsisdeliveredtothecustomer.Withanover55%responserate(Figure7.2-11),thisisoneofFitHabits’measuresofengagement.FeedbackfromwebsitessuchasHowIlookbookandWitterisalsomonitoredforfeedback.

Step 2: Analyze and Use the VOC—TheCustomerListeningTeamoverseestheaggregationandanalysesofallVOCinforma-tion.Teammembersaggregatesurveyinformation,feedbackfromRatingsandReviews,“NotesofInterest”fromthewebsite,

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Figure 3.1-1: Voice of the Customer Process

Analyze and Use VOC• Review VOC• Aggregate and

analyze results• Translate results

into priorities for improvement

Evaluate, Modify, and Sustain

• Use SustainIt to track progress and make needed improvements

Improve and Innovate• Deploy priorities

through SPP and ShapeItUp

VOC: Listen and Learn

• (Figure 3.1-2)

Customer Requirements

episodesbyeitheruseridentificationoranIPaddress.Further,FitWebhassurveysbuiltintotheuserexperiencethataretiedtobrowsingandeaseofaccess,aswellaspurchasingandeaseoftransactions.ThisinformationgoestotheCustomerListeningTeamforanalysis.

Weekly,theCustomerListeningTeammembersdistribute“HotNews”bulletinsontrendstheyseetoallteammembers.In2013,theirreportoncus-tomersaskingfortangerine-coloredactivewearvalidatedearlyindustryreportsthatMarketingandSaleshadreceivedon“tangerine”beingthenewcolorofchoice.Onamonthlybasis,theCustomerListeningTeampresentsitsanalysistotheLT.Annually,theLTreviewsandanalyzestheVOCfeedbackasinputstotheSPP.

Step 3: Improve and Innovate—ResultsreceivedfromtheCustomerListeningTeamareusedinseveral

departments,includingMarketingandSalesandtheCallCenter,tovalidateorimproveexistingprocessesandintheSPPtohelpprioritizeimprovements.Annually,BSCresultsarereviewedagainsttheVOCresultstodeterminetheeffectivenessoftheVOCmechanismsandtosuggestimprovements.In2014,thecreationoftheAdvisoryBoardoffrequentlyengagedcustomerstoprovideinputsoncataloguesandproductsstartedasaresultofsuchanalysis.

Figure 3.1-2: Listening and Learning Mechanisms

Listening and Learning Mechanisms E, F E, P E, O A NYR L NFC

AdvisoryBoardSurvey

BrandAwarenessSurvey

BrowsingTransactionSurvey

CallCenter

CataloguePreviewSurvey

FocusGroups

GuppolSurvey

“HeardontheStreet”Reports

IndustryNews(paperandelectronic)

PurchasingTransactionSurvey

RatingsandReviews

SocialMedia

SupplierMeetings

Website“NotesofInterest”

Legend:E-Engaged,F-Frequent,P-Persistent,O-Occasional,A-AdvisoryBoard,NYR-NewYearresolutioners,L-Lurkers,NFC-Notcustomeryet/ Formercustomer/Customerofcompetitor

“HeardontheStreet”reports,anddissatisfactionreports.TheyalsoreviewtheconclusionsofRBR’s“DataShop:MarketingNow.”ThisdataanalyticstoolreceivescustomerinformationfromFitWebandhelpsFitHabitsunderstandcustomerrequire-ments,buyingtrends,andpatternsofdissatisfaction.

TheenhancementsthatFitHabitsbuiltintotheredesignofFitWebenablethecompanytotracknotjustbuyingpatternsbutbrowsing

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Step 4: Evaluate, Modify, and Sustain—IfVOCresultsindicateaneedforimprovement,aShapeItUpteamwillbeassembledtouseLeanandFITTESStoolstoaddresstheneedforimprove-ments.Toensuretheimprovementsmadearesustained,changesareintegratedintoSustainIt.Forexample,whenimprovementsweremadetoservicerecoveryprocessesasaresultofVOCinputs,SustainItprocessesmadesurethatthechangeswereincorporatedintoSOPPs,onlineforms,anddailyhuddles.Theseimprovementsinservicerecoveryledtoanincreaseincustomerloyalty(Figure7.2-10).

Toenhancelisteningandlearningmechanismswithcustomers,theLTmadeacommitmenttogatherinputfromsocialmediabyestablishingtheSocialMediaTeam.FitHabitshasusedRatingsandReviewsfromcustomerstoreviewtheirexperiencessince2011.FitHabitsalsohasanofficialpresenceonHowIlookbook,OurTube,Witter,Zolp,Wckler,Meowsuite,andWitterDeck.TheSocialMediaTeammonitorsthesechannelsandgeneratesweeklyreportsthataggregateandtrendinterestandengagementtohelpguidemarketingeffortsandimprovecustomerengagement.

Toexpandthebodyofcustomerinformation,in2014,FitHabitsintroducedtheAdvisoryBoard.Thisgroupofstakeholdersismadeupofengagedcustomerswhoprovidefeedbackonproductselectionstylesandcolorsthroughamonthlyonlinesurvey.TheyareencouragedtoparticipatenotonlytooffertheiropinionsbuttoreceiveachancetowinaFitHabits’giftcardinmonthlydrawings.TheirfeedbackhelpsensurethatFitHabitsoffersthemerchandiseandservicesthatbestmeetcustomers’needs.

3.1a(2) Approachesusedtocapturethevoicesofformercustom-ers,potentialcustomers,andcustomersofcompetitorsareshowninFigure3.1-2.Formercustomers(thosewhohavenotmadeapurchasewithintwelvemonths)aresurveyedtounderstandtheirviewsonproductquality,availability,andvalue,aswellastheirexperienceswithcustomerserviceandFitWeb.MarketingandSalesTeammemberstaketheresultsofthesesurveysintothesemiannualplanningefforts.Onoccasion,thereisanopportunityforservicerecovery,andteammembersareempoweredtofollowthroughtoregainacustomer.FitHabitslistenstopotentialcus-tomersthroughsocialmediaandthroughFitWeb.Asaservicetothefitnesscommunity,FitWebprovidesinformationonmarathonsandlocalfunrunsthroughhealthorfitnessblogsandthe“ask-a-fitness-friend”feature.FitWebcapturescustomerandpotentialcustomerinformationandtrackstheirinterests.Likeotheronlineretailcompanies,FitHabitspurchasesdetailedanalyticsfromthirdpartiessuchasGooglethatcanshowthebrowsinghabitsofanyonewhoclicksonFitWeb.Sortingouttheexistingandformercustomers,FitHabitscanaddressspecialpromotionstopotentialcustomersandcustomersofcompetitors,andconductsurveysthataregeneralinnaturebutcanprovideactionabledataforFitHabits.TheMarketingandSalesTeamfollowsupontheseefforts.

Inadditiontosocialmedia,FitHabitsalsolistenstopotentialandformercustomersthrough“oldfashioned”methodsandfilesinformationasthe“HeardontheStreet”reports.WhenFitHabits’teammembersstaffeventssuchastheRiverFunRun,theycollectandreportoncommentstheyhearonactivewearclothingandathleticshoes,aswellasonFitHabitsanditscompetitors.ThisinformationisfiledontheintranettobeusedduringtheSPP

(2.1a[3])byMarketingandSalesTeammembers(3.2a[1])andbysuppliermanagementteammembers(6.2b).

3.1b(1) FitHabitshasengagedtheGuppolcompanytogatherdataonthesatisfaction,dissatisfaction,andengagementofcustomers.Everymonth,Guppolsurveysastatisticallyvalidsampleofcustomersfromeachofthekeycustomersegments,usingquestionsspecifictothatsegment.Carehasbeentakentoselectquestionsthathavehighvalidityandprovideinformationthatmaybeusedtodrivethecompany’sprogressonitskeygoals.TheGuppolresultsareusedindailyoperationsacrossthecompanyandareupdatedmonthlyontheFitWebintranet,withcomprehensivereportsprovidedquarterly.

Theseresultsarealsocomparedwiththedailysurveysforbrows-ingtransactions,purchasingtransactions,RatingsandReviews,andotherlisteningmechanisms.AllsurveyshelpFitHabitsunderstandhowwellitismeetingitsmissionofclothingcustom-ersforafitlifeanddelightingthem,always.

3.1b(2) FitHabitsworkswiththenationalathleticmediawhoperformcomparativeanalysisofathleticproductsandservicesonbehalfoftheirreaders.ThesereviewsfunctionmuchlikeJWStrengthreviews,asmeasuringsticksforrelativesatisfactionwithboththecompany’sbrandanditsproducts,asopposedtoitscompetitorsandtheproductsandservicestheyprovide.

TheMarketingandSalesTeamusesthebrandsurveytodeterminewhethercustomersalsopurchaseproductsandservicesfromcompetitorsand,ifso,howsatisfiedaretheywiththoseproductsandtransactions.SocialMediaTeammemberscontinuallyscanthemediausingtoolssuchasWitterDeckaswellastheircompeti-tors’HowIlookbookpagestounderstandhowsatisfiedcustomersarewithFitHabitsandtheircompetitors.

3.2 Customer Engagement3.2a(1) FitHabitscapturescustomerandmarketinforma-tionthroughthecomprehensiveListeningandLearningMechanisms(Figure3.1-2).Thesedata,bothformalandinformal,areprocessedthroughtheVOCProcess(Figure3.1-1)toprovideinputstoPhaseIoftheSPP(Figure2.1-1).Thedataarealsousedtounderstandmarketconditionsandcustomerrequire-ments,andtheyareusedduringSWOTanalysisintherefinementordevelopmentofnewproductsandstrategies.Forexample,theSocialMediaTeamprovidesinputsbyaggregatingallofitsinputstreamstoprovideacurrentlookatthecustomerandfuturecustomerbase.TheplantoprovideactivewearandathleticshoesforchallengedathletesstartedinWitterfeedsandwasbroughtintothemid-yearbusinessanalyticsin2014.MovingthroughSWOTandcomprehensiveactionplanning,across-functionalteamwasformedwithteammembersfromfinance,marketing,suppliermanagement,andL&DandledbyamemberoftheLTtoshepherdtheplanningthroughanRNAandthehiringofachallengedathletetoworkinthemarketingofthisproductline.Asthenewproductlineisreleased,L&Dwillprovideinforma-tionmodulesthroughtheLearningManagementSystem(LMS;

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5.2b[1])tointroducetheproduct,aswellasprovidebackgroundinformationformembersoftheCallCenter.

AsFitHabitsisaretailcompany,itiscriticalthattheMarket-ingandSalesTeammembershavetheir“ears”opentothefashionandproductmarketplacestolearnofnewproductdevelopmentandenhancements,aswellastrendsinthemarket.Representationatsemiannualfashionandannualfitnesstradeshowsprovidesinformationoncomingtrendstouseinsuppliernegotiations.FeedbackfromtheAdvisoryBoardprovidesinsightsonactivewearandshoeproducts,aswellasonthereceptionofmarketingcampaignsandcatalogues.AllofthisinputisusedbyMarketingandSalestoidentifywaystoexceedtheexpectationsofallthecustomerandstakeholdergroups(P.1b[2]).

Inlisteningtocustomers,FitHabitsisabletoidentifynewproductofferingsandmarketsegmentstoenter.TheSOtoenterthechal-lengedathletemarket,asdescribedabove,isthelatestresultoflisteningmethods.PartneringwithExtraceptionalOlympicsandOurWarriors,FitHabitsisworkingwithitssupplierstoprovideproductstomeettheneedsofthismarket.Roll-outofthisnewproductlineisscheduledtobecompletedbyFall2016.

3.2a(2) Easytransactionsareakeycustomerrequirement.Cus-tomerswanttoopentheFitHabits’website,quicklyaccesstheirsectionofinterest,logintoaprofile,findhelpthroughanonlinechatorahotline,andmakepurchaseseasilyandsmoothly.Doingthis,theyincreasetheirengagement,returntoFitWeboften,andrecommendFitHabits.Enablingthesetransactionsistheheartofthecompany,meetingitsmission.FitHabitsusesVOCmethods(Figure3.1-2)suchassurveys,focusgroups,andsocialmediatodetermineandprioritizethesecustomersupportrequirements.Forexample,thevalueoftheAdvisoryBoardmemberswasamplifiedwhentheyparticipatedinfocusgroupsonhowFitHabitscouldsupportthembetter.

TherecentredesignofFitWebfocusedonprovidingmultiplemechanismsforcustomersandpotentialcustomerstoaccessinformationonproductsandcustomersupport.MarketingandSalesTeammembersworkedcloselywithITtoensurethatcus-tomersupportrequirementswereconsideredintheredesign.Forexample,in2014,FitHabitsreleaseditsownmobileapptoenablecustomerstoaccessitswebsite,placeanorder,orcheckorderstatusfromanymobiledevice.Thiscustomeraccesswassys-tematicallyidentifiedusingtheVOCmechanisms(Figure3.1-2).Customerkeysupportrequirementsgatheredfromthosemethodsledtothedevelopmentoftheonlinechatfunction,theonline“hotline,”anexpandedcustomerprofile,andtheonline“NotesofInterest,”whichprovidescustomerswithatooltosendFitHabitsarequest,aquestion,anobservation,oracomplaint.Thekeysup-portrequirementsweresimilarforallcustomergroups,withtheexceptionofthecustomerprofile.Thisfunctionalitywaslimitedtoengagedcustomers,notlurkersorNYRs.

EachofthecustomersupportrequirementsissupportedbyaSOPPthatincludesresponseandresolutiontimesforonlineandphonehotlines,aswellas“NotesofInterest.”Allcustomerinteractionshaverequirementsforgreetings,messages,andclosings.ThesearedeployedthroughtheSOPPsandtrainingfornewCallCenterandMarketingandSalesTeammembers.The

requirementsarealsocoveredinall-team-membersmeetings,withLTmembersroleplayingsomeofthebestandsomeofthemostlackinginteractionsoverthelastquarter.

3.2a(3) UnderstandingFitHabits’customerstoday,theirbrowsingandpurchasingpatterns,andwhowillbeFitHabits’customerstomorrowiskeytoFitHabits’success.AsFitHabitsbegantoidentifycustomergroups,thefirstgroupingwaseasy—thosewhopurchasedandthosewhojustlookedaround.AnanalysisofIPaddressesrevealedthatthegroupofnonpurchaserscouldbeclearlysegmentedintothosewhocamebacktoFitWebmanytimes—thelurkers—andthosewhovisitedonlyoneortwotimes.Specialpromotionsandsurveysfocusedonthelurkers,aseffortstriedtomovelurkerstothecustomergroup.Closerlooksatthecustomergrouppurchasingpatternsshowedthatabout35%ofthecustomerspurchasedactivewearand/orathleticshoesonlyinJanuaryandthendidthesamethingthenextJanuary.ThiscustomergroupbecametheNewYearresolutioners(NYR).Theother65%ofcustomerswhopurchasedproductsthroughouttheyearbecameknownasthe“engagedcustomers.”

Althoughcustomerrequirementsaresimilar,customersegmenta-tionallowsFitHabitstodirectdifferentmarketingcampaignsandpromotionstospecificcustomergroups.In2015,FitHabitshadnearlyhalfamillionuniquecustomerexchanges,with75%oftheexchangeswithreturningcustomers(Figure7.2-1).

AnewChiefMarketingandSalesOfficerin2014pushedthecompanytofurtherunderstandtheengagedcustomers.Theadditionofthe“DataShop:MarketingNow”salesanalyticstoolhelpedsegmenttheengagedcustomersintothreegroups:(1)frequentbuyerswhomadepurchasesalmosteverymonth,(2)persistentbuyerswhomostlymadeseasonalpurchasestostayupwithtrends,and(3)occasionalbuyerswhomadepur-chasesthroughouttheyearonaneed-it/replacementbasis.Thissegmentationofengagedcustomershelpedtofocusmarketingcampaigns,particularlythosedesignedtomovepersistentandoccasionalbuyersintothefrequentbuyerscategory.

Lurkerswereconsideredtobepotentialcustomersand/orcompetitors’customers.OnceidentifiedbytheirIPaddresses,lurkerswouldfindFitHabits’adspoppinguponlineinplacesliketheirHowIlookbookfeedsandinthemiddleofonlinemagazinearticles.

Alloftheinformationoncustomergroupsandsegments,aswellasothermarketknowledge,isassessedduringthesemiannualmarketanalyticsinPhaseIoftheSPP(Figure2.1-1).Thisassess-mentledtotheidentificationofthestrategicopportunityofthechallengedathletemarket,asdescribedin3.1a(1).Inputsintothemarketanalyticsin2011alsoshowedamajorpushforactivewearclothingforadolescentgirlsbyacompetitor,whichsoonafterannouncedanagreementwiththeFemaleSeekersoftheUSAtobeasolesupplierforitsgirls’activewear.FitHabitsconsideredasimilarcampaignwithanotherteencompany,buttheevaluationrecommendednotpursuingthisintelligentrisk.

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3.2b(1) Sinceitsfounding,FitHabitshasbelievedthatifitoperatesbyitsvalues(Fun,Innovative,Team-based,Healthy,Agile,Balanced,Integrity,Timely,andService)thatthecompanywillliveintoitsmission:Clothingourcustomersforafitlifeanddelightingthem,always.Thecorporateresultshaveagreedwiththatbelief(Figure7.5-1).Thecorecompetenciesofrelationships,innovation,andfitnesshavebeeninterwoveninallthathasbeendone,buttheyshineparticularlystrongincustomerrelationships.

FitHabitshassteadilygrownacustomerbaseandincreaseditsmarketshareintheboutiqueonlineactivewearclothing/athleticshoesretailmarket.FitHabitshasaccomplishedthisusingnumerousmechanismstomarket,build,andmanagerelationshipwithcustomersandthefitnessindustry.ThesehaveincludedtheredesignedFitWeb,aswellasthemobileappforsmartphonesandtabletsthatenablescustomerstofindproductsmoreeasily,searchanexpandedfitnesstopicresource,haveanenhanceduserprofile,locatefitnessevents,anduseone-clicktechnologytomakepurchases.Theuserprofileisnotjustaboutstoringaddressandcreditcardinformationbutincludessizinginformation,favoritecolors,andtypesofclothingpreviouslypurchased.ThisisusedbyFitHabitstosuggestclothingorshoesthatwereprevi-ouslyconsideredbythecustomerandtodisplayclothingonavirtualmannequinsizedsimilartothecustomer,whiletakingintoaccountthesizevariationsindifferentproducts.

Additionally,themissionoftheSocialMediaTeam(3.1a[1])istoenhancerelationshipswithcustomersandpotentialcustomersbyprovidingengagingcontentonFitWeb,OurTube,andWitter.Teammembersalsotrackvarioussitesandapplicationsforinformationthatcanbeusedinmarketingandstrategicplanning.WeeklyreportscreatedbythisteamprovideinformationtotheCallCentertobeabletohelpcustomersbedelightedwithFitHabits.Theeffortshavehelpedincreasecustomerengage-ment,aswellastotransformanumberoflurkersintoengagedcustomers.

TobuildandenhancethebrandofFitHabits,theSocialMediaTeamblogsonaregularbasis,withresponsestopostsanalyzedandrespondedto,asappropriate.Additionally,FitHabitsadvertisesinnationalfitnessmagazines,suchasLadies’ Fitnow,Men’s Fitnow,Skipping,GamesIL,and Soccer Women.Sponsor-shipoffitnessevents,suchastheWalkforBreastCancer,alsosupportsenhancementoftheFitHabits’brand.In2015,FitHabitsmadetheleapintotelevisionadvertisingduringtheWomen’sSoccerBiggestEventgamesandworkedwithXZContheRace-Around-France.

FitHabitsevaluatesandimprovesallofthesemechanismsannu-allyunderSustainItprocessesandasnewstrategicopportunitiesemerge,liketheSocialMediaTeam.

Tohandleallofthedataanalyticsandsecurityneededtorunthebusiness,FitHabitscontinuallyscansthedevelopmentofnewtechnology.Ontheback-endofthebusiness,FitHabitsselected“DataShop:MarketingNow”togiveFitHabitstheabilitytoplan,test,andexecuteonlinepromotionsandcampaignsofanysizeorcomplexity.Thesoftwarealsoprovidesarobustsetofpredictiveanddataminingtools.

3.2b(2) Since2014,FitHabitshasusedtheComplaintManage-mentProcess(Figure3.2-1)toresolveandlearnfromcomplaints

Figure 3.2-1: Complaint Management Process

Receive complaint

Escalate to coach

Investigate

Conduct SustainIt Improvement

Share learning

Track and identify trends

No

Yes

Yes

No

Resolved?

Resolved instantly

byaggregatinganddisseminatinginformation.Thisapproachensuresthatcomplaintsareresolvedpromptlyandeffectivelyandallowsforrecoveryofcustomerconfidence.Forexample,whenacustomerindicatesonlinedissatisfactionwithanunavailableselection,ashiptime,alostshipment,oranyotherreason,acustomerservicespecialistwillapproachthecustomeronlinetodeterminethecorrectservicerecoveryapproach.Thecustomerservicespecialistisempoweredtoofferdiscountsoracouponforfutureproducts,asappropriate.Ifthesituationisresolvedinstantly,thecustomerservicespecialistwillrecordthecomplaintintheKlagensystem,whichaggregatesandanalyzesittodetermineifitispartofatrendthatneedsfurtherattention.Ifanupperlimitonthenumberofsimilarcomplaintsisreached,theKlagenwillautomaticallyissueanoticeviae-mailtotheDirectoroftheCallCenter,whodirectstheproblemstothecorrectdirectorforresolution.

Ifacomplaintcannotberesolvedinstantly,itisrecordedinKlagenandescalatedtothecoachondutyattheCallCenterforfurtherinvestigation.Ifthecoachcannotresolvethecomplaint,itcontinuesontoaShapeItUpteamwiththeexpectationthattheproblemwillberesolvedoractiontakenwithinsevendays.FinalresolutionofthecomplaintisstoredinKlagen.Monthly,KlagenissuesareportoncomplaintsandresolutiontimesthatisreviewedduringtheFitReviewprocess(Figure4.1-4).

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Category 4 Measurement, Analysis, and Knowledge Management

4.1. Measurement, Analysis, and Improvement of Organizational Performance4.1 FitHabits’comprehensivemeasurement,selection,review,andimprovementoforganizationalperformancearemanagedthroughtheFitTrackingProcess(Figure4.1-1).ThisprocesssupportsFitHabits’strategicadvantageofafocusoncontinuousimprovementsandoverallachievementoforganizationalgoalsandAPs.Varioussubprocessesareaddressedbelow.

4.1a(1) Throughseveralcyclesofevaluationandimprovement,arobustMSP(Figure4.1-2)wasdevelopedasthesecondStepofFitTracking,toeffectivelyselect,collect,align,andintegratedataandinformationintrackingdaily,monthly,quarterly,andannualorganizationalperformance.DuringPhaseIIIoftheSPPwhenAPdevelopmentisalignedtospecificorganizationalgoals,theLTandAPownersdefineandproposemeasuresthatthenareflowedthroughtheMSPtofinalizethemeasure.ThesemeasuresmakeuptheBSCofkeyFitMeasures.Outcomeandin-processFitMeasuresarealsoselectedanddifferentiatedduringthisprocess.DepartmentFitMeasuresaretrackedthroughdepartment-leveldashboardsandABsusingthesameselectionprocess,andindividualFitMeasuresaretrackedthroughtheQCPs.

PerformancedataandinformationarecollectedandperformanceanalyzedduringStep4ofFitTracking.ThisstepincludesanalysisofthedashboardFitMeasures,progressofAPs,anddepartmentandprocessperfor-mance.ThesedataandinformationareavailablethroughtheFitTrackOnlinePortal,whichisavailabletoteammembersbasedonjobresponsibilitiesandsupportsdailyoperationsanddecisionmaking.FitTrackOnlineisanend-to-endbusinessplatform,providingaccesstotheinformationandanalyticsneededtoimplementanddeployactionableinformationacrossthecompanythroughscorecardsanddashboardsthatreflectappropriatelevelsandsegmentationofFitMeasuresoutcomeand/orin-processmetrics.

4.1a(2) AkeyelementofFitTracking(Figure4.1-1)isthesystematicselectionofeffectiveandappropriatecomparativesourcesandlevels.OncekeyFitMeasuresareselected(Figure4.1-2),comparativeopportunitiesareidentifiedusingtheCom-parativeSelectionProcess(Figure4.1-3)basedonfivekeysources.Ifcomparativesexistfromthesesources,thentheFitHabits’comparativetargetissetatthetop10%.Thecomparativeisthenusedontheappropriatedashboardstomonitorperformanceandsupportoperationalandstrategicdecisionmaking.Ifacomparativesourceisnot

Evaluate and improve

FitTracking(Step 7)

Define goals and APs through

the SPP(Step 1) Select and

align measures to track goal and AP

achievement (Figure 4.1-2)

(Step 2)

Select and align comparatives and

projections (Figure 4.1-3)

(Step 3)

Identify opportunities and

best practices(Step 6)

Conduct performance reviews

(Figure 4.1-4) (Step 5)

Collect and analyze

performance(Step 4)

Figure 4.1-1: FitTracking Process

available,ameaningfulcomparativewillbedeterminedfromhistoricalperformanceand/orinterreliability,andastretchgoalofatleast10%betterthanpriorperformanceisestablishedandmonitored.

Overthepastsevenyears,throughcyclesoflearnings,FitHabitshasimproveditsuseofcomparativesfromlessthan10%togreaterthan65%comparativesinplaceforallkeyFitMeasures(Figure4.1-4).

4.1a(3) VOCandmarketdataandinformationareidentifiedfromtheVOCProcess(Figure3.1-1)andkeylisteningandlearningmechanisms(Figure3.1-2).MarketdataandinformationareselectedbasedonkeysourcesofinformationfrompurchasingpatternsandmarketanalysisfromPhaseIoftheSPP.TheseVOCdataandinformationaredeployedandintegratedthroughAPs(2.2a),theL&DSystem(5.2b[1]),andkeyworksystemsandprocesses(Figure6.1-1).VOCandmarketinformationandmea-suresaresystematicallyevaluatedthroughperformancereviewsandimprovement(Figure4.1-1);inaddition,bestopportunitiesareidentifiedanddeployed.ThisinformationsupportsoperationalandstrategicdecisionmakinganddirectlycontributestoFitHabitsbuildingandsustainingamorecustomer-focusedculture,as

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AsshowninFigure4.1-4,theLT,BOD,andothercoachesreviewFitMeasures,includingfinancialperformance,onaregularlyscheduledreviewcycle.FitHabitscomparesperformance,progress,andsuccesstoitskeycompetitors,BaldrigeAwardrecipients,andthenationaltop10%(4.1a[2]),whenbenchmarksareavailable.OFIsareidentifiedwhenaFitMeasureisnotmeetingexpectedlevelswithin5%oftheexpectedrangeforthatspecifiedtimeperiod.FrequencyofperformancereviewsatalllevelsensuresFitHabits’abilitytorespondrapidlytochangingorganizationalneedsandchallengesintheoperatingenvironment.ThisFitReviewfrequencyisevaluatedannually,withthelatestcycleofimprovementin2015beingtheadditionoftheBestPrac-ticeandImprovementSustainabilityReviewtoensuretractionofbest-practiceimplementationacrossthecompany(4.1c[1]).

4.1c(1) High-performingareasareidentifiedthroughanalysis,includingprocess,customerfeedback,quality,supportfunction,regulatory,andworkforceFitMeasures.InStep6ofFitTracking(Figure4.1-1),bestpracticesareidentifiedusingthreecriteria:

1. Thepracticedemonstratesevidenceofsuccess. 2. Thepracticepositivelyimpactsorganizationalachievement

ofstrategicgoalsandobjectives. 3. Thepracticehasthepotentialforreplication/adaptiontoother

areaswithinthecompany.

BestpracticescanbeidentifiedbyanyoftheFitReviewpartici-pants(Figure4.1-4),ShapeItUpteams,orLT.

Onceabestpracticeisidentified,theoriginatingareaisaskedtodocumentitsprocessand/orpracticeonaSustainIttemplate.Thisissenttoalldepartmentswithtalkingpoints.Coachesareaskedtoshareapplicableprocesseswiththeirteamsatthenextteammeeting.Ifitisapplicable,theexpectationisthatthebestpracticeisadoptedanddocumentedwithinthreemonthsintheSustainItPortal.Sincetheinceptionofthispracticein2012asakeymethodforknowledgetransfer(4.2),best-practiceadoptionhasgonefromlessthan5%toasustainedlevelof75%orbetterforthelastthreeyears(Figure7.1-21).

evidencedbysustainedcustomersatisfactionandengagementresults(Figures7.2-2through7.2-6,and7.2-8through7.2-10).

Informationiscaptured,analyzed,andtrendedonaweeklybasisandsharedacrossthecompany.AsummaryisreportedmonthlytotheLT.AnynegativecommentsareimmediatelyresearchedandrespondedtobytheSocialMediaTeam.TheeffectivenessoftheonlineRatingsandReviewsandComplaintManagementProcess(Figure3.2-1)isevaluatedannually(Step7,FitTracking).

4.1a(4) AnnualevaluationofFitTracking(Step7;Figure4.1-1)andfrequent,scheduledreviewsoforganizationalperformance(Figure4.1-4)ensurethatFitHabitsanditsperformancemeasurementsystem(FitTracking)areabletorespondtorapidorunexpectedorganizationalorexternalchanges.EachyearduringtheSPP,theLTandAPownersevaluatethedashboardsandscorecardsforFitMeasuresandgoalsandmakenecessarychangestosupporttheSOsandaddressthecompetitiveandregulatorylandscape.Frequent,scheduledperformancereviewsalerttheLTandothercoachesacrossthecompanywhenakeyprocessorsystemisnotperformingtogoal;thisapproachenablestimelycorrectiveanalysisandaction.FitTrackingalsoallowstheadditionofnewFitMeasuresthroughouttheyearifanewprocessisimplementedorsignificantprocessredesignoccurs(6.1b[3]).

4.1b FitHabits’performanceandcapabilitiesarereviewedthroughSteps4and5ofFitTracking(Figure4.1-1).Thisapproachtoperformanceanalysisandreviewensuresthat

1. FitMeasuresarealignedtostrategy(improvethebusiness)and/oroperations(runthebusiness),

2. performanceisassessedusingabalancedsetofmeasures, 3. performanceresultsareanalyzedtoprovidetheLTand

coacheswithinformationfordecisionmaking,and 4. improvementplansaredevelopedandimplemented.

Avarietyofrobustanalysesandanalytics,includingcomparative,quantitative,rootcause,trend,variance,andcorrelationanalysis,areconducted.

Figure 4.1-2: Measurement Selection Process

Stakeholder/ regulatory/process

requirement?

Actionable?

Critical to run the business?

Supports improvement or innovation for

SPP goal?

Not selected

Propose

Select

Yes

Yes

Yes

Yes

No

No

NoNo

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4.1c(2) InStep3ofFitTracking(Figure4.1-1),futureperfor-manceprojectionsaredeterminedasoneofthelaststepsoftheComparativeSelectionProcess(Figure4.1-3),andprojectionsareintegratedintotheSPPtosystematicallyprojectfutureperfor-mance.DuringtheSPP,Step8,theLTandseniorcoachesanalyzeperformancereviewfindingsandkeycomparativedatainlightofhistoricaltrends,alongwithplanninghorizonsandinternalcapabilityandcapacityfactors.ProjectionsaresetforthemajorityofkeyBSCFitMeasures(keyAP,outcome,andfinancialmea-sures)butarenotsetformostFitMeasures(primarilyin-processmeasures).Establishingaccurateprojectionsisbothanartandascience,andFitHabitshasimproveditsprojection-settingcapabil-ityinthelastfiveyearstobeover80%accurate,within2–3%ofactualperformanceyearoveryear.

Figure 4.1-3: Comparative Selection Process

Select measure (Figure 4.1-2)

Step 1

Search comparative opportunities:• Evidence-based literature• Regulatory/publicly reported data• Industry benchmarks• Competitors• Baldrige Award recipients

Step 2

Evaluate source for• Validity, reliability • Comparable in structure • Relevance to business • Ability to segment and analyze• Cost to obtain

Step 4a

Set target at top 10%Step 5a

Set a stretch goalStep 5b

Establish projections based on statistical trends and expected trajectory

Step 6

Use to monitor performance Step 7

Determine most meaningful comparison:

• Interreliability• Historical performance

Step 4b

Comparative existsStep 3

BecausetheAPprocessisintegratedintoPhasesIIIandIVoftheSPP,therearerarelysituationswhereAPprojectionsdonotreconcilewithprojectionsestablishedinFitTracking,Step3;however,whenthisdoesoccur,theLTworkswiththeindividualAPownerstoreviewdatausedtosetprojectionsandmutuallyagreeonappropriateprojections.

4.1c(3) PerformanceFitReviewfindings(Figure4.1-4)drivethedevelopmentofprioritiesforcontinuousimprovement,best-practiceidentification,andinnovationthroughtheSPP(Figure2.1-1).FitReviewfindingsprovidekeyinputsintotheSPPanddrivethedefinitionanddeploymentofAPs(forallthreeplanninghorizons),improvements,andinnovativeopportunities.AsAPsareidentified,APownersandteamsareselected.Theyarerespon-siblefordevelopingtheAPstoachievedesiredimprovement.

ImprovementinitiativesaredeployedthroughtheSustainItPortaltosharewiththeentireworkforce.CoachesatalllevelsusetheSOsandAPs,alongwithdepartmentalperformanceresults,toprioritizedepartmentalgoalsforcontinuousimprovementandworkwithteammemberstoaligngoalsintheirQCPs.SuppliersandcollaboratorsareincludedonShapeItUpteams,asappropri-ate,toensureorganizationalalignment.

4.2 Knowledge Management, Information, and Information Technology4.2a(1) FitHabits’knowledgemanage-ment(FitKM;Figure4.2-1)focusesonconsistentcollectionandtransferofinformationandknowledgeacrossthecompany.Informationreflectingcurrentperformanceisshared,aswellasbestpractices,innovations,SOPPs,andOFIs,throughthecommunicationsmechanisms(Figure1.1-2).TheSustainItPortalmakesinformationavailableacrosstheentirecompany.Improve-mentopportunitiesareidentifiedthroughreviewofperformancemeasures(Figure4.1-4).

Knowledgetransferoccursviamultiplevenues,includingcoach-ing,communicationsmechanisms,teammember-to-teammemberinteractions,andmentoringopportunities;thereisalsotwo–threeweeksofcrosstrainingwhenteammembersaretransferringtootherdepartmentsand/orleavingthecompany.Operationalperformancetrendsarecommunicatedindaily,monthly,andquarterlyreports.

Workforceknowledgeiscollectedandtransferredthroughpoliciesandprocedures,SOPPs,KeyCommunicationsMechanisms(Figure1.1-2),theL&DSystem(5.2b),trainingmaterials,andtheSustainItPortal.Additionalinformationsystems(IS)-basedshareddrivesprovideaccesstoinformationwithindepartmentsandcross-functionalgroups.Knowledgeisalsotransferredthroughmonthlylunch-and-learnsessionsandadedicatedonlinenewslet-terfortheworkforce.

Knowledgeistransferredtoandfromcustomersthroughelectronicforms,includinge-cataloguesandpapercatalogues,customerinquiries,activewearkeyinformationanddescriptions,andthe“What’sHappeninginyourRegion”sectionofFitHabits’website.

Knowledgeistransferredtoandfromsuppliersandcollaboratorsusingcommunicationsmechanisms(Figure1.1-2).Annually,a

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numberofkeysuppliersandcollaboratorsareinvolveddirectlywithbestpracticesandinnovativeandimprovementinitiativestofurtherthetwo-wayknowledgetransfer.ThesearedocumentedandcapturedwithintheSustainItPortal.

4.2a(2) OrganizationallearningissystematicallyembeddedinFitHabits’operationsthrougheachofthefivefoundationalelementsofthePES(FigureP.2-4)andfurtherenhancedthroughbest-practicesharing(4.1c[1]).Keylearningsandcriticalknowl-edgearecapturedandhousedwithintheSustainItPortalforeasyaccesstoinformationandtrackingofapproachesthathavebeenadoptedinotherareas.ALTfocusonFitHabits’cultureofexcel-lencehelpstosustainthedriveforimprovementsandinnovativepractices,whichencouragesnewlearningstocontinuouslybeembeddedinday-to-dayoperationsandstrategicdirection.Forexample,learningsfromquarterlysupplierreviewswithakeysupplierareoftensharedwithotherkeysupplierstoenhancetheproductstheybringtomarketaspartofFitHabits’portfolio.

4.2b(1) FitHabits’ISandwebprocessesensurethatthequalityoforganizationalandcustomerdataismaintained.Weekly,anISandwebreportisdeliveredtoalloftheLTtoprovidetranspar-encyintoIToperations.FitHabitsputsastrongemphasisontheintegrity,security,validity,andconfidentialityofcustomerandorganizationaldataandinformationandhassystematicandfullydeployedapproachestoaddressthedataandinformationproper-tiesofitsISandwebprocesses(Figure4.2-2).Annually,thesepropertiesarereviewedtoensurethattheyaremeetingorgani-zationalandcustomerneeds.Improvementshaveresulted;theseincludethe2012implementationofasurveyforcustomersandotherkeystakeholderstogatherkeyISandwebrequirements,the2013improvementresultingintheaccuracyofdatacapturefromcustomersthroughimprovedsecurityfeaturesforweb-ordering,andthe2014implementationofthird-partyassessmentsfromannuallytoeverysixmonths.

4.2b(2) Theconfidentialityandsecurityofcustomers’personaladdressesandbillinginformationareakeyfunctionofISservices.Datasecurityandsensitivityofinformationareman-agedandensuredthroughleveragingtechnologyandinnovationwhilebalancingtheneedsofallstakeholders.FitHabitsutilizesanindustrystate-of-the-artsystemthatmanagestechnologiesandsystemstosupplyrelevantandsecureinformationtotheappropri-atestakeholder.Customerdataarestoredandmaintainedthroughamultilevelsecuredatawarehouse,withcustomerpasswordsandPINsthatmeettheISO27001regulatorycompliance.Securepor-talsexistforteammembersforreal-timeinformation,scorecards,andotherimprovementsandcriticalknowledgesources,aswellasforkeysupplierstoaccessreal-timeinformation,supplychaintracking,andstatusoforders(6.2b).

FitHabitsensuresthesecurityofsensitiveorprivilegeddataandinformationthroughalayeredsecurityapproachcalledDefense-in-Depth.Multiplelayersofdefenseoperateindependentlyandproviderobustprotectiontothenetwork.Securitylayersincludeperimeterfirewalls,serverandworkstationfirewalls,serverandworkstationantivirusandantimalwaresoftware,regularsecuritypatches,dataandtransportencryptionwhereappropriate,andastrongpasswordpolicy.Securityinthecustomerdatasystemandfinancialaccountingsystemiscontrolledthroughgroups,andthesegroupsareassignedtheappropriatepermissions.Cybersecurityisverifiedduringannualsecurityauditsperformedbyacybersecurityauditvendor,CyberVendor,Inc.FitHabitstrainsallteammembersannuallythroughaprogramdevelopedbyanothervendorspecializingincybersecuritytraining,CyberCompany,LLC.

4.2b(3) FitHabits’ISandwebprocesses,hardware,andsoftwareareintegratedacrossallareasandplatforms.AllISandwebprocessesarereviewedannuallyforeffectivenessinensuringthatdataandinformationarereadilyavailable,timely,and

Identify knowledge and best practice needs.

Identify who needs to know it.

Select communication method (Figure 1.1-2).

Deliver and execute on knowledge and/or

best practice.

Evaluate and improve FitKM process.

Figure 4.2-1: FitKM

Figure 4.1-4: Key Performance Reviews

FitMeasures Listed in Key Participants Frequency of FitReviews

BaldrigeCategories Category7 Director,PerformanceExcellence;LT;BOD Quarterly

BestPracticeandImprovementSustainabilityReview AOS Director,PerformanceExcellence;LT;andallteammembers

Biannually

BSC Figure2.1-3 LT,BOD Bimonthly

Compliance,Regulatory,andEthics Figure1.2-2 LT,BOD Quarterlyandasappropriate

CustomerSurveysandComments Figure3.1-2 LT,ChiefMarketingandSalesOfficer Monthlyandasappropriate

DailyOperationalandProcess(ofkeyworkprocesses) Figure6.1-1 Departmentcoaches Daily,monthly,annually

MonthlyOperatingReviews AOS CFO,LT Monthly

QuarterlySupplierReviews FigureP.1-6 COO,LT,Purchasing Quarterly

WorkforceSurveyandOutcomes Figures5.1-2,5.1-3 LTandChiefPeopleOfficer Monthlyandannually

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user-friendlybasedoncustomer,supplier,andotherstakeholderrequirements(verifiedeverytwoyearsthroughanIS/websurveytokeycustomersandstakeholders).In2014,inresponsetoFitHabits’customers,aFitHabits’appwasdevelopedtoprovideaccesstoorderingandorderstatusfromanymobiledevice.

4.2b(4) ThenatureofFitHabits’businessdemandshardwareandsoftwarereliability,security,anduser-friendlinessasbusinesscriticalfactors.KeymethodsandapproachesareshowninFigure4.2-2.Systemreliabilityisaddressedthroughduplicationofinfrastructurecomponents,suchasfirewalls,domaincontrollers,routers,switches,andaphonesystem.Activemonitoringofsys-temperformanceandutilizationallowsforimmediateresolutionofbottlenecks.Allchangestothecoresystemsgothrougharigiddeploymentprocessfromdevelopmenttotesting,changecontrol,deployment,andmonitoring.Reliability,hardware,andsoftwarearemanagedthroughreal-timeperformancemonitoring.

Systemsecurityisensuredthroughlimitedaccesstosensitivehardwaresystemsviakeypadsandpersonalizedaccessbadgesforauthorizedpersonnel.Internetaccessissecuredwithafirewall,antivirussoftware,andInternetcontentfiltering.

Proactivemaintenanceincludesbothhardwareandsoftware.Hardwareisproactivelyreplacedwhenitisnolongermaintain-ableordoesnotmeetbusinessneeds,asidentifiedduringtheSPPandbudgetingprocess.Workstationoperatingsystemsandsoftwareareupdatedmonthly,andserveroperatingsystemsareupdatedquarterly.Firmwareforinfrastructurehardwareisupdatedbiannually.Enterprisesoftwareisupdatedasneededwiththegoalofbeingnomorethanonemajorversionbehind.The

cloud-basedmanagementsystemisupdatedcontinuously,andFitHabitsisalwaysonthemostrecentversion.Faulttoleranceisprovidedthrougharchitecturedesignthatminimizessinglepointsofhardware failureandrapidrecoveryfromhardwarefailure.Thenetwork,storage,andserversdonothavesinglepointsoffailurebecauseofacombinationofhardwareredundancyandsoftwaredesign.

Technologyinfrastructurehardwaresuchasnetwork,storage,andserverscancontinuetooperatewithoutdisruptionifanyindividualcomponentfails.Forinstance,ifafirewallfails,anotherfirewallwillassumethefunctionsofthefailedfirewallwithoutinterruptiontoteammembersorinterventionbytheISDepartment.Intheeventofcatastrophicfailure,FitHabitsbacksupandreplicatesessentialdata.Theapproachtobackupandreplicationiscalled3-2-1andinvolvesthreecopiesofthedata,onatleasttwodifferentstorageplatforms,andoneoff-sitebackup.FitHabitsusescloud-basedplatformsintargetedrolessuchasaWarehouseManagementSystemandanti-spamservicestosupplementthereliabilityandrobustnessofonlinesolutions.ThemostcriticalsystemistheFitWebOnlineCatalogueandOrderingSystem,whichishostedwithacloudprovidertoensurethebestavailabilityforthiscriticalapplication.Foranti-spam,havingacloudproviderensuresthate-mailsenttoFitHabitsisreceivedandfilteredindependentlyforspam,viruses,andmalwareaspartoftheDefense-in-Depthapproach.

4.2b(5) FitHabits’IS,webteam,andSafetyHabitsCommittee(6.2c[2])havedevelopedandimplementedextensivecontingencyplanningtoensurethecontinuedavailabilityofcriticalinforma-tion,data,hardware,andsoftwareintheeventofanemergencyordisaster.In2013,FitHabitsimplementedanannualrisk-basedassessmenttoidentifyandprioritizeanEmergencyOperationsPlan(EOP).TheEOPoutlinesandaddressesfivelevelsofhardware/softwareemergenciesbasedonbusiness/customerimpactandlikelihoodofoccurring.Level1beingthemostdamagingcontainstwokeyissues:physicaldamagetotheITserversandacyberbreachofcustomerdata.Firewallsaretesteddailyforintegrityandmonitored24hoursadayforanytypesofcyberattacks,spam,andsuspectactivity.ISperformsregularnightlysystemwidebackupsofcriticalcustomer,supplychain,company,andteammemberinformationanddata.Regulartestinganddrillsareconductedtoensurethatpoliciesandproceduresareinplaceandteammembersarepreparedandtrainedoneffectiveandtimelyresponse(seeFigure7.1-28).Debriefingsareheldafterdrillstosolicitparticipantfeedback,assessplaneffectiveness,anddevelopAPstoaddressopportunities.

Toensureemergencyavailabilityofon-sitesystems,anindepen-dentdisasterrecoverydatacenterstoresareplicaofcriticaldata.Afullyfunctionaldatacenter,withbackupservers,isavailableforuseattheindependentdisasterrecoveryfacility.Forcloud-basedsystems,suchastheWarehouseManagementSystemandtheFitWebOnlineCatalogueandOrderingSystem,theservicecontractincludesrequirementsfordisasterrecoverycapabilities.

Forkeysystems,includinge-mail,thecatalogueandorderingsystem,andnetworkfileshares,Sauvegardersoftwarereplicatestheentireserverevery15minutes,andservicescanberestoredwithinminutes,ifneeded.Forless-criticalsystems,nightlybackupsarecopiedtothebackupservers.

Figure 4.2-2: Data and Information Properties

Property Methods for Ensuring Property

Accuracy Data-entryvalidationFieldvalidation

Integrity DatavalidationchecksUpgradetestingonbetasitebeforeimplementing onlivesystems

Overall ISpoliciesandproceduresISOversightCommitteeInternalauditsandthird-partyassessments (everysixmonths)

ISlifecycleplanningprocessesNightlysystembackups

Reliability DisasterrecoveryandbusinesscontinuityplansRedundantsystemsDualInternetserviceproviderandgeneratorbackupsforordering/inventoryandpaymentsystems

SecurityandConfidentiality

Dataencryptionfororders,creditcardinformation,addresses,andotherpersonalinformation

FirewallandantivirussoftwareCustomerPINsandpasswordsIntrusion-detectionsystemsThird-partysecurityassessmentsNondisclosureagreementswithsuppliersandcollaborators

Timeliness 24/7accesstoinformation,e-catalogue,andorderingReal-timetransactionsOnlinechats

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productsales,returns,andtheincreasewithNYRs.ContractteammembersprimarilyfortheCallCenterandwarehouseshelptoaddressthecapacityneeds.InStep7,progresstowardmeetingtheforecastedcapabilitiesandcapacitiesismonitoredandreviewedforthemid-year,andadjustmentsaremade.AspartofSustainIt,thePeopleTeamannuallyevaluatesandimprovestheCapabilityandCapacityPlanningModel.

5.1a(2) FitHabits’leaderslearnedearlyinthecompany’shistorythat,asauthorJimCollinssaid,havingthe“rightpeopleonthebus”wascriticalforthecompany’ssuccess.Inthe2009SPP,facedwithengagementscoresthatwerelowerthangoalandahighturnoverrate,theLTselected“teammemberrecruitmentandhiring”asastrategicopportunity.TheChiefPeopleOfficerledacross-functionalteaminthedesign,testing,andimplementationofanewrecruitmentandhiringprocess,usingTargetedSelec-tion,abehavioral-basedinterviewingprocess(7.3a[1]).Thenewprocessalsoincludesalistingofkeyskills,competencies,andbehaviorsneededforeachjob.Thischangehascreateda“slowtohireandquicktofire”situationbutithasbeeneffective.Inthreeyears,theprocesshelpedimproveteammemberengagement(Figures7.3-12and7.3-13)andretentionresults(Figure7.3-1).

UnderstandingthegapsincapabilityandcapacityidentifiedthroughtheRNAs,thePeopleTeamusesmultipleapproachestorecruitcandidates.Theapproachesincludesending/postingannouncementstoFitWeb,onlinerecruitmentsites,professionalassociations,socialmedia,andprintmedia.FitHabits’needfortechnicalskillsrequiresspecializedrecruitingapproaches.

Torecruitdiverseteammemberstotheworkforce,FitHabitsactivelyseekscandidatesfromvariousnationalities,cultures,backgrounds,andlifestyles.Tomeetdiversitygoals,recruitersreachouttoprograms,suchas

■ MomsBacktoWork,anonprofitgrouphelpingmotherswhowanttoreturntotheprofessionalworkforce,and

Figure 5.1-1: Capability and Capacity Planning Model

SPP

Phas

e 1

1 Evaluate a current

workforce composition. Where are we today?

SPP

Phas

e 1

2 Determine future state of

workforce. Where do we need to be? SP

P Ph

ase 2

3 Forecast workforce capability

and capacity needs. SP

P Ph

ase 2

4 Review forecast against

benchmarks.

SPP

Phas

e 3

5 Develop plan to close gap between

current and future

requirements.SPP

Phas

es 3–

46 Implement recruiting/

hiring/ onboarding strategies. SP

P Ph

ase 5

7 Monitor results.

Evaluate and modify processes, as needed.

Category 5 Workforce

5.1 Workforce Environment5.1a(1) BeforethestartoftheSPP,thePeopleTeamcompletesStep1oftheCapabilityandCapacityPlanningModel(Figure5.1-1),analyzingthecurrentworkforcecompositionbyassessingskills,competencies,production,andengagementlevels.TheresultsofthissteparereviewedinthebusinessanalyticsoftheSPPPhaseI.Throughthebusinessanalyticsandtheplanningretreat,theChiefPeopleOfficernoteschangesincapabilitiesthatmaybeneededinthenextyearandsharesthatwiththePeopleTeamtodevelopthefuturestate,primarilylookingatorganizationalcapabilities,inStep2.Forexample,whentheplanningbeganontherewriteandtransitionofFitWebin2010toprovideforcustomereaseofuseaswellasincreasedsecurityandfirewalls,itwasclearthathumanresourcesprofessionalsandcybersecurityITexpertisewouldbeneeded.IntheSPPPhaseIII,theAPsandRNAsarecompletedandprovideinputstothePeopleTeamonneededcapabilitiesandcapacitylevels.ThePeopleTeamaggregatestheneedsintheRNAstodeterminecapabilityrequirementsintermsofknowledge,skills,abilities,andspecificcompetenciesandcapacityneedsbyassessingtheamountofworkandthenumberofpeoplerequiredforeachrole,inStep3.

InStep4,FitHabitsassessescapacityagainstbenchmarkstoevaluateiftargetsareconsistentwithbestperformersintheindustry.Thisstepwasaddedin2013afterbenchmarkingwithtwoothercallcentersandadjustingthestaffinglevelstomatchindustrybenchmarks.ThathelpedincreasethesatisfactionlevelsoftheCallCenterteammembers.Wherepossible,staffinglevelsarebenchmarkedandadjustmentsaremadeasappropriatetoenableoperationalefficienciesacrossthecompany.InStep5,strategiesaredevelopedtoachievedesiredlevelsoforganiza-tionalcapabilityandcapacity,andtherecruitment,hiring,andplacementoccursduringStep6.StaffinglevelsareseasonalatFitHabits,withanincreaseincapacityneededintheearlyfallthroughtheholidayseasonandearlyJanuarytoaccommodate

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■ StartFit,anin-houseinternshipprogramdesignedtoexposehigh-performingcollegestudentstothebusiness,whilegivingthemtheopportunitytodeveloptheirprofessionalskills

Therecruitersactivelyparticipateinveteranjobfairs,localcommunitycollegejobfairs,andtheCityUniversityjobfairsthatfocusonminorities.Inaddition,therecruitersalsolooktolocalandchallengedathleteeventssponsoredbyFitHabits.Teammemberreferralsalsocontributetothepoolofapplicants.Lastyear,22%ofallnewteammemberswerereferredbyanotherteammember,anindicatorofhighengagement(Figure7.3-3).

Jobcandidatescompleteanonlineapplicationthatrequiresthemtopledgetoacceptthevalues(FigureP.1-1).Recruitersscreenapplicationsandforwardqualifiedapplicantstothehiringcoaches,whoconductinterviewstoassesstechnicalskills,job-specificcompetencies,andvalues-fit.Ifthefitlooksgood,thehiringcoachschedulesaPeopleTeaminterview.Usingbehavioral-interviewingtechniques,theteamassessesteamworkandteamfitwiththecandidateand,ifthefeedbackispositive,anofferismade.

NewteammembersparticipateintheFitWelcome!orientationprogramthatstartstheironboardingprocess.WithafocusonthevalueofFun,FitWelcome!isledbyoneofthefoundersandincludessigningtheFitFulpledge(1.2b[2]).Attheendoforientation,a“FitBuddy”fromanotherworkteampicksthenewteammemberup,takeshim/hertotheworkarea,andmakesintroductionstoallinthegroup,includingthecoachwhotakesthenewteammembertohis/herdeskorworkstationtostarttheonboardingprocess.

Afterrealizingin2013thattheretentionoffirst-yearteammem-berswaslowerthantheoverallretentionrate,theChiefPeopleOfficerimplementedaStandardizedOnboardingProcess,utilizingShapeItUp.Someofthetoolscreatedtofacilitateonboardingincludethefollowing:

■ OnboardingInsideTrack,acentralrepositoryofinforma-tionfornewteammembers,whooftenhaddifficultytrackinginformationfrommultiplesources,thatisavail-ableonlinefromtheteammemberportal

■ FitBuddy,aresourceforthenewteammemberduringtheonboardingperiodandthroughoutemploymentatFitHabits.TheFitBuddyisselectedfromaworkteamsimilartotheonethatthenewteammemberwillbejoining.TheFitBuddyservesasaresourceforpolicies,procedures,andpaperworkandisencouragedtosetupweeklymeetingswiththenewteammember.

■ LunchwiththeFitHabits’CEO/president.Monthly,theCEO/presidentinviteseveryonewhojoinedFitHabitsinthelast30daysorsotojoinherforlunch.Sheelaboratesonthefoundingofthecompany,includingsomeofherfavoritecorporateaccomplishments.Shetalksaboutseniorcoaches’open-doorpolicyandgivesnewteammembersacopyofherbusinesscardwithherhomephonenumber.

SinceimplementingtheStandardizedOnboardingProcess,retentionoffirst-yearteammembershasimprovedandlookstoeventuallybetrendinghigherthanoverallretention(Figure7.3-1).

5.1a(3) FitHabitsorganizestheworkforceintofunctionaldepart-ments,suchastheCallCenterorIS,andalsointocross-functionalteams,eitherstandingorproject-based,toaccomplishtheworkofthecompanythroughtheAPs.SOPPsarereviewedannuallytosupporttheprocessesofthecompany.

ByaligningtheSOsthroughtheAPsandthedepartmentstoteammembers’QCPs,FitHabitsreinforcesacustomerandbusinessfocus.ThisalignmentenablesteammemberstobeengagedwiththesuccessofFitHabitsastheyachievetheirgoalsandexceedperformanceexpectations(5.2a[3]).

5.1a(4) FitHabitspreparestheworkforceforchangingcapabil-ityandcapacityneedsthroughseveralmechanisms.First,theLTleadsthefocusontransparency,planning,anddisciplinedexecutionofAPs.Sincetheearlydaysofthecompany,theLThassharedfinancialandbusinessplanninginformationduringthequarterlyall-team-membersmeetings.Teammembersknowwhenthecompanyisexpandingorholdingsteadythrougharoughperiod.Inaddition,FitHabitspreparestheworkforceforchangesthroughtheL&DSystem,SustainItefforts,andtheQCPProcess(5.2a[4]).TheQCPProcessprovidesteammemberswithavehicletoidentifypersonal,professional,andeducationalgoalsandenablesleadershipcoachingthroughquarterlydiscussions.

FitHabitshasneverhadlayoffs.Consistentlowperformerswhoareunabletomeetthestandardsofthehigh-performingcultureareencouragedtoseekemploymentelsewhere.

Theworkforceexpandstemporarilythroughthefallandintothenewyeartoaccommodatetheincreaseinsales,shipping,returns,andNYRs.Continuityofprocessesisensuredforbothpermanentandseasonalteammembersthroughtraining,education,frequentcommunication,SOPPs,andcross-training.

5.1b(1) Providingteammemberswithahealthy,secure,andaccessibleworkenvironmentisimportanttoFitHabits.Thelightingoftheparkinglotswasmodifiedin2012basedonteammembers’concerns.Achangeinforklifttrainingthatgreatlyreducedinjurieswasmadein2013afteraShapeItUpanalysis.ProcessesandpoliciesaresupportedbySOPPsandreinforcedduringseniorcoachroundingandtrainingtominimizeandaddressotherhealthandsafetyrequirements,whichvarybyjobcategory(FigureP.1-3).PerformancemeasuresandimprovementgoalsareshowninFigure5.1-2.

5.1b(2) FitHabitsoffersavarietyofservicesandbenefits.Thecompanyofferschoices,showninFigure5.1-3,inbenefitsandretirementpackagessoteammemberscantailorplanstomeettheirneeds.TheLTreviewsthesebenefitsannuallyandmakesadjustments,asnecessary.

FitHabitsisproudofitsWellFitProgram,implementedin2008,thatprovidesteammemberswithfinancialrewardsforengaginginhealthyandresponsiblebehaviors.Theon-siteFitCenteratheadquarters,whichopenedin2006,isavailablefreeofchargeforteammembersandatasmallfeeforfamilymembers.TheFitCenterprovidesnotonlyclassesandworkoutareasbuthealthylifestylecoachingandpersonalizedhealthassessmentsforteammembersandtheirfamilies.

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5.2 Workforce Engagement5.2a(1) TheMVVlaysthefoundationforFitHabitstofosteranorganiza-tionalculturecharacterizedbyopencommunication,high-performancework,andanengagedworkforce.Thisfoundationisstrengthenedthroughthecorecompetenciesofrelationships,innovation,andfitness.WiththeMVV,thecorecompetencesareintroducedduring

FitWelcome!andarepartoftheQCPProcess.TheLTensuresacultureofopencommunicationandtransparencythroughtheapproachesdemonstratedinFigure1.1-2.FitHabitsmakesthepromisetoteammembersthattheywillbepartofawinningteam.

Seniorcoachroundingprovidesopportunitiestosharemessageswiththeworkforcebutalsotolistentotheirconcerns.TheLTaggregatesthisinformationandfound,in2014,adesireformorecompanyperformanceinformation.ABsshowingcorporategoalsandperformance,aswellasdepartmentgoalsandperformance,modeledafteraBaldrigeAwardrecipient,wereinstalledineachdepartment.TheLTensuresthatteammembersareengagedinworthwhileworkandareempoweredtomakedecisions.FitHabitsincreasesitsvalueasaworkplacebyinvestingintrainingandcoaching,anditprovidesongoingsupportbylistening,communi-cating,andensuringtransparency.Inreturn,FitHabitsasksfortheworkforce’scommitmenttothecorevalues,100%effort,work/lifebalance,andacontinuousdesiretolearnandimprove.

TheFitHabits’cultureisbasedonthediverseideasandback-groundoftheworkforce.Tobuildthisculture,FitHabitsrecruitsfordiversity,encouragesopencommunicationsandnewideas,andoffersprograms—includingStartFit(5.1a[2])—toprovideflexibleworkingarrangements.

5.2a(2) Usinganannualteammembersurvey,FitHabitslever-agesGuppol(3.1b[1])todetermineandassessthekeyelementsthataffectworkforceengagement.Throughextensiveresearch,benchmarkinganalysis,andcorrelationstudies,Guppolidentifiedthesurveyquestionsthatmosteffectivelymeasureworkforceengagement.TheLTalsoreviewedinputsfromthecommunica-tionsmechanisms(Figure1.1-2)andpastengagementresultstodefineengagementfactorsforjobcategories.ThefactorswerevalidatedthroughQCPdiscussions,huddles,annualteammembersurveyactionplanning,andall-team-membersmeetings.

5.2a(3) In2012,theteammembersurveysbeganfocusingonquestionsthatserveasindicatorsofworkforceengagementandonquestionstoidentifyspecificareasforimprovementandofinteresttoFitHabits.Thissurveyprovidessegmentationofresultsbyjobcategories,departments,jobroles,tenure,ages,andgenderstoenablethecompanytodeterminetheengagementfactorsfordifferentworkforcegroupsandsegments.Thevendoralsoprovidesbenchmarkdataforthegenericquestionsthatcanbespecifiedbyindustryandsizeofcompany,providingbest-in-classcomparisons.

Inadditiontotheformalteammembersurvey,FitHabitsalsoassessesworkforceengagementusingindicatorssuchasretention(Figures7.3-1)andsafetyresults(Figures7.3-7).Correlatingtheresultsfromtheformalandinformalmeasureswithresultsincustomerengagementandfinancialmeasureshelpstoindicatepotentialissues.Forexample,in2013,adropinwarehouseteammemberengagementscorestiedwithincreasesinproductshiptime,creatingadropincustomersatisfaction.ThroughFITTESSanalysis,theLTdeterminedthattheheavyuseofcontractstaffinthewarehouseswascreatingamoraleissue.TheLTmadethedecisiontoeliminatetheuseofcontractstaffandaddpermanentpositionsinthewarehousesand,asaresult,bylate2014,teammemberengagementincreased,productshiptimesmetgoals,andcustomersweredelightedonceagain(Figure7.2-1).

Figure 5.1-2: Workplace Environment Measures

Factor Measure

Work Categories/

Groups Goal

Health WellFitProgramparticipation

All 80%

Ergonomicstraining All 100%(every thirdyear)

Safety Annualsafetytraining All 100%completions

HazCommtraining WarehouseandFulfillment

100%completions

Lockout/tagout WarehouseandFulfillment

100%completions

Lifting/handlingtraining WarehouseandFulfillment

100%completions

ForkliftSafetyCertification

Forkliftdrivers 100%completions

Work-relatedinjuries All 7injuriesper100teammembersannually

Security Unauthorizedbuildingaccess/physicalsecuritybreaches

All 0

Access ADAcompliance All 100%

Figure 5.1-3: Benefits and Services

FitHabits’ Benefits

FinancialBenefits

Competitivesalaries;performance,credentialing,team,andcareermilestoneawards;referralandspotbonuses;401Kmatching;RetirementWealthBuilderPlan

HealthBenefits

Low-costmedical,dental,andvisioninsurancecoverage;healthandflexiblesavingsprograms;smokingcessationandstressmanagementprograms;infertilitycoverage;theWellFitProgram;lifeanddisabilityinsurance;roomsfornursingmothers

ProfessionalDevelopment

Tuitionreimbursement,reimbursementforprofessionalassociationsandcertifications

Work-LifeBalance

Flexibilityprograms,alternativeworkschedules,telework,parentalleaveandadoptionsupport

Other Generousvacationandsicktime,bereavementtime,jurydutyleave,militaryleave,grouplegalplan,petinsurance,teammemberdiscountsforFitHabits’products

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5.2a(4) FitHabitsdriveshigh-performanceworkandworkforceengagementthroughtheQCPProcess.Establishedin2013,theQCPProcessreplacedatraditionalperformancemanagementsystem.IthelpsFitHabitsalignorganizationalgoalstoindividualperformancetofullyleveragethestrategicadvantageofhighlyengagedteammembers.InPhaseIIIoftheSPP(Figure2.1-1),departmentcoachesmeetwithindividualteammemberstoestablishgoalsthatarealignedwiththeSPP,APs,anddepartmentgoals.IndividualgrowthgoalsfortheteammemberarealsoincludedintheQCP.DepartmentmeasureswillbetrackedondashboardsandABs;individualteammemberstrackgoalsontheirQCPs.

Quarterly,eachcoachmeetswithhis/herteammemberstoreviewprogressonthegoalsandprovidecoachingandfeedbacktoenhancetheteammember’slearningandperformance.TheQCPmaybeupdatedwithrevisedgoals.Onayearlybasis,theannualperformancereview(APR),heldearlyinthesecondquarter,istheculminationoftheQCPProcess.TheAPRhighlightstheteammember’smostsignificantaccomplishments,contributions,andstrengths,aswellasopportunitiestoreachahigherlevelofperformanceinthenextyear.Teammembersarecompensatedbyaformulathatincludesindividualgoalperformanceanddepartmentperformance.AnnualbonusesfromtheTeamMemberVariablePayProgramaredistributedatthediscretionoftheLTandarebasedonachievementofthestrategicgoals.In2014,theFitInnovatorbonuswasimplementedtosupportthecorecom-petencyofinnovationandisgiventoteammemberswhohaveoutstandingcontributionsinintelligentrisktakingorinnovation.

RecognitionisimportantatFitHabits.Therearecompanycelebrationswhenthesalesandprocessesof“BlackFriday/CyberMonday”aresuccessfulorwhenthe“CountdowntoChristmas”isover.Therearedepartmentandteamcelebrationswhencertaingoalsarereachedorwhenagroupgoes“aboveandbeyond”tomakesomethinghappenforaninternalorexternalcustomer.FitArrowawardsareusedforpeer-to-peerrecognitionwhenhelpwasappreciated.OtherapproachestorewardsandrecognitionatFitHabitsincludethefollowing:

■ Recognitionbonusesforcertificationachievementsanddegreecompletion

■ Personalrecognitions(birthdays,weddings,births,long-termillnesses,bereavement)

■ Anniversary:annualcertificate■ Anniversary:FitHabits’jacketatthreeyears■ Referralbonusforwhenateammemberrecommendsa

newteammember,andthenewteammemberreachesasix-monthanniversary

■ SummereventforFamily,Friends,andFun(“FitF3”)

Theapproachestorewardandrecognitionareevaluatedeachyearusingtheresultsoftheannualteammembersurveyandthecom-municationsapproaches(Figure1.1-2).ThePeopleTeamreviewsthesurveyresultsand,iftheapproachestobenefits,specificallyrewardandrecognition,havedropped,aShapeItUpinitiativeisstarted.In2015,learningfromaBaldrigeAwardrecipient,theLTstartedcollectinginformationfromteammembersonrewardandrecognitionbyaskingcoachestostronglyencourageteammemberstocompleteaformontheintranetentitled,“HowIwanttoberecognized .”Informationfromthisformenablesthecoach

tounderstandtheindividual’spreferenceforrecognitionand,whenaggregated,willhelptheLTunderstandthepreferenceofteammembersasagroup.

5.2b(1) AsFitHabitsgrew,itwaseasytohirefriendsandfriendsoffriendstofillavailableopenings.Butsuddenly,thefoundersrealizedthattheydidn’thavetherightskillsetstogrowthecompany.TofigureoutwhatskillsFitHabitsneeded,theyworkedwithanorganizationaldevelopmentconsultanttodefinethecompetenciesforeachjob.Knowingthecompetenciesrequiredforajobcertainlyhelpedinthehiringprocess,butitalsoledtothedevelopmentofcompetency-basedtrainingplansforeachteammember,includingtheCEO.Thecompetenciesforeachjobareavailableonlinetouseincareerdevelopment.In2004,FitHabitsacquiredtheLMStotrackthecompetenciesforeachjob,thetrainingavailableforthosecompetencies,andindividualtrainingplansforteammembers.

Today,theL&DSystemincludestheLMSandthecurriculatosupportorganizationalneedsandthepersonaldevelopmentgoalsoftheworkforce.TheL&DSystemincludestrainingtargetedtoeachstaffinglevel,fromnewteammembertoseniorcoach,aswellastheprocess-specificSOPPs.ItalsoincludescriteriafortheTalentDevelopmentProgram.FitHabitsintroducesnewteammemberstotheMVV,corecompetencies,andstrategicchallengesinFitWelcome!andreinforcestheminotherclasses.Arole-specificcompetency-basedtrainingplanisgiventoeachnewteammemberattheendoftheorientation.ThecompetenciescouldrequireHazCommtraininginthewarehousesandnegotia-tionskillsinsuppliermanagement.Oneofthefirsttaskswiththecoachisforthenewteammembertoreviewinwhichcompeten-cieshe/shewillneedtraining.Thatinformationgoesintotheteammember’sQCPandtotheL&DTeamwhoenteritintotheLMS.Thisinput,alongwiththelearninganddevelopmentneedsassociatedwithAPs,isidentifiedduringtheSPP(2.1a[1])andhelpsdefinethetrainingprogramsofferedthatyear.

Inaddition,in2013,theL&DSystemwasrefinedtofullyaligntotheFHLS.Thischangewasdrivenprimarilybyinputsgatheredduringroundingfromnewcoacheswhofeltthattheydidn’thaveallthetoolstheyneededtobesuccessfulatFitHabits.Forexample,anassessmentofnewcoachesin2012showedtheneedformoretrainingandpracticumsincoachingtheirteammembers.L&Dpilotedanewprogramtoaddressthisneedand,basedontheevaluationsafterthreemonths,addedtheprogramtotheleadershipcurriculum.

TrainingthatsupportsPIandinnovationisrequiredofallteammembers.WithatoolboxcontainingacomprehensivesetofLeanandFITTESStools(ShapeItUp),teammembersstartwithaone-dayorientationintheirfirstsixmonthsthatcoverstheurgencyandneedsofPIaswellasanoverviewoftheBaldrigeExcellenceFramework.Then,astheybecomeengagedwiththeirprimaryteamsandcross-functionalteams,theytakeadditionalPItooltrainingforuptofourdays.In2015,Modern Training magazinenamedthePIprograma“HallofFameOutstandingTrainingInitiative.”

TheFitWelcome!orientationdiscussesethicsandethicalbusinesspractices,andteammemberssigntheFitFulpledge.Teammem-berstakearefresherethicscourseandsignthepledgeannually.

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TheL&DSystemishighlyintegratedwiththeFitKM(Figure4.2-1),andtheonlineL&DcurriculumisavailableviatheLMS.Workinginteamshelpsensurethatkeyinformationdoesnotresidewithoneteammember.Ifateammemberleavesorretires,timeisscheduledtotransferknowledgetootherteammembers.Departingteammemberscompleteachecklistindicatingthatknowledgehasbeentransferred.

5.2b(2) FitHabitsevaluatestheeffectivenessandefficiencyoftheL&DSystem.AseachcourseisdesignedorenteredintotheLMS,theevaluationprocessisidentified,basedontheKirkpatrickmodel.Informativeoroverviewcoursesareevaluatedthroughparticipantreactionsurveys.Skill-basedtrainingisevaluatedbyademonstrationoftheskillattheendofthecourseandthenanotherdemonstrationintheworkareaafter90days.Thesebehavioralevaluationscanindicateaprobleminthetrainingapproachorintheneedforadditionalordifferenttraining.Othertrainingprograms,suchascoachingorperformanceevaluation,areevaluatedbyasurveyoftheparticipants,aftertheyhavehadachancetopracticethenewskill.

Organizationalresultsineachdepartmentareimpactedbytheeffectivenessofthetraininginhelpingteammembersacquireskillstohelpthemcompletetheirwork.Sometraining,suchasthePItraining,crossesmultipledepartmentsandhelpsintheachievementoftheAPs.

TheL&DDepartmentsummarizestheevaluationresults,aswellastheeffortsintrainingdevelopmentorcourseacquisition,todeterminethedepartmentscorecard.Theresultsalsopointtoopportunitiestoimprovespecifictrainingcoursesorcurriculum.

5.2b(3) CareerprogressionforteammembersismanagedthroughtheQCPProcess,coaching,andencouragementforteammemberstoachievetheirprofessionalandpersonalgoals.AchangeintheQCPProcessin2014addedasectiononcareeraspirations.ThecoachandteammemberdiscusswaystoachievetheaspirationanddocumentthatintheQCP.Supportforcontinuingeducationisavailablewithtuitionreimbursement,certificationreimbursement,andmodifiedworkschedulestosupportoutsideclasses.

Successionplanningforcoaches,seniorcoaches,andotherLTmembersstartswiththeQCPProcess.Feedbackfromthe2013teammembersurveyledtheLTtocreatetheTalentReviewSystem.Annually,eachcoachreviewsthetalentsoftheirteammemberstoidentifycoachesorpotentialcoacheswhoarereadytoadvanceorwillbeinthenearfuture.Usingtheidentifiedcom-petenciesforthenextlevel,thecoachworkswitheachindividualonaplantoacquireneededcompetencies.Eachseniorcoachusestheseresultstodevelopformaltwo-deepsuccessionplans.

Category 6 Operations

6.1 Work Processes6.1a(1) FitHabitsdetermineskeyworkprocess(KWP)andproductrequirements(Figure6.1-1)usingitslisteningandlearningmechanisms(Figure3.1-2),regulatoryrequirements,ISOrequirements,strategicandoperationalrequirements,andsupplierandcollaboratorinputsreceivedthroughthecommunica-tionsmechanisms(Figure1.1-2).KeysuppliersparticipateonanumberofShapeItUpteams,aswellastheAdvisoryBoardandothercustomerfocusgroups,whichareusedwhendetermin-ingandvalidatingcustomerrequirementsaskeyproductsandfashionsshift.TheseinputsareanalyzedbyShapeItUpteamsintheInnovatephaseandtestedintheTestphaseofFITTESS.IftheShapeItUpteamsidentifyrequirementchanges,thesearealsoreviewedandvalidatedbytheCEO/presidentandseniorcoachesinaregularperformancereviewmeeting(Figure4.1-4).KeyproductandprocessrequirementsforFitHabits’workprocessesarereviewedannuallyduringtheSPPtoensurestrategicalign-mentandongoingoperationalfocusonmeetingandexceedingtheserequirements.

6.1a(2) FITTESS(Figure6.1-2)providesadisciplinedapproachtodesignandinnovateFitHabits’KWPstomeetrequirementsandensurethatproductsmeetandexceedcustomers’expectationsandrequirements.

NewKWPsorthoseselectedforimprove-mentintheSPParedesignedandinnovatedwiththeguidancefromFitHabits’MasterBlackBelt.InStep1(Focus),eachstrategicPIprojectisintendedtodriveachievementofstrategicandoperationalobjectivesandbeginswithacharterdefiningkeyelementsthatincludestheprojectobjectiveorgoal,abusinesscaselinkingtheprojecttoastrategicoroperationalobjective,processmeasuresassociatedwithcycletime,andatimetablefortrackingachievements.Toaligntheprojectwithstrategicoroperationalobjectives,thebusinesscasemustincludealignmenttooneofthecorecompetenciesand addressastrategicchallenge.

InStep2(Innovate),newtechnology,organizationalknowledge,benchmarking,customerandserviceexcellenceexpectationsandrequirements,andthepotentialneedforagilityareincorporatedintothedesign,revisions,andinnovationofworkprocesses:

■ NewtechnologyisoftentiedtoefficiencyandsupportsorresultsinrefinementofanexistingKWP.Onceithasbeendeterminedthatacquiringanewtechnologymeetscustomerororganizationalneeds,processesassociatedwiththetechnologyaredevelopedorrefinedusingFitHabits’PEStoolsandmethodologies(P.2c).

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Figure 6.1-1: Key Work Systems, Work Processes, Requirements, and Measures

Key Work SystemsKey Work Processes Key Requirements Key FitMeasures and Figures (Additional measures AOS)

CustomerRelationsSystem Marketing Timely,quality,relevant,effectivecommunications,timelypromotions

• Customerloyalty(7.2-10)• Customersatisfactionoverallandbycompetitors (7.2-2and7.2-3)

• PromotionsROI—overall(7.1-1,7.1-2;byeventAOS)• Active#ofcustomersoverall(7.2-1)• %Abandonedcartstrategies(AOS)

ProductMerchandising(Sales)

Productselection,productavailability,competitivepricing,financialperformance

• Averagesalespercustomerencounter(7.1-4)• Grosssales(7.5-3)• Revenuesalesbyteammember(7.1-7)• %products“MadeinAmerica”(7.1-19)

CallCenter(OrderandIssueResolution)

Timeperencounter,timeliness,accuracy,satisfaction,easetodobusinesswith

• Abandonedcallrate(7.1-8)• Totalsalespercall(7.1-4)• Phoneuptime(7.1-12)• Easeofdoingbusinesswith(7.2-7)• Averagesecondstoanswerandfirst-callresolution(AOS)

Key Work SystemsKey Support Processes Key Requirements Key Measures and Figures

Supplier,Manufacturer, andCollaborator RelationsSystem

SupplierCommunications

Timely,effective • Suppliersatisfaction(7.1-29)• Supplierperformance(7.1-29)

SupplyChainManagement

Qualityproducts,costeffective, fillrates,selection,inventoryavailability

• Inventoryturns(7.1-30)• In-stockrate(7.1-14)• Inventoryturnspersupplier(7.1-31)• #ofproductspersupplier(AOS)• %ofrecycledshippingmaterialsused(7.1-18)• #availableproducts—overall;bysegment(AOS)• productreturnrate—overall(bysupplierAOS)

Fulfillment Timely,accuracy,gettingthe rightproducttotherightcustomereverytime

• %Returns(7.1-13)• Costperinvoice(7.1-15)• 24-hourshippingguarantee(7.1-16)• Costofreturns(7.1-13)• Productreturnrate(7.1-13)• Shippingaccuracy(7.1-17)• Shippingpackagequality(7.1-18)

Operationsand SupportSystem

FinanceandAccounting

Accuracy,integrity,timely • Netmargin(7.5-2)• Invoiceaccuracy(7.1-17)• Responsivenesstocustomers(7.2-7)• Netincome(7.5-1)• Grosssalesoverall(7.5-3)• Grosssalesbyproductline(7.5-3)• Dayscashonhand(7.5-6)

PerformanceImprovement

Timely,engagescustomersandsuppliers,ROI

• ROIfromimprovementprojects—overall(7.1-21; byprojectAOS)

• ISOcorrectiveactions,preventativeactions(7.1-22)

InformationTechnology

Easeofuse,uptime,secure,accurateinformation

• FitWebspeed(homepageloadtime;7.1-23)• FitWebuptime(7.1-23)• e-orderuptime(7.1-12)• #ofcyberattacks(7.1-24)• ISauditcompliancerates(7.1-24)

FacilitiesManagement

Clean,adequacyofspace,effectiveworkspace

• Totalcostpersquarefoot(7.1-25;additional segmentationAOS)

• %preventativemaintenanceontime(7.1-25)

WorkforceManagement

Engagedteammembers,effectiveclimate,safeandproductiveenvironment,learningopportunities

• Directlaborcostperinvoice(7.1-27)• Totalcostperinvoice(AOS)• TraininganddevelopmenthoursperFTE(7.3-25)• Teammemberretention(7.3-1)• Teammembersatisfaction/engagement(7.3-12)

Key:InRed=BSCand/orAPkeyFitMeasures

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■ Organizationalknowledgeisintegratedintoworkprocessdesignbyselectingacross-functionalteamwiththediversityinexperienceandknowledgetoachieveanoptimizedoutcome,includingteammemberswhoworkdirectlywiththeprocess.Knowledgeabouttheneworrevisedprocessissharedwithteammembersthroughcom-municationsmechanisms(Figure1.1-2),learningmethods(Step4,FITTESS,and5.2b),andSustainItefforts,aswellastheculturalfocusonPE(P.2c).

■ CustomerandserviceexcellenceareaddressedinStep2ofFITTESS.Throughbenchmarkingintheactivewearandathleticshoesindustries,aswellasinothersectors,

thecompanyhasidentifiedopportunitiestoexcelinservicesandbestpractices.TheseeffortscontributetoCC2(innovation).TocapitalizeonCC1(relationships)andtoincludekeycustomergroups,FitHabitstargetsspecificprojectsthroughfocusgroupsordirectinteractiononShapeItUpteamsand/orkeysupplierstoprovidedirectknowledge,engagement,andinputsintothedesignand/orrevisionsofprocessesandproducts.

■ ThepotentialneedforagilityisintegratedintoStep2andthentestedinStep3ofFITTESStomonitorprocessresultsforindicationoftheneedtorefine,redesign,orinnovatetheprocessifitisnotmeetingdesignexpectationsfortheKWPorcustomerrequirements.

6.1b(1) ThedesignofaKWPusingFITTESSandsupportedwithdocumentedSOPPs,workinstructions(Step5,FITTESS),andteammembereducation(Step4,FITTESS)ensuresthattheday-to-dayoperationoftheprocessmeetskeyrequirements.Thedesignofnewprocessesincludesin-processmeasurestomonitorprogresstowardsachievingtheoptimizedoutcome.PerformanceoftheseKWPsandkeysupportprocesses(KSPs)ismonitoredthroughperformancereviews(Figure4.1-4).Inaddition,keyindi-catorsandotherstatistical,productivity,andexpensemeasuresareusedbycoachesandteammemberstotrackdailyoperationsandreviewduringdailySustainItefforts.Keyperformancemeasuresandin-processFitMeasuresforcontrolandimprovementofKWPsareshowninFigure6.1-1.

6.1b(2) Supplier,Manufacturer,andCollaboratorRelations,andOperationsandSupport,twoofFitHabits’KWSs,areconsideredsupportivesystemstotheCustomerRelationsSystem.TheKSPsembeddedwithintheKWSsaredeterminedduringtheSPP.TheKSPs(Figure6.1-1)provideforeffectivesupplierrelationsandoperationalandsupportfunctions.TheseKSPsaredesigned,implemented,andmanagedtomeetrequirementswiththesamerigorastheKWPs,asoutlinedin6.1aand6.1b(1).

6.1b(3) FitHabitsimprovesitsworkandsupportprocessesandproductofferingstoenhancecustomerexperiencesandfeedback,aswellastosustainorganizationalsuccess.ProductandprocessOFIsareidentifiedandmanagedthroughthefiveelementsofthePES(FigureP.2-4).OFIsareidentifiedfromannualBaldrigefeedbackreports,ISOinternalandexternalaudits,customerreviewsandfeedback(3.1),supplierreviewsandfeedback(6.2b),andoperationalandstrategicperformancereviews(4.1b).ImprovementeffortsaremanagedthroughtheuseofShapeItUpcross-functionalteams,whichoftenincludecustomersand/orsup-plierstocapitalizeonCC1,LeanandFITTESS,SustainItefforts,andacultureofperformanceexcellence.Cross-functionalteamspromoteinnovativethinkingandopportunitiesforbenchmarkingfromotherindustries.

Processimprovementrecommendationsarederivedfromdataanalysis;strategictargets;best-in-classbenchmarks;regulatoryagencies;andfeedbackfromcustomers,suppliers,andteammembers.WhenKWP/KSPandproductkeymeasuresareunder-performingasidentifiedduringperformancereviews,theprocessownerisrequiredtoevaluatetheprocessandidentifybarriersandOFIsand/orinnovation(CC2).AnAPiscreatedandmonitoredthroughSustainIteffortstodriveachievementofthedesiredoutcome.Workprocessimprovements,bestpractices,andlessons

Figure 6.1-2: FITTESS

Steps Description and Key Activities

1 Focus • Identifyissueand/oropportunity.• Writecharter.• Assembleteam.• Analyzedataandinformation.

2 Innovate • Identifyandvalidaterequirements.• Designneworrevisedprocess.• Identifyandintegratenewtechnology.• Addresscycletimeandvaluestreammapping.• AssessrisksandconductFMEA.• Reviewbenchmarks.• Assessworkforcecapabilityandcapacityofchange.• AssessanticipatedROI.• Addresschangestofacilitiesand/orothersupportingfunctions.

3 Test • Pilotandtestdesign/revisions.• TeammemberuseLeantoolsandmethods.• Addressanyissues,andretestifnecessary.

4 Train • Trainteammembersondesign/revisions.

5 Execute • Executeplannedroll-outtoidentifiedarea(s).• DevelopanddeploySOPPsandworkinstructions.• Use5S,asappropriate.• EvaluateforeffectivenessandROI.

6 Share • Assessforbest-practicesharingandreplicate,asappropriate.

• Assessforstandardization,asappropriate.• Evaluateforadditionalimpact.

7 Sustain • Sustaineffortsofdesign/revisions.• Assessoveralleffectiveness.• IncorporateeffortsintoSustainItprocesses.

>>

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etc.)pertheperformancereviewcycleviaFitTrackingbyseniorcoaches,coaches,andteammembers.Whenindicatorsidentifyunderperformance,theprocessownerisrequiredtoevaluatetheprocessandidentifybarriersandOFIsand/orinnovativeinterven-tions.Theparticipantsinthevariousperformanceanalysesandreviews(Figure4.1-4)helptocreateabetterunderstandingofperformancegaps.AnAPiscreatedandmonitored,includingfactorsrelatedtoproductreturns(Figure7.1-13),warrantycosts,rework,andserviceerrors(Figure7.1-17),todriveachievementofthedesiredoutcomes.

WhendevelopingKWPsandKSPs(especiallyevidentinStep3,Figure6.1-2),FitHabitspreventsreworkanderrorsusingShapeItUp,FITTESS,andSustainIteffortsintegratedintothePES;theseeffortsincludeprocessandvaluestreammappingforprojectsfocusedonwastereductionandprocessefficiencies.Thisapproachallowsearlyrecognitionofpotentialreworkanderrorsandtheiravoidanceasasystem,withKWPs/KSPsdesignedandrefinedbeforeimplementation(Steps3–6,FITTESS).AdditionaltoolsutilizedduringthedesignandtestingincludeFMEA,RCAs,andbenchmarkingtohelpdriveprioritizationandstandardizationof(re)designefforts.When“optimal”processesaredesigned,processstepsthatcreatereworkandpotentialerrorsareavoided,yieldingcostavoidanceandensuringexcellenceinmeetingcustomerandoperationalrequirements.Thecostofinspections,tests,andauditsisminimizedthroughgoodprocessdesignandSustainItefforts.Costsassociatedwithongoinginspectionsandauditsareminimizedthroughhardwiringerror-proofedstepsintothedesignofKWPsandKSPs.Forexample,in2009,theentiresupplychainofactivewearclothingandathleticshoeswenttothestandardizeduseofbarcodetechnology,frombeingreceivedinthewarehouses,tocustomerordering,toteammemberspickingproductsfromshelves,topackaging,andfinallytoshipment.Whilethistechnologywasasignificantinvestment,theROIhasresultedinsignificantdecreasesinreworkandwrongproductshipments,andimprovementincustomerandteammembersatisfaction(Figures7.1-17,7.1-13,7.2-2,and7.3-12).Thisrefinementresultedinmeetingtheneedsofcustomerswhilecontrollingtheoverallcostsofoperations.Annually,aspartofStep7(FITTESS),eachKWPandKSPisreviewedforadditionalopportunitiesforimprovedcosteffectivenessandoperationaleffi-ciencies.Forexample,in2015,Financestreamlineditsaccountsreceivable(AR)processestomakeimprovementsoverallandreduceDaysinAR(Figure7.5-5).

6.2b TheFitHabits’SupplierManagementTeammanagesthesupplychainusingSupplyFit(Figure6.2-1).Withinnovationasacorecompetency,FitHabitsworkscloselywithitssuppliers.ASupplierCertificationProgram,basedonsevenkeycriteriaelements(Figure6.2-2),providesdistinctiveadvantagesforsup-pliers.Oncecertified,suppliersenteracollaborativerelationshipwithFitHabitscalledtheInnovativeReverseProductIdentifica-tionandCaptureProcess(SA2).ThisprocessenablesFitHabitstoworkdirectlywithsupplierstodesign,manufacture,anddelivercustomer-specificandspecialtyproductsforkeycustomergroupsinacost-effectiveandtimelymanner.FitHabitsmeetswithsuppliersonaregularschedule(eithermonthlyand/orquarterly)toreviewperformance,performancemetrics,andcustomerfeedback.Suppliersshareinformationontheirsalestrendsaswellasonnewfabricsandactiveweardesigns.FitHabitsalsoprovides

learnedaresharedacrossthecompanythroughthekeycommuni-cationsmechanisms(Figure1.1-2),knowledgetransfermethods(4.2a),andtheL&DSystem(5.2b).PerformancereviewsandSustainIteffortsareusedtoreviewsuccessesandopportunitiesonaregularbasisandconsiderprocessstandardization(Step6,FITTESS)toreducevariabilityinprocesses.

6.1c FitHabits’innovationissupportedbyanInnovationCouncil,whichensuresasystematicprocessforsolicitingideasfornewstrategicopportunities,selectingthemostpromisingideas,performingsmall-scaletesting,andevaluatingandsharingwhatislearned.ThisfollowstheFITTESSProcessandisincorporatedintoSustainIteffortsacrossthecompany.In2013,innovationconceptslearnedfromattendingvariousASQseminarsandworkshopswereintegratedintotheFITTESSProcess,andStep2wasrevisedfrom“Identify”to“Innovate”toencourageandsustaininnovativethinkingandconceptsintoeveryprocessandproductdesignandrevisionproject.AssessingrisksassociatedwithimprovementeffortswasalsointegratedintoStep2toensurethatappropriateopportunitiesareidentified,evaluatedforimpact,andresourcedappropriately.

Asteamsidentifyinnovativeimprovementefforts,anticipatedROIandresourcerequests(Step2,FITTESS)arerequiredtomoveforward.ReviewedthroughtheInnovationCouncil,thetwoprimaryresourcesrequiredforthemajorityofFitHabits’innova-tiveideasandimprovementsaretimeandmarketingresources.Forexample,theintelligentrisktoaddactivewearspecificallydesignedforchallengedathletesrequiredsignificantresearchandengagementtimewithsuppliersandtargetedcustomergroups,andthenadditionalmarketingresourcestoadaptFitHabits’websiteande-cataloguetoaccommodatespecialrequirementsforthespecificactivewearlines.

FitHabitscontinuestobuildanenvironmenttolerantoffailureforthesakeoflearningandinnovation.Atthepointofsmall-scaletesting(Step3,FITTESS),iftheresultsarenottrackingtotheexpectedimprovementsidentifiedintheprojectcharter,pursuitoftheopportunityisdiscontinued.Supportforhigher-priorityoppor-tunitiesisevaluatedinthenextperformancereviewtoensurecontinuedalignmentwithstrategicandoperationalopportunities.

Inaddition,tosupportinnovativeideasfromacrossthecompany,theFitInnovatorbonuswasaddedin2014(5.2a[4])tosupportthecorecompetencyofinnovationandisgiventoteammemberswhohaveoutstandingcontributionsinintelligentrisktakingorinnovation.

6.2 Operational Effectiveness6.2a FitHabitscontrolstheoverallcostsofitsoperationsandworkandsupportprocessesthroughthePES(P.2c)andFitTracking(4.1b).Pro-cessesaredesignedusingShapeItUpandFITTESStools,withmethodsthatspecificallyaddressthecycletime,productivity,efficiency,andeffectivenessofeachprocessandtheimpactthesemayhaveonteammembersandthecompany’soverallcapabilitiesandcapac-ity.Keyin-processFitMeasures(Figure6.1-1),suchascycletimeandproductivity,areregularlymonitored(daily,weekly,monthly,

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thecontractwiththemisterminated.Forexample,in2014,asupplier’sproductionofseveralkeyactiveweargarmentsnolongerwasmeetingqualityandselectionspecifications.FitHabitsworkedwiththesupplierforoverninemonthstobringitincongruencewithcontractualrequirementsbutwasnotsuccessful.Inearly2015,thecontractandrelationshipwiththatsupplierwereterminated.

6.2c(1) FitHabitsprovidesasafeoperatingenvironmentbyassessingenvironmentalfactorsthroughacompany-widesafetycommittee.TheSafetyHabitsCommittee,whichiscomprisedoftwoseniorcoaches,twocoaches,andfourteammembersfromdifferentunitsincludingISandthewarehouses,monitorsdata,identifiesOFIs,managesrisk,andcoordinatesriskre-education.EnvironmentalsafetyregulationsandISOstandardsaremonitoredandsafetyplanscreatedtoaddressthem.Basedonanannualhazardvulnerabilityanalysis(HVA;6.2c[2]),monthlyenviron-mentalandoperationalauditsareperformedtoidentifypotentialareasofrisk.Ifriskareasareidentified,theyareanalyzedandRCAsareperformedtounderstandthemandmitigatetheissues.Annually,theseplansareevaluatedandupdatedasneededtoaddressorganizational,facility,and/orregulatorychanges.GoalsareestablishedandtrackedthroughperformancereviewsandincorporatedintoSustainItefforts.Thecommitteemonitorsinjuryrates,lostworkdays,andrestrictedworkdays.AnongoingFacilitiesMaintenanceProgrammaintainsfireprojectionsinallFitHabits’facilitiestopreventafireorlimittheeffectsifonewastooccur.Additionaltrainingforareassuchasforkliftoperationsandergonomics(Figure5.1-2)isprovidedtoallteammembersatthetimeofonboardingandannually,asappropriate.

6.2c(2) FitHabits’EmergencyManagementSystem(EMS)utilizesabest-practiceHVAtool,benchmarkedfromapreviousBaldrigeAwardrecipient.HVAidentifiespotentialemergenciesandanalyzesthelikelihoodofthoseemergenciesoccurringandtheirimpactsontheoperations,worksystems,andservicestocustomers.TheEMSisalsopartoftheSafetyHabitsCommittee’sresponsibility.ThiscommitteeevaluatestheHVAannuallytogainunderstandingofinternalandexternalvulnerabilitiesandfocusresources,readiness,andplanningeffortstoensureprepara-tion,readiness,andresponsefordisastersandemergencies.Contingencyplansaredevelopedformitigation,preparedness,response,andrecovery.Drillswithallareasandshiftsofteam

Figure 6.2-1: SupplyFit

Steps Description and Key Activities

1 IdentifySupplierQualifications.

• IdentifypotentialsupplierusingtheInnovativeReverseProductIdentificationandCaptureProcess(AOS).

• Completesupplierqualificationsurvey (basedoncriteria;Figure6.2-2).

2 AnalyzeandReviewSupplierQualifications.

• AnalyzeSupplierQualificationSurveyresponses.

• Conductsupplierqualificationon-sitevisit.• Reviewcontractconditionsandexpectationswithpotentialsupplier.

• Reviewkeyperformancemetricsandperformancereviewschedules.

• TestproductswithAdvisoryBoard.

3 SelectSupplier. • Selectappropriatesuppliersthatmeetcriteriaandcontractconditions.

4 OnboardSupplier.

• Provideonboardingtrainingwithsupplierandkeycontacts(ethicalexpectations,alignmenttoMVV,etc.).

• Ensurethatappropriateconnectionsande-sourcingcapabilitiesareinplace.

• IntroducenewsupplierstoMarketingand SalesTeammembersandproductpromotions (asappropriate).

5 ConductOngoingPerformanceReviews.

• Conductmonthlyand/orquarterlyperfor-mancereviews(basedonvolumesofproductsales)toperformancemetrics.

• Sharecustomerandoperationalfeedback.• Addressperformanceissues.• Conductbiannualqualificationvisits.

6a SustainRelationship.

• Engagekeysuppliersinperformanceimprovementinitiatives.

• Engagesuppliesininnovativeproductandprocessopportunities.

• Engagesuppliersinfocusedpromotionstodrivesales,engagement,andmarketpenetration.

6b AddressNonconformingSupplierPerformance.

• Assessnonconformingissuesand/orsuppliers.• Terminaterelationshipsthatprovetobeunsuccessful.

7 EvaluateSupplyFit.

• AnnuallyevaluateSupplyFiteffectivenessandefficiency.

• Identifyandimplementimprovements(ShapeItUp/FITTESS).

Figure 6.2-2: Supplier Certification “Fit” Criteria

Criteria

1 Atleast8outof10products“MadeinAmerica”(Figure7.1-19)

2 Atleast2outof10productsmadefromrecycledmaterials

3 Allpackagingmadefromrecycledorrecyclablematerials (Figure7.1-18)

4 Overallproductqualityandselection

5 Productpricingstructure

6 Easeofdoingbusiness

7 Congruencyofcompany’sMVV

aggregatedinformationfromuserprofilesoncustomersizing,productratings,andpurchasingpatterns.ThisenablesFitHabits’supplierstodeliverbetterproductssuitedtoFitHabits’customersandmeetthegrowingdemandforcustomizedofferings(suchasforchallengedathletes),whichhelpsthecompanymeetitsmission:Clothingourcustomersforafitlifeanddelightingthem,always.

Suppliersthatarenotmeetingorsustainingexpectedperformancelevelsareinvitedtoparticipateinimprovementopportunitiesandaregivenaspecifiedperiodoftimetomakeappropriateadjust-ments.Forthoseraresuppliersthataredeemed“nonconforming,”

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members,aswellastestingoftheentiresystem,areconductedeverysixmonths.Outcomesareevaluated,andtheSafetyHabitsCommitteeaddressesOFIs.SafetyHabitsalsoaddressescontinu-ingoperationsandbusinessrecoveryinconjunctionwithIS(4.2b[5])shouldamajordisasteroremergencyoccur.Rolesofspecificdepartmentsorindividualsareoutlinedandassessedfortimelyandeffectiveimplementationofemergencyresponseandpotentialimpacttooperations.ThecommitteeworksdirectlywiththeISDepartmenttoensurecontinuityofservicesorminimal

Figure 7.1-2: Percentage Promotions Uptake Overall and by Product Area

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interruptionofservicesintheeventofanemergencyordisaster.In2015,theSafetyHabitsCommitteetestedthecompany’sandseveralkeysuppliers’capabilitiesinaddressinga“mock”productrecallofamajoractivewearproduct.Thismockexerciseresultedintheidentificationofbotheffectiveprocessesinplace,aswellasseveralgapsforbothFitHabitsandthesuppliers,whichhavesincebeenaddressed.Sincethatfirstexercise,twoadditionalkeysuppliershaverequestedtoparticipateinthenextopportunityslatedforlate2016.

Category 7 Results

FitMeasuresarepresentedforkeyareasofimportancetothesuccessandsustainabilityofthecompany.FY2016projections(shortterm)areprovided,withadditionallong-termprojectionsAOS.Top-decilecomparativesareprovidedwhereavailableandarerepresentedas“bestpractices.”Limitedcompetitivecompara-tivesareprovidedduetothelackofavailabilityand/orproprietaryinformation.Additionalsegmenteddataforareassuchasspecificwarehouses,suppliers,productgroups,workforcegroups,etc.,areAOS.

7.1 Product and Process Results 7.1a ProvidingtargetedproductpromotionsisacriticalcustomerdelighterandenablesFitHabitstoengageandretainitscustomers.PromotionsROIisapositiveinfluencerofFitHabits’business,andbeneficialyear-over-yearROIisdemonstratedinFigure7.1-1.ThesignificantgrowthrateofpromotionsasapercentageofoveralluptakeandbyproductareaisshowninFigure7.1-2,withbothactivewearandathleticshoessustainingarateof2–5%yearoveryear.

Inadditiontopromotions,FitHabitscontinuouslyworkswithitskeysupplierstobringtomarketnewproductofferingsineachofitstwoproductareas;theseofferingsaremeasuredbySKU(Figure7.1-3).Inaddition,aSOistogrowwarehousecapacity(Figure2.1-3),asevidencedbythegrowthofSKUsthatFitHabitsoffersdailytoitscustomers.

FitHabitstracksitsoverallsuccessintotaldollarsalesthroughcustomerencounters,measuringe-ordersandCallCentervolume,aswellasoverallvolumethroughbothorderingoptionsandaver-agesalespercustomerencounter,e-order,andperson-2-person(P2P)orders(Figure7.1-4).TheCallCenterprovidescustomers

Figure 7.1-3: Percentage New Offerings by Product Area and Overall

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withoptionsformorepersonalizedservice;forexample,theycanalwaystalkwithatrainedteammemberP2P.AnotheroptionisthroughFitHabits’securee-orderingsystem.Whileoverallthepercentageofe-orderscontinuestogrow(Figure7.1-5),custom-ersspendmoreperencounterwhenorderingthroughtheP2Poption.TheCallCenteriscustomers’preferredmethodofdoingbusinesswithFitHabits(Figure7.1-5).AdditionalCallCentermetricsareavailabletoteammembersevery15minutes,withhourlyanddailyformatsforcallmanagement,staffing,coaching,andperformanceimprovementefforts.ThesemeasuresareAOS.NotethatSratsa.combestinclassiscomparabletotheindustry’s“top-quartile”performance.

FitHabits’overallgrowthinsalescontinuestobeextremelystronginbothofitsproductcategories(Figure7.1-6).Withtherecentexpansionintospecializedproductsforchallengedathletes(newproductsavailablescheduledthroughFall2016),growthsalesprojectionsinactivewearwillreachover$700millionforFY2016.

FitHabits’successisdependentonitshighlyskilledteammembersandtheircontinuedabilitytoengageinandsustainpositiverelationshipswithcustomers.Salesperteammembercontinuetoincrease(Figure7.1-7).ThedecreaseinsalesperteammemberseeninFY2014wasplanned.ThiswasduetotwomajoreventsoccurringinFY2014:(1)CallCenterupgradesintechnol-ogy,requiringadditionaltrainingandadditionaltimepercustomerencounter;and(2)facilitiesexpansionresultinginFitHabitsutilizingadditionaltemporaryteammembersandovertimetoaidinthistransition.

AsCallCentervolumeremainsstrong,theoverallabandonedcallratecontinuestodecrease(Figure7.1-8).InFY2013,theCallCenterexpandeditsstaffandenhanceditsteammembertraining,whichreducedthepercentageofabandonedcalls.Inaddition,theFY2014CallCentertechnologyupgradeprovidedstate-of-the-arttechnologyforteammemberstomoreeffectivelymanagecallvolumes,whileatthesametimesignificantlyreducingtheaban-donedcallrate.NotethatSratsa.combestinclassiscomparabletotheindustries“top-quartile”performance.

Figure 7.1-8: Abandoned Call Rate (Call Center)

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Figure 7.1-5: Percentage of e-Ordering and P2P Orders

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Figure 7.1-6: Gross Sales by Product Category

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Figure 7.1-4: Average Sales per Customer Encounter, e-Order, and Call Center Orders

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WhileCallCentervolumesremainstrong,theaveragetimeforP2Pcustomerencounters(asmeasuredinminutes)forbothordersandissuesremainspositive,asdemonstratedbythecontinuedimprovementincustomerengagement(Figure7.1-9).Thisdemonstratesastrongabilityofteammemberstoprovidepositiveservicerecoverywhendealingwithcustomerissuessuchasreturns(Figure7.1-13).TheLTtranslatesthesestrongresultstoteammembers:“moretimewithyourcustomerstranslatesintohighercustomerengagementandhighersales...awin-win.”

ACallCenterefficiencymeasureisthetotalaveragecostofaP2Pcustomerencounter(Figure7.1-10).FitHabits’CallCenterefficiencyhasbeenbetterthanaSratsa.combestpractice(comparabletoindustry“top-quartile”performers)forthepastthreeyears.AnotherCallCenterefficiencymeasureisphoneande-orderuptime(Figure7.1-12).

AnadditionalperformancemeasureistheeffectiveuseofthetotalsquarefootageownedandleasedbyFitHabits.InFY2014,theexpansionofnewwarehousespaceresultedinasignificantdecreaseinsales/squarefootage,whichresultedinaShapeItUpimprovementprojectbeinglaunched.Throughcarefulstudyandanalysisoftheworkflowofvariousdepartmentsandareas,significantconsolidationandmoreeffectiveuseofspacewereimplemented.ThisfreedupspacetootherareasofthecompanytoenablegrowthinSKUandwarehousecapacity.WiththegrowthrateofnewproductofferingsandadditionalSKUsbeingman-aged,peritsprojection,FitHabitshasregaineditsmomentumintotalsales/squarefootatthebestpracticerate(projected;Figure7.1-11).NotethatSratsa.combestinclassiscomparabletotheindustries“top-quartile”performance.

TwokeymanagementmeasuresoftheFulfillmentDepartmentarereducingreturnsfromallcustomerorders,whileatthesametimereducingthecostofhandlingthosereturns(Figure7.1-13);forbothmeasures,FitHabitsismakingprogress.TheseeffortsareaugmentedbytheCallCenterande-orderingsystemtoenablethecustomertoordertherightproductattherightsize(andcolor,andstyle,etc.),reducingreturnsanddissatisfaction.Whenproductsarereturned,FitHabits’barcodetechnologyandrelationshipswithsuppliershaveenabledthecompanytoreduceitsoverallcostofhandlingthosereturns,whileatthesametimeexceedingcustomers’expectationswithreplacementitemsand/orrefundsandcouponsforfutureorders.

Figure 7.1-13: Percentage Returns from all Customer Orders by Product Line and Average Cost per Return of Products

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Figure 7.1-12: Call Center Phone and e-Order Uptime

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Inensuringeffectivesupplierrelationshipsandwarehouseinven-torymanagement,FitHabits’in-stockrateisprojectedforFY2016tobeattheindustrybestpracticerateof99%(Figure7.1-14).NotethatSratsa.combestinclassiscomparabletotheindustries“top-quartile”performance.

FulfillmentcostperinvoiceandaverageshippingcostperinvoiceareimportantefficiencyindicatorsfortheKWPProductMerchan-dising(Sales;Figure6.1-1).Forbothindicators,FitHabitsisatornearingbest-practicelevelsfortheindustry(Figure7.1-15).

Thefollowingfourmeasures(Figures7.1-16through7.1-19)aremonitoredascustomerrequirementsanddelighters,aswellasenvironmentallysustainablepractices.Inthreeofthesefourmea-sures,FitHabitsisatornearingbest-practiceperformancelevels.Asaboutiquecompanywithinalargemarketspace,FitHabitsisseenasamarketleader,andbyallaccounts(basedonAdvisoryBoardandcustomerfocusgroupinterviewsandcomments),itfaroutpacesanyofitsfourkeycompetitorsinthesefourindicators.

FitHabits’24-hourshippingguarantee(ContinentalUnitedStates),whilenotuniqueinthetotalmarketspace,makesittheonlybou-tiqueactiveweardistributortoprovidethisguarantee.InFY2016,therateisprojectedtobeat99%orbetter(Figure7.1-16).

Shippingandinvoiceaccuracy(Figure7.1-17),aswellaspackag-ingqualityandpercentageofpackagingmadefromrecycledmaterials(Figure7.1-18)andpercentageofproducts“Madein

Figure 7.1-17: Shipping and Invoice Accuracy

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Figure 7.1-18: Shipping Packaging Quality Rating and Percentage Packaging from Recycled Materials

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Figure 7.1-15: Average Fulfillment Cost per Invoice (Excluding Shipping) and Average Shipping Cost per Invoice

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Figure 7.1-14: Percentage In-stock Rate of All Products

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Figure 7.1-16: 24-Hour Shipping Compliance

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America”(Figure7.1-19),demonstratesustainedperformanceatornearbest-practiceperformancelevels.FitHabitscontinuestoworkwithitsathleticshoessupplierstoimproveonitsabilitytoincreasethisratewithintheproductline.NotethatSratsa.combestinclassiscomparabletotheindustries“top-quartile”performance.

Thetimefromproductordertoshippingisakeycontributorinmeetingthe24-hourshippingtimeguarantee.Picklines(foreffi-ciencyinfindingproductsinawarehouse)areanotherindicatorofthisguarantee.Thesetwoindicators,showninFigure7.1-20,demonstratethesuperbcontributionsbyFitHabits’teammemberstoreduceoverallorder-to-shiptime,whileimprovingthenumberofpicklinesperhour.

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7.1b(1) Todriveprocesseffectiveness,FitHabitsusesitsPES(P.2c)toidentifykeyimprovementefforts,managesthosethroughitsShapeItUpeffortsandtools,sustainsthebestpractices,leveragestheknowledgeacrossthecompany,andmaintainstheperformancegainsthroughitsSustainItapproachandtools.Thecumulativeyear-over-yearROIfromthosefocusedperformanceimprovementprojectsareshowninFigure7.1-21.Thesesavingshavecontributedtoastrongprofitmargin(seeFigure7.5-2).

EveryFitHabits’KWPissubjecttoextensiveISOstandards,including,ataminimum,annualinternalaudits.Theseauditshaveresultedincorrectiveactions(reactionary).ButtherealvalueFitHabitshasleveragedwithitsISOworkismovingfromthereactionarycorrectiveactionfindingstotheproactivepreventativeactioninitiatives.BymidFY2012,FitHabitsmovedfrombeinginareactionarymodetoaproactivestance(Figure7.1-22).TheseeffortsdirectlysupportFitHabits’abilitytodeliverexceptionalvaluetoitscustomers,teammembers,suppliers,andotherstake-holders,aswellasinnovativeandleadingsolutionsasaboutiquedistributor,asevidentbymanyofitskeyresultsbeingatornearbest-practiceperformancelevelsinitsmarketspace.

FitWebisacriticalresourceforthecompanyandenablescustom-erstoviewproductsandorderandtrackshipments.FitWeb’shomepagespeedanduptime(Figure7.1-23)arecriticalsuccessfactorsthataremanageddailybyISteammembers.

FitWebandtheoverallISsecurityagainstcyberattacksaremoni-toreddaily.ISauditstoISO27001securityandPCIDSSauditfindingsaresharedwiththeLTquarterlytoensurethehighestlevelofdataintegrityandcustomersecurity(Figure7.1-24).

AsaKSP,FacilitiesManagementisanimportantfunctionthatisoftenundervalued.AsFitHabitshasgrownitsfootprintwithnewwarehousespace,theFacilitiesTeamhasdoneanoutstandingjobinmanagingtheoverallfacilities,grounds,andkeywarehouseequipment,resultinginreducedoverallfacilities’costpersquarefoot,whichisprojectedtobeatabest-practicelevelforFY2016.FitHabitsisalsonearinga100%rateoncompletingallpreventa-tivemaintenanceontime(Figure7.1-25).

FitHabitsisveryconsciousabouttheenvironmentandhassustainedzeroEPAviolationsoverthepastsixyearsfromitsoperations(Figure7.1-26).ThisaugmentsFitHabits’effortsinincreasingitsuseofrecycledpackaging(Figure7.1-18)andwork-ingwithsupplierstoimprovethepercentageofproducts“MadeinAmerica”(Figure7.1-19).

Figure 7.1-23: FitWeb Home Page Speed to Load and FitWeb Uptime

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Figure 7.1-19: Percentage Products Shipped that are "Made In America"

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Figure 7.1-29: Supplier Satisfaction with FitHabits and Supplier Performance

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Figure 7.1-26: Number of EPA Violations

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Figure 7.1-27: Average Direct Labor Cost per Invoice

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Figure 7.1-28: Emergency Preparedness

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Figure 7.1-24: Cyber Security and IS Audit Compliance

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#ofCyberAttacks 352 498 1,222 18,527 28,752 35,171

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Key:ISO27000securityauditconductedduringeverymajorITinstallation

Overallprocessefficiencyismeasuredbytotaldirectlaborcostpercustomerinvoice(Figure7.1-27).FitHabitsisprojectedtooutperformthebest-practiceperformancelevelinFY2016.

7.1b(2) Thesafetyandwell-beingofFitHabits’teammembersareimportanttothesustainabilityofthecompany.FitHabits’emergencypreparednessisfocusedonprovidingevacuationdrillsforallteammembersonallshiftstoensureappropriate

andtimelyresponse(Figure7.1-28).Annually,fivedrillspersiteareconducted.Eachdrillisevaluatedforitseffectivenessandefficacyinmeetingitsspecifiedcriteriaandobjectives.OFIsarereviewedbytheLT,andactionsaretakentoimproveandsustainoverallefforts.

7.1c SupplierandcollaboratorrelationshipsarekeytoalljobsatFitHabits.Whileacoachoverseesday-to-daymanagementandregularsuppliermeetings,almosteveryLTmemberandteammemberregularlyinteractswithkeystakeholdersandvaluestheserelationshipstoensurethecontinuedandsustainedabilitytodelightFitHabits’customers.AdelightedFitHabits’customerisadelightedsuppliercustomer.FitHabitsworksdiligentlytocreateastrongsupplier/manufacturerrelationshiptoensureawin-win.TheseeffortsareevidentinsustainedsuppliersatisfactionandFitHabits’annualevaluationonindividualsupplierperformancetocontractualobligationsandexpectations(Figure7.1-29).Eachindividualsupplierperformanceratingisreviewedwiththesup-plieronanannualbasisormorefrequently,ifwarranted.TheseresultsareAOS.

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Akeysupplychainefficiencyandeffectivenessmeasureisthewarehouses’abilitytoturntheinventory.Reducinginventoryonthefloorisasignificantexpenseandonethatneedstobemoni-toreddaily.InventoryturnsoverallandforeachwarehouseareshowninFigure7.1-30andbykeysupplierinFigure7.1-31.

Productrecallsareasupplier’sanddistributor’sworstnightmare.FitHabitshasbeenfortunateanddiligenttoensurethatithassustainedstrictsupplierrequirementsinorderforamanufacturertobecomeaFitHabits’supplierandtomaintainbeingaFitHabits’supplierthrougheffectivemanagementandstrictoversightoftheexpectations.Thisrelationshiphasresultedinzeroproductrecallsinthepastthreeyears(Figure7.1-32).FitHabitsbelievesthatthisisalsoaresultofitseffortstopushformoreproductsthatare“MadeinAmerica.”TherecallsinFY2010andFY2012wereofproductsmadeoverseasandresultedintwoofthethreesuppliersinvolvedbeingremovedfromtheFitHabits’supplierlist.

Figure 7.2-2: Customer Percentage Satisfaction Overall and by Segments

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Overall Activewear Clothing Athletic Shoes Sratsa.com Top 10% JWStrength Top Performers

Figure 7.1-32: Product Recalls

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Figure 7.2-1: Overall Customer Encounters and Percentage of Returning Customers

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7.2 Customer-Focused Results7.2a(1) Clothingourcustomersforafitlifeanddelightingthem,always.ThatmissionstatementdrivesFitHabitstomeetandexceedcustomerexpectations.Armedwiththecorecompetenciesofrelationships,innovation,andfitness,theteammembersatFitHabitsapproacheachcustomerencountertofulfillthemissionstatement.

AsthenumberofcustomerencountersatFitHabitshasincreaseddramaticallyoverthepastsixyears,thepercentageofreturningcustomershashadagentlerbutsteadyincrease(Figure7.2-1).FitHabitsfindsthattheoldadagethatitiseasiertosellagaintoanexistingcustomerthanitistomakeanewcustomeristrueinitsbusinessaswell.Theincreaseofreturningcustomersfromaround32%tonearly80%isatrendthatFitHabitsplanstoincrease.

Overallcustomersatisfactionhasalsoincreased—fromnearly92%to94%(Figure7.2-2).Satisfactionishighestintheactive-wearmarket,reflectingthecreativityandvalueoftheproductsofFitHabits’suppliers.

Inaverycompetitivemarketplace,FitHabitsconsistentlysurpassesitscompetitorsinoverallcustomersatisfaction(Figure7.2-3).

Figure 7.1-30: Inventory Turns Overall and By Warehouse

Inventory Turns Overall Inventory Turns Richmond, VAInventory Turns Irving, TX Inventory Turns Portland, ORTurnit.org Top Decile

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FitHabitsmeasuresthesatisfactionofitscustomersbytheirrequirements(Figure7.2-4).ThishelpsFitHabitsknowhowtoprioritizeimprovements.Forinstance,whilecustomersupporthasincreased,itdoesnotyetmeettheSratsa.comtop-10%bench-mark.CustomersatisfactionwithproductselectionhasequaledorexceededtheSratsa.comtop-10%benchmarkconsistently.

Returnsarerarelypositiveexperiencesintheretailworld.Providingno-costreturnshippinglabelsandfollowingupwiththecustomerafterareturnhavekeptsatisfactionlevelswithreturninganorderover90%since2010(Figure7.2-5).

Wheneverthereisacomputerglitchoraproblemforacustomerinplacinganorder,thereareopportunitiesforFitHabits’teammemberstoprovidetheextrastepincustomerservice.Whensatisfactionwasbelow90%forseveralyears,anewservicerecoveryprocess(3.1a[1])wasimplementedin2013,bringingthissatisfactiontoover95%.

Promotionsoverall,includingnewproductofferingsand“MadeinAmerica”labels,havehadincreasingsatisfactionlevelssince2011(Figure7.2-6);however,itwasclearthenthatFitHabits

Figure 7.2-4: Customer Percentage Satisfaction by Requirement

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Figure 7.2-5: Customer Percentage Satisfaction with Return and Service Recovery

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Figure 7.2-6: Customer Percentage Satisfaction with Promotions and Number of New Offerings

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FitHabits Tip the Scales Lean OutLean Muscle DZMT Large IR/BS (Index)

wasnotprovidingsufficientnewproductsonitswebsitetokeepcustomersinterestedandsatisfied.TheSupplierManagementTeamtookupthechallengetoworkwithsupplierstobalancenewproductsonline,replenishproductlevels,anddecreasere-stockfees.Theresultsareseenintheincreaseinsatisfaction,startingin2012 .

In2013–2015,whilesatisfactionwiththeeaseofdoingbusi-nesswithFitHabitswashighat88%to90%,itdidnotmeettheSratsa.comtop-10%benchmark.Across-functionalteamworkedthroughaShapeItUpinitiativeanddevelopednewprocessesattheendof2015.Earlyresultsshowanincreaseinsatisfaction(Figure7.2-7).

7.2a(2) FitHabits’customerengagementlevelsexceedthecom-petitors’levelsandmeettheSratsa.combenchmark(Figure7.2-8).WhensegmentingFitHabits’customergroups,frequentpurchas-ers,asmightbeexpected,havethehighestlevelsofsatisfaction,exceedingtheSratsa.comtop-10%benchmark(Figure7.2-9).

Consideringengagementasthelikelihoodofcustomerstorecom-mendFitHabits,thecompany’sscorehasbeen97%forthepastfouryears,justshortofthebenchmarkat100%(Figure7.2-10).Inaddition,catalogueshaveremainedastrongfeatureoftheonlineshoppingexperience,andforthepastsixyears,catalogueshavereceived97%levelsofapproval.

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FitHabitsgentlyenteredthesocialmediaworld,startingwithRatingsandReviewsin2011(3.1a[1];Figure7.2-11).TheSocialMediaTeamhasmovedFitHabitsfirmlyintosocialmedia,includ-ingHowIlookbook(Figure7.2-12),Witter,andOurTube.Retail Globalhastrackedtrendsinsocialmedia,showingthatFitHabitsisatop-10watchedOurTubechannelintheretailmarket(Figure7.2-13).

Theuseofthe“DataShop:MarketingNow”salesanalyticstoolhelpsFitHabitsunderstandcustomerpatterns,includingreturnsandcomplaints.TheFootwearMarketingTeamreviewedtheresultsonreturnsin2010and2011andworkedwiththeFootwearSupplierTeamonproductinformationandtrendstoconveyto

Figure 7.2-10: Would You Recommend and Would You Buy From This Catalogue?

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Figure 7.2-11: Percentage of Customers Providing Ratings and Reviews on Products

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Figure 7.2-12: Social Media Connections: HowIlookbook "Likes"

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Figure 7.2-8: Customer Engagement by Competitor

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Figure 7.2-7: Overall Ease of Doing Business with FitHabits

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thefootwearsuppliers.Thesignificantdropinreturns,startingin2012,istheresultofthenegotiationswiththefootwearsuppliers(seeFigure7.1-13).

Overalldissatisfactionhasdecreasedfrom2010,basedonalloftheimprovementsdiscussedaboveaswellastheenhancementstothewebsite(Figure7.2-14).

7.3 Workforce-Focused Results7.3a(1) AkeycomponentofFitHabits’missionistheempower-mentoftheworkforcethroughengagement,teamwork,andprofessionaldevelopment.FitHabitscreatesateammemberclimatethatsupportstheseempowermentelementsthroughthe

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corecompetencyofrelationshipsandtheSO“BeaTeamEmbrac-ingFitness”(Figure2.1-3).

ThekeyworkforcecapabilityandcapacityperformancemeasureforFitHabitsistheretentionofteammembers.TheresultsreflectedinFigure7.3-1arefortheretentionofteammembersoverall,identifiedhigh-performingteammembers,andfirst-yearteammembers.ThelowretentionofnewteammemberswasanalyzedthroughaShapeItUpprojectin2013,andvariousimprovementsweremade,includingtherevisedFitWelcome!orientationprogramandtheFitBuddyprogram.

Overthepasttwoyears,throughShapeItUp,thetimetofilljobvacanciesinnumberofdayswascutbyover60%,surpassingtheAgencyforPeopleManagement(AFPM)75thpercentile(Figure7.3-2).ThisimprovementenablesthePeopleTeamtomeettherequirementsofinternalcustomers.In2014,TargetedSelection,

abehavioralinterviewingprocessthatlooksatall“targets”ofsuccess(knowledge,skills,experience,competencies,andmotiva-tionalfit)wasimplemented.Theprocessnotonlyidentifieswhattolookforinacandidatebutalsohowtomanageaninterviewtoensurethatthehiringmanagersaregettingtothebestdatafromthecandidatessotheycanmakethebesthiringdecisions.Thisrecruitingprocessisalsoattributedtotheincreaseinfirst-yearretentionofteammembers(Figure7.3-1).

Asignofteammembers’engagementistheirwillingnesstoreferfriendsandfamilytoapplyforjobsatFitHabits(Figure7.3-3).In2013,areferralbonuswasawardedtothe“referringteammember”afteranewteammemberpassedasix-monthworkanniversary.

UnscheduledabsencesnegativelyimpactFitHabits’abilitytomeetitsvision.Additionally,theyareoftenanindicatorofworkforcedissatisfaction.FitHabitshasmaintainedconsistentlylowlevelsofunscheduledabsences(Figure7.3-4).

Theimprovementinovertimehoursasapercentageoftotalpay-rollisevidenceofthesuccessofcapabilityandcapacityplanning(Figure7.3-5).OvertimehoursatFitHabitsarecurrentlyhalfoftheBureauofLaborStatisticsbenchmarkandreflectafavorablefour-yeartrend.

Asevidenceofhowthecompanysupportsdiversity(Figure7.3-6),FitHabitshasbeenrankednearthetopofAssortment Magazine’stop50companiesintheUnitedStatesforthepastsixyears.

7.3a(2) FitHabitshascompliedwithallregulationsoftheADA,includingcreatingaccessforallinnewbuildingsandrefittingleasedbuildings,asneeded.FitHabitshasalsocompliedwithallregulationsoftheEEOCandhasnothadaviolationinthehistoryofthecompany.

Figure 7.3-1: Retention100% 95% 90% 85% 80% 75% 70% 65% 60% 55% 50%

FY20

10

FY20

11

FY20

12

FY20

13FY

2014

FY

2015

FY

2016

Pro

j FY

2010

FY

2011

FY

2012

FY

2013

FY20

14

FY20

15

FY20

16 P

roj

FY20

10

FY20

11

FY20

12

FY20

13FY

2014

FY

2015

FY

2016

Pro

j

Overall Retention High-Performing Retention First-Year Retention

Figure 7.3-2: Recruiting Time to Fill

45 40 35 302520 15 10

5 0


FitHabits AFPM 75th Percentile

Days

to F

ill

Figure 7.2-14: Overall Dissatisfaction (by all Total Customer Encounters)

9% 8% 7% 6% 5% 4% 3% 2% 1% 0%

FY FY FY FY FY FY FY2016 2010 2011 2012 2013 2014 2015 YTD

Figure 7.2-13: Ranking of Social Media Outlets

Social Media Outlets Q1 14 Q2 14 Q3 14 Q4 14 Q1 15 Q2 15 Q3 15 Q4 15 Q1 16

HowIlookbook—100MostLikedRetails 70 66 67 59 50 48 42 41 40

Witter—100MostFollowedRetails 88 78 77 76 69 61 60 55 52

OurTube—HottestRetail 57 45 46 37 35 40 38 34 33

OurTube—MostWatchedRetail 19 15 14 14 15 13 11 12 10

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Afteraspikeofinjuriesin2013(Figure7.3-7),theSafetyHabitsCommitteereinforcedthetrainingprocessandmaterials.Com-mitteemembersmadepresentationsacrossthesites,successfullybringingtheinjuryratetoalmosthalfoftheOSHAbenchmark.Thetrendforclaimsforworkers’compensation(Figure7.3-8)followedtheinjuryrate.

A2011FitHabits’reviewoftrainingrecordsshoweddecentcompletionratesfornewhiresbutpoorcompletionsfortheannualrefreshtrainingrequiredofallteammembers.When2013startedoffwithanumberofaccidents,theSafetyHabitsCom-mitteeworkedwiththeLTtomakecoachesaccountableforteammembersafetytrainingcompletions(Figure7.3-9).

Traininginsafetybeyondthebasicsisrequiredofanumberofjobs.Forteammemberswhoworkinthewarehouse,traininginHazComm,lockout/tagoutprocesses,andportablefireextinguish-ersisimportantfortheirsafety(Figure7.3-10).Similarly,theteammemberswhodriveforkliftsinthewarehouseneedtobecertifiedannually(Figure7.3-11).

7.3a(3) FitHabitsmeasuresteammemberengagementandsatisfactionthroughteammemberreferralsaswellastheresultsoftheannualteammembersurvey(Figure7.3-12).

Figure 7.3-7: Team Member Injury Rate

9 8 7 6 5 4 3 2 1 0

FitHabits OSHA Goal

FY FY FY FY FY FY 2010 2011 2012 2013 2014 2015

Rate/

1000

Figure 7.3-8: Workers' Compensation

12%

10%

8%

6%

4%

2%

0% FY FY FY FY FY FY 2010 2011 2012 2013 2014 2015

FitHabits Department of Labor Benchmark

Perce

ntage

of To

tal P

ayro

ll

Figure 7.3-5: Overtime as Percentage of Payroll

3.5% 3.0% 2.5% 2.0% 1.5% 1.0% 0.5% 0.0%


Overtime as % of Payroll Bureau of Labor Statistics

Figure 7.3-6: Ranking by Assortment Magazine

50

40

30

20

10

0

FitHabits Company A Company B FY2010 FY2011 FY2012 FY2013 FY2014 FY2015

Figure 7.3-3: Referrals (as a Percentage of New Hires)

35% 30% 25% 20% 15% 10%

5% 0%

% Referrals


Figure 7.3-4: Unscheduled Absences

1.4% 1.2% 1.0% 0.8% 0.6% 0.4% 0.2% 0.0%

Unscheduled Absences


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ThesurveygivesFitHabitstheabilitytolookacrosstenuregroupsandfunctionalgroupsofteammembers.Thelowretentionratesoffirst-yearteammembersfrom2010to2012werereinforcedintheirlowengagementscores.AsthePeopleTeammadechangestosupportfirst-yearteammembers,resultswereseeninretentionandengagement(Figure7.3-13).

Theengagementofteammembersincreasedrelativelyconsis-tentlyacrossdifferentjobcategoriesoverasix-yearperiod.TheengagementresultsfortheCallCenterhavebeenthehighest.Whenthisgroupwasstudiedin2014tofindlessonstosharewithothergroups,thecontinual,mostlypositivecustomercontactthat

teammembers’hadwasthekeydrivertotheirengagement.TheLTcouldeasilyseehowtheyimpactedtheFitHabits’missionbydelightingcustomers(Figure7.3-14).

Severalresultstiedirectlytoteammemberrequirements.

Open,transparent,andfrequentcommunicationhasbeenapartoftheFitHabits’culturesincethefoundingdays.Resultsfromcommunicationsmechanisms(Figure1.1-2)suchasseniorcoachrounding,leaderthankyous,CEOupdates,aswellastheinforma-tiononmyFitHabitshomepage,showhighlevelsofengagement,surpassingthebenchmark(Figure7.3-15).

Figure 7.3-14: Overall Engagement: Segments

85%

80%

75%

70%

65%

60% FY2010 FY2011 FY2012 FY2013 FY2014 FY2015

Call Center Warehouse/Fulfillment Corporate/Administrative IS/Operational Support

Figure 7.3-11: Forklift Safety Certifications

100%

80%

60%

40%

20%

0%

Annual Certifications OSHA Best Practice FY2010 FY2011 FY2012 FY2013 FY2014 FY2015

Figure 7.3-12: Overall Engagement85% 80% 75% 70% 65% 60% 55% 50% 45% 40%

FY FY FY FY FY FY 2010 2011 2012 2013 2014 2015

FitHabits Guppol Best Practice

Figure 7.3-13: Overall Engagement: Tenure

85%

80%

75%

70%

65%

60%

<1 yr 1–2 yr 3–5 yr 6–10 yr >10 yr FY2010 FY2011 FY2012 FY2013 FY2014 FY2015

Figure 7.3-10: Safe Workplace Training

100%

80%

60%

40%

20%

0%

% C

omple

tions

FY FY FY FY FY FY 2010 2011 2012 2013 2014 2015

HazComm Lockout/Tagout Portable Fire Extinguisher

Figure 7.3-9: Safety Overview Training%

Train

ed100%

95%

90%

85%

80%

75%

70%

New Hire Training Annual Refresh TrainingFY201

1FY201

0FY201

2FY201

3FY201

4FY201

5FY201

1FY201

0FY201

2FY201

3FY201

4FY201

5

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TeamworkhasalsobeenahallmarkoftheFitHabits’cultureandisseenasoneofthevalues(Figure7.3-16).TheadditionofTargetedSelectionbehavioralinterviewingandselectionprocessusesteamingskillsandbehaviorsasaguideinselectingnewteammembers.

Thetransparentcommunicationmethods,suchasthedeploymentoftheFitPlan(2.2a[2])andQCPProcess(5.2a[4]),keepallteammembersinformedandalignedwiththegoalsandobjectivesofFitHabits.Inadditiontobenefitsoffered,thishelpsincreaseteammembers’prideintheirwork,aswellastheirengagement(Figures7.3-17and7.3-18).

Whilerecognitionhasneverappearedasakeyworkforcerequire-ment,theLTisconvincedthatrecognitionoftheworkforceisanimportantfactorintheengagementofteammembers(Figure7.3-19).ArecognitionbudgetisannuallyincludedintheFitPlan.

Recognizingatrendappearingnationally,in2010,theLTwasconcernedaboutthelowparticipationinthe401Kplan(Figure7.3-20).ThisseemedtobetiedtotheyoungworkforceatFitHabits.WiththePeopleTeam,theLTmountedacampaignin2011toincreaseparticipation,focusingonthecorporatematchingaspect.In2015,recognizingthatparticipationwasstillbelowabestpractice,theLTscheduledaseniorcoachroundinginApriltofocusonthevalueandbenefitsofhavinga401K.

Withfitnessasacorecompetency,FitHabitsencouragesallteammembersinRichmondtoparticipateintheactivitiesoftheFitCenterandforteammembersinIrvingandPortland,subsi-dizedmembershipinalocalfitnesscenter.In2012,theLTtiedsuchparticipationtoareductioninthecostofhealthinsurance

Figure 7.3-18: Engagement: Benefits100%

90% 80% 70% 60% 50% 40% 30% 20% 10%

0%

FitHabits Guppol Best Practice FY2010 FY2011 FY2012 FY2013 FY2014 FY2015

Figure 7.3-17: Engagement: Pride in Work100%

90% 80% 70% 60% 50% 40% 30% 20% 10%

0%


Figure 7.3-16: Engagement: Teamwork90% 80% 70% 60% 50% 40% 30% 20% 10%

0%


Figure 7.3-15: Engagement: Communication

90% 80% 70% 60% 50% 40% 30% 20% 10% 0%


Figure 7.3-19: Team Member Recognition74% 72% 70% 68% 66% 64% 62% 60% 58% 56% %

Team

Mem

bers

Reco

gnize

d7.0 6.0 5.0 4.0 3.0 2.0 1.0 0.0

Recognition Budget % Team Members FY2010 FY2011 FY2012 FY2013 FY2014 FY2015

$ Milli

ons

forthatteammember,seeingthecorporatecontributionforhealthcarelowerforfitteammemberswhopracticedhealthybehaviors.ParticipationhasnowsurpassedtheAFPMbestpractice(Figure7.3-21).

7.3a(4) Anotherkeyrequirementofteammemberswastheabilitytogrowintheirjobs.Figure7.3-22showsthepercentagewhofelttheyhadtheopportunitytogrow.Whileanumberofopportunitieswereavailable,theintroductionoftheQCPProcessbroughtfeedbackfromtheworkforcetotheLTandhelpedteammembersbecomeawareofopportunities.

OfparticularinteresttotheIS/OperationsSupportDepartmentswasprofessionaldevelopmenttiedtosomeparticularlytechnicaljobs,aswellasoveralldevelopment.TheintroductionoftheQCPProcessin2013,inadditiontothehiringofanewCIOandseveraltechnicalsystemdirectors,helpedfocusthecompany

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onthedevelopmentneedsofthetechnicalstaff.Resultshavecontinuedtoimprove(Figure7.3-23).

Asabusinessstartedinagarageshop,FitHabitshasalwayshadapracticeofpromotingfromwithintheexistingstaff,aslongascapabilitiesweremet.Theresultsforinternalpromotionsexceedthebestpractice,withtheexceptionof2013whentherewasaconsciousdecisiontobringinnewtalenttosupportthewebsiteandsystemsecurity(Figure7.3-24).

FitHabitshasbeenalong-timebelieverinthevalueofeffective,focusedtraining.Takingatipfroma2001BaldrigeAwardrecipi-entseniorleaderwhosaid,“Whatifyoudon’ttrainthemandtheystay?”theLTinvestedearlyinaLMStotracktraining(Figure7.3-25).Asthesystembecamemoreversatile,LTmembersfounditwouldalsodeliveronlinetrainingandtrackevaluationdata.MoreinformationisavailableAOS.

Figure 7.3-25: Average Training Hours per FTE

70

60

50

40

30Aver

age H

ours

of Tr

aining

FY2010 FY2011 FY2012 FY2013 FY2014 FY2015FitHabits AFPM Best Practice

TheL&DDepartmentreviewseachnewtrainingmoduleorcoursetodeterminethelevelofevaluation.FollowingtheKirkpatrickmodel,alltraininggetsevaluatedatLevel1,orsmilesheets.Thesedataareusedtodetermineifthetrainingfacilitiesarecomfortableortheonlineprogramsloadquickly.SometrainingreceivesLevel2,orskillachievement;canthestudentmeettheobjectivesattheendofthetraining?Theanswerhelpsdeterminewhetherthestudentneedsadditionaltrainingorthetrainingisnoteffective.Othertrainingisevaluatedatsomeperiodafterthetrainingoccurredtodeterminewhetherthetrainingwaseffective.Figure7.3-26showsasampleofcoursesandthelevelsofevaluationstheyreceive.MoreinformationisAOS.

Tohelpwithteammemberprofessionalgrowth,FitHabitsprovidestuitionreimbursementstohelpteammemberscontinuetheireducationandreceivedegrees(Figure7.3-27).TheCOOisa

Figure 7.3-23: Engagement: Professional Development100

90

80

70

60

50

40

Overall IS/Operational SupportFY201

1FY201

0

FY2012FY201

3FY201

4FY201

5

FY2011

FY2010

FY2012FY201

3FY201

4FY201

5

% E

ngag

ed

Figure 7.3-22: Engagement: Opportunity to Grow

70% 65% 60% 55% 50% 45% 40% 35% 30%

FY2010 FY2011 FY2012 FY2013 FY2014 FY2015FitHabits Guppol Best Practice

Figure 7.3-21: WellFit Participation

80% 70% 60% 50% 40% 30% 20%


Figure 7.3-24: Internal Promotions

80% 70% 60% 50% 40% 30% 20%


Figure 7.3-20: 401K Participation

70% 65% 60% 55% 50% 45% 40% 35% 30%


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bigproponentofthisprogram,asshecompletedanMBAthroughtuitionreimbursementandthisgaveherthebackgroundforhercurrentjob.Eachyear,theopportunityforhighereducationisatopicduringseniorcoachrounding.

Insomecases,certificationsarerequiredratherthandegrees.ThisisparticularlytrueintechnicalareassuchasinITandquality.FitHabitssupportsthiseducationaswell.Teammemberswhocompleteeitheradegreeorcertificationarerecognizedduringall-team-membersmeetings,andtheyreceiveabonus.TheLTisproudthat,overthelastsixyears,43degreesand234certifica-tionswereawardedtoFitHabits’teammembers(Figure7.3-28).

7.4 Leadership and Governance Results7.4a(1) ThegrowthandsuccessthatFitHabitshasenjoyedcanbetiedtothesuccessfulapproachesthattheleaders,orcoaches,useforcommunicatingandlisteningtoteammembers.Figures7.4-1and7.4-2presentresultsofannualteammembersurveys.

ABspostedineachdepartmentkeepteammembersupdatedonthecompany.Throughfrequentandtransparentcommunicationmethods,includingrounding,teammembersseeastrongfocusonactionfromtheircoaches(Figure7.4-3).

Seniorcoachrounding(Figure7.4-4)startedinFitHabitsin2009,aftertheCEO/presidentsawademonstrationofitseffectivenessataBaldrigeAwardrecipienthospital.ThepracticewasquicklyadoptedatFitHabitsin2010andbecamepartofthecultureby 2012 .

Figure 7.4-2: Engagement: Senior Coaches Listen

75%

70%

65%

60%

55%

50%

45%

40% FY2010 FY2011 FY2012 FY2013 FY2014 FY2015


Figure 7.4-1: Engagement: Senior Coaches Communicate Key Messages

90%

80%

70%

60%

50%

40%

30% FY2010 FY2011 FY2012 FY2013 FY2014 FY2015


Figure 7.3-26: L&D Evaluations

Course Level 2 Level 3

Quality101

Lockout/Tagout

Coaching

PerformanceReviews

Lean1

AdvancedLean

Figure 7.3-27: Tuition Reimbursements70

60

50

40

30

$ Tho

usan

ds


Figure 7.3-28: Degrees and Certifications

10

8

6

4

2

0

# of D

egre

es

# of C

ertifi

catio

ns

60

50

40

30

20

10

0 FY2010 FY2011 FY2012 FY2013 FY2014 FY2015

Certification Degrees

Figure 7.4-3: Engagement: Senior Coaches Focus on Action

80%

75%

70%

65%

60%

55%

50% FY2010 FY2011 FY2012 FY2013 FY2014 FY2015


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Figure 7.4-7: Board Survey

Assessment Statement 2010 2011 2012 2013 2014 2015

IunderstandtheroleandresponsibilitiesoftheFitHabits’BOD. 95% 100% 100% 100% 100% 100%

BODmembershipincludestheskillsandrepresentationneededtoeffectivelyrepresenttheinterestsofFitHabits.

95% 100% 100% 100% 100% 100%

ThestrategicplanisconsistentwiththemissionofFitHabits. 95% 85% 100% 100% 100% 100%

BODdecisionmakingisdoneeffectively. 85% 100% 100% 90% 90% 100%

BODcommitteeseffectivelypreparetheboardtoactonkeyissues. 90% 90% 100% 100% 100% 100%

PoliciesareinplacethateffectivelypreventconflictsofinterestonthepartofBODmembers.

100% 100% 100% 100% 100% 100%

Ihavethetime,energy,andlevelofcommitmenttobeanactive andengagedmemberofthisBOD.

90% 90% 100% 100% 100% 100%

Figure 7.4-6: Financial Audits

FY2010 FY2011 FY2012 FY2013 FY2014 FY2015

ThreeSistersFinance pass pass pass pass pass pass

InternalFinancialAudits pass pass pass pass pass pass

Figure 7.4-4: Senior Coach Rounding100%

95%

90%

85%

80%

75% FY2010 FY2011 FY2012 FY2013 FY2014 FY2015

% Senior Coaches Conducting Monthly RoundsBaldrige Award Recipient Best Practice

Figure 7.4-5: Senior Coaches Modeling MVV

FitHabits

100%

90%

80%

70%

60%

50% FY2010 FY2011 FY2012 FY2013 FY2014 FY2015

TeammembershaveahighconfidencelevelthattheirleadersmodeltheFitHabits’MVV(Figure7.4-5).

7.4a(2) Asevidentin7.5,FitHabitscontinuestoexhibititsvaluesofBalancedandIntegrity.

BecauseFitHabitsisaprivatecorporation,theBODhasfiduciaryresponsibilitytoascertainthatFitHabitsisfinanciallysoundandfollowingcommonaccountingpracticesandallapplicablelawsandregulations(Figure7.4-6).

ResultsoftheBODsurvey(1.2a[2])arereviewedannually(Fig-ure7.4-7),andrecommendationstostrengthentheBODaremade.ArecentimprovementincludedarequesttohavetheCIOpresentabriefingtotheBODonInternetsecuritythatfocusedonchangesintheindustryandonplanstokeeptheFitHabits’networksecure.

FitHabitsisproudoftherecognitionitreceivesfromcompaniesandpublications(Figure7.4-8).Someoftherecognition,suchastherecyclingawards,isaresultofShapeItUpimprovementinitiatives.Others,suchastheHallofFamerecognitionfromModern TrainingforthePItrainingcurriculum(5.2b[1]),aretheresultoftheoutstandingworkdonebyteammemberseverydayatFitHabits.

7.4a(3) FitHabitspridesitselfonnotonlymeetingminimumregulatoryandlegalrequirementsbutworkingtosurpassthem(Figure7.4-9).IntheareasofInternetandnetworksecurity,ITstaffmembershaveparticipatedinindustryroundtablesandutilizebestpracticestohelpFitHabitsstayontheleadingedgeoftheneweststandardsandkeepthenetworkfrombreachesorotherincursions.

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Figure 7.4-10: Ethics Training/FitFul Compliance

FY2010 FY2011 FY2012 FY2013 FY2014 FY2015

BODTraining 100% 100% 100% 100% 100% 100%

NewHireTraining 90% 91% 90% 100% 100% 100%

RefreshTraining 77% 82% 80% 97% 100% 100%

#SuitsFiled 0 0 0 0 0 0

COICompliance 99% 100% 100% 99% 100% 100%

Figure 7.4-9: Corporate Compliance

Regulatory FY2010 FY2011 FY2012 FY2013 FY2014 FY2015

FTCMail,Internet,Telephone MerchandiseCompliance

100% 100% 100% 100% 100% 100%

FTCAnti-trust:#ofViolations 0 0 0 0 0 0

Quality and Industry FY2010 FY2011 FY2012 FY2013 FY2014 FY2015

ISO9000Compliance:Findings 0 0 0 0 0 0

ISO26000(IT)Compliance:Findings 0 0 0 0 0 0

IEC/ISO27001(IT)Compliance:Findings 0 0 0 0 0 0

ISO14001forEnvironmentalCertification 0 0 0 0 0 0

Internet and Network Security FY2010 FY2011 FY2012 FY2013 FY2014 FY2015

PCIDSSCompliance:Breaches 0 0 0 0 0 0

WebSecurity(TruthSign):Breaches 0 0 0 0 0 0

7.4a(4) FitHabitstakescorporateethicsveryseriously.NewteammemberscompleteanethicsunitduringFitWelcome!,andallteammembersandcoacheshaverefreshertrainingeachyear(Figure7.4-10).EachpersonsignsbothaFitFulpledgeonethicsandaCOIstatement.Initsshorthistory,FitHabitshasnothadanethicscasefiled.

7.4a(5) TheresultsshowninFigure7.4-11havequalifiedFitHabitstoreceiveanEnergyStarrating,anEPAmeasurementofenergyefficiency.FitHabitsreceivedthisnewsinApril2016,asthisapplicationwasfinalized.

Figure 7.4-8: Awards

Recognition

Group/Publication Award

OSHA GREAT!Awardin2014forreductionofforkliftinjuries.

EPAWasteWiseProgram 2013GoldAchievementforRecycling

EPAWasteWiseProgram 2015forIndustrialMaterialsRecycling

Modern Training magazine 2015HallofFameOutstandingTrainingInitiativeforthePIprogram

StatePerformanceExcellenceProgram 2015StatePerformanceExcellenceAward

LocalJoinedPath 2013JoinedPathPlatinumAwardfor90%participation

AllteammembersatFitHabitsareencouragedtosupportcom-munityorganizationsandevents,whetherofficiallysponsoredbyFitHabitsornot.Eachteammemberisallocated16hoursannuallyforthissupport(1.2c[2]).In2015,82%ofallteammemberscontributedalmost12,000hourstotheircommunities(Figure7.4-12).

FitHabitsisinvolvedinhelpingcommunitieswithanumberofeventsandresources.Thepinnacleeventistheannualshoegive-awayforelementaryschoolchildren,OperationFitShoe,whichprovidesFREEshoestochildren(1.2c[2]).Workingwith

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itsshoesuppliers,FitHabitsgetsshoesatcostorlessfromitssupplierstoprovidefortheevent.FitHabitsestimatestheaveragepairofshoes,betweenthediscountedandfreeshoes,coststhecompany$10.Startingwithonelocalelementaryschoolin2010,theprogramhasexpandedtothreeschools,helpingapproximately1,500childrenhavenewshoestostarttheschoolyear(Figure7.4-13).

InadditiontoOperationFitShoe,anumberofothereventshavebeensupportedbyFitHabits,includingtheWalkforBreastCanceratallthreesites(Figure1.2-3).In2016,FitHabitswillsupportsixevents,providingteammemberstostaffeventsandotherresources,totalingnearly$65,000(Figure7.4-14).

FitHabitsisasupporterofJoinedPathateachofitssites.Teammemberparticipationandcontributionshaverisensteadilysince2010(Figure7.4-15).FitHabitswasawardedtheJoinedPathPlatinumAwardin2013forhavingover90%oftheworkforceparticipatingandhascontinuedtoreceivethisawardeveryyearsincethen.

7.4b FitHabitsusestwoprimarymechanismsfortrackingtheachievementoforganizationalstrategyandAPs:(1)theBSCpro-videsahigh-level,strategicviewoforganizationalperformancerelativetoeachfocusarea(Figure7.4-16);and(2)drill-downmeasuresassociatedwiththeAPsprovidemoretactiledetail.

FitHabitsestablishesaggressiveAPs,withthetargettocompletetheshort-termAPsataminimumof85%completionbytheirestablishedtimeframes(Figure7.4-17).Insettingtheseaggres-siveplans,seniorcoachesareawarethatsomeAPs,becauseofcompetingpriorities,resourceallocation,andstrategicagility,willnotmeetthis85%target.Inthesecases,aseniorcoachworkswiththeassignedAPownertomakeappropriateadjustments.AnAPcompletionrateoflessthan70%isnotacceptable.

Figure 7.4-14: Community Support

$K S

uppo

rt

# of E

vents

70 65 60 55 50 45 40 35 30

FitHabits' Support Supported Events FY2010 FY2011 FY2012 FY2013 FY2014 FY2015 FY2016

8 7 6 5 4 3 2 1 0

Figure 7.4-15: JoinedPath Support

% P

artic

ipatio

n

400 350 300 250 200 150 100 50 0

$K C

ontrib

ution

Participation Contributions

100908070605040302010

0

FY2011

FY2010

FY2012FY201

3FY201

4FY201

5

FY2016

FY2011

FY2010

FY2012FY201

3FY201

4FY201

5

FY2016

Figure 7.4-12: Team Member Volunteer Time

Perce

ntage

Team

Mem

bers

90%

85%

80%

75%

70%

65%

60%

11700 11300 10900 10500 10100 9700 9300 8900 8500 To

tal H

ours

in Co

mmun

ity S

uppo

rt FY2010 FY2011 FY2012 FY2013 FY2014 FY2015

Team Members Total Hours

Figure 7.4-13: FitShoe Results

# Chil

dren

Ser

ved

17000

15000

13000

11000

9000

7000

5000

3000

$ Sup

port

600

550

500

450

400

350

300

Pairs of Shoes FitHabits SupportFY201

1FY201

0

FY2012

FY2013

FY2014

FY2015

FY2016

FY2011

FY2010

FY2012

FY2013

FY2014

FY2015

FY2016

Figure 7.4-11: Environmental Concerns

FY2010 FY2011 FY2012 FY2013 FY2014 FY2015 Goal

Recycling(%ofWaste) 65% 67% 66% 75% 79% 80% 98%

EquipmentEfficiency 72% 76% 76% 82% 86% 88% 90%

%ofSKUsRecycled 10% 12% 16% 19% 19% 20% 20%

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7.5 Financial and Market Results7.5a(1) Astheoveralleconomyhasrecovered,sotoohasthemarketforactivewearproducts.Asasmallboutiquebusiness,FitHabits’strongfinancialresultsareastrategicimperative,andcustomersinterestedinfitnessandhealthhavecontributedtoitssuccess.

FitHabitshasimplementedandsustainedkeyinitiativesandpro-cessestoensuresuperiorcustomerservice,acultureofexcellence,strongsalesinactivewearandathleticshoes,andhighlyengagedteammembersandsuppliers.Theseeffortshaveensuredcriticalstrategicadvantages(FigureP.2-3)inthemarketplace,whichhaveenabledFitHabitstodemonstrateextremelystrongperformanceinitsnetincome(Figure7.5-1)andnetmargin(Figure7.5-2).Competitorcomparisonsarenotavailable.

Theoverallrateofsalesgrowth(Figure7.5-3)isadirectcontributortothecompany’sstrongnetincomeandnetmargin.AsFitHabitshascontinuedtogrow,theoverallsalesgrowthrateremainsstrongandiskeepingoverallpacewiththemarket.WhileFitHabits’overallathleticshoessalesremainstrong,theoverallgrowthratehasslowedasadditionalcompetitorscomeintothemarketandtheoverallmarketcontinuestobesaturatedwithoptions.

Figure 7.5-1: Net Income

$400 $350 $300 $250 $200 $150 $100

$50 $0

−$50

$ Net

Incom

e in T

hous

ands


Figure 7.5-2: Net Margin45% 40% 35% 30% 25% 20% 15% 10%

5% 0%

−5% FY FY FY FY FY FY FY2016 2010 2011 2012 2013 2014 2015 Proj

Figure 7.4-16: Balanced Scorecard

Focus Area Scorecard FitMeasures 2014 Results 2015 Results Figure

Customers CustomerEngagement 95% 95% 7.2-8

Sales$perCustomerEncounter $107 $155 7.1-4

Inventory #SKUOffered 368,228 390,321 7.1-3

$Sales/SquareFoot $272.29 $449.64 7.1-11

%SupplierPerformance 96.5% 97% 7.1-29

%Returns 10% 5% 7.1-13

%In-stockRate 98% 98% 7.1-14

TeamMembers OverallTeamMemberEngagement 80% 82% 7.3-12

High-performingTeamMemberRetentionRate 93% 93% 7.3-1

FinanceandGrowth NetMargin 22.67% 35.70% 7.5-2

NetIncome $93M $241M 7.5-1

ActivewearClothingRanking #1 #1 7.5-9

AthleticShoesRanking #4 #3 7.5-9

ColorKey:Green=ExceedStrategicTargetforYrby +3%;Yellow=AchievedStrategicTargetforYearby2%;Red=BelowStrategicTarget forYrby −3%

Figure 7.4-17: Percentage Action Plan Accomplishment by Each Focus Area (Target is 85% or greater)

Focus Area 2013 2014 2015

Customers 95% 80% 84%

Inventory 100% 90% 85%

TeamMembers 72% 95% 90%

FinanceandGrowth 79% 82% 88%

FitHabits’abilitytopayitssuppliersontimeisakeycontributortosuppliersatisfactionandperformance.Forthepastfouryears,FitHabitshasoutperformeditscompetitorsintheratetosuccess-fullypayitssuppliersontime,asshownbyBaseline&Rich’sPayUpRating(Figure7.5-4).

FitHabits’daysinaccountsreceivablehaveremainedstrongandperformbetterthanBaseline&Rich’stop-quartileperformers,

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nearingthetop-decileperformers(Figure7.5-5).Foraboutiquecompanyintoday’smarket,FitHabitsisveryproudofitsabilitytocontinuallymeetitsobligations.

FitHabits’dayscashonhandhasconsistentlyoutperformedBaseline&Rich’stop-quartileperformersandinFY2016isprojectedtobeatornearthetop-decile-performers’level,withover280dayscashonhand(Figure7.5-6).Thisstrongcashpositionenablesaccesstofunds,allowingtheagilityforFitHabitstotakeadvantagesofopportunitiesquicklyastheyariseandsupportplannedinvestmentsinnewprojectssuchaswarehouseexpansion.

FitHabits’specialfocusareaistocontinuetoexpanditssupport ofchallengedathletesandtoprovideawideselectionofactive-wearproductsspecificallydesignedfortheseathletes(1.2c[1]).Overthepastthreeyears,FitHabitshasbeenfortunatetoexperienceastrongoverallgrowthrateofthesetargetedproducts(Figure7.5-7);moregrowthisexpectedwiththeadditionalspecializedproductsforchallengedathleteslaunchingthroughFall2016.

Inadditiontoensuringitpaysitssuppliersontime,FitHabitsalsoknowsthatitisimperativetofilecompletequarterlytaxfilingsontime(Figure7.5-8).Asaprivatelyheldcompany,FitHabitshasneverbeensubjectedtoanOfficeoftheInspectorGeneralorIRSauditorinvestigation.

Figure 7.5-5: Days in Accounts Receivable

80

60

40

20

0

Days

in A

R

Days AR Baseline & Rich Top Decile Baseline & Rich Top Quartile


Figure 7.5-6: Days Cash on Hand400

300

200

100

0Days

Cas

h on H

and


Days Cash on Hand Baseline & Rich Top Decile Baseline & Rich Top Quartile

Figure 7.5-7: Gross Sales Growth Year Over Year and Growth Sales in Line for Challenged Athletes

70% 60% 50% 40% 30% 20% 10%

0%

Overall Sales Growth Rate Growth Sales Rate of Specialized Products

FY2011

FY2010

FY2012

FY2013

FY2014

FY2015

FY2016 P

roj

FY2016 P

roj

FY2015

FY2014

Figure 7.5-4: Baseline & Rich PayUp Rating: FitHabits Ability to Pay Suppliers On Time

Baseline & Rich Rating FY2010 FY2011 FY2012 FY2013 FY2014 FY2015

FitHabits **** *** ***** ***** ***** *****

TiptheScales *** *** *** **** **** ****

LeanOut *** *** **** **** ****

LeanMuscle **** **** *** *** ***

DZMT *** *** *** **

KEY:5-StarTopRanking(Green),3-StarConditionalRanking(Yellow),2-StarorBelowUnacceptableRanking(Red)

Figure 7.5-3: Gross Sales Overall and by Product Line

Gros

s Sale

s in $

M900 800 700 600 500 400 300 200 100

0

FY20

10

FY20

11

FY20

12

FY20

13FY

2014

FY

2015

FY

2016

YTD

FY

2010

FY

2011

FY

2012

FY

2013

FY20

14

FY20

15

FY20

16 Y

TD

FY20

10

FY20

11

FY20

12

FY20

13FY

2014

FY

2015

FY

2016

YTD

Gross Sales in $M Activewear Clothing Sales $ Athletic Shoeware Sales $

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Figure 7.5-10: Market Share Overall Based on Percentage Internet Net Sales

Activewear Clothing FY2012 FY2013 FY2014 FY2015

FitHabits 6% 7% 8% 8%

TiptheScales 9% 9% 7% 7%

LeanOut 6% 6%

LeanMuscle 1% 1% 3% 2%

DZMT 2% 3% 2% 4%

AllothersLargeIR/BS) 82% 80% 74% 73%

AsidentifiedbySratsa.comandSCMComparedata

Figure 7.5-9: Market Share Position vs. Key Competitors Based on Percentage Internet Net Sales

Activewear Clothing FY2012 FY2013 FY2014 FY2015

FitHabits #3 #2 #1 #1

TiptheScales #1 #1 #2 #2

LeanOut NA NA NA NA

LeanMuscle #4 #4 #4 #4

DZMT #2 #3 #3 #3

Athletic Shoes FY2012 FY2013 FY2014 FY2015

FitHabits #4 #4 #4 #3

TiptheScales #1 #1 #2 #1

LeanOut NA NA #1 #2

LeanMuscle NA NA NA NA

DZMT #2 #3 #3 #4

7.5a(2) Marketsharedataaredifficulttoobtain,astheactivewearmarketissaturatedwithcompaniesthatprovideamultitudeoffitnessproducts,services,nutritionalitems,etc.Inthepastfiveyears,FitHabitshashiredMarketAnalyzer,LLCtoanalyzeannualreportsfrompubliclyreportedcompanies,conductmarketresearchontheprivatelyheldcompetitors,andengagewithSratsa.comandSCMComparetohelpidentifythestatisticallysoundmarketpositionsofFitHabits’keycompetitorsinitstwo

productareas(Figure7.5-9).MarketAnalyzer,LLCalsodoesanalysistoidentifyFitHabits’overallmarketposition(Figure7.5-10).FitHabitsremainsinthenumberonepositioninInternetnetsalesofactivewearproductsversusitsfourboutiquecompetitors;itisnumberthreeinsalesofathleticshoes(Figure7.5-9).

FitHabitsremainsthemarketleaderinoverallInternetsalesincomparisontoitsfourboutiquecompetitors.LargeIR/BSretainthemajorityofthemarketshare(Figure7.5-10).

Figure 7.5-8: Quarterly Filings Percentage on Time and Percentage Completed (State and National)

FY2010 FY2011 FY2012 FY2013 FY2014 FY2015

QuarterlyFilings%onTime 100% 80% 100% 100% 100% 100%

QuarterlyFilings%Completed 80% 80% 100% 100% 100% 80%

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