Gap's Employee Productivity Lags its Peers


Being the largest of its competitors with the most resources, Gap Inc. (NYSE:GPS) stores should be able to sustain a steady flow of regular customers. Sales from regular customers should sustain a minimum market share and guarantee less volatility. Due to its size, Gap Inc. also has a huge advantage in economies of scale over all its competitors. Yet, Gap is steadily under performing its competitors.

Adapting Darwin's Principle to the business world: It is not the largest of corporations that survive, nor is it the ones with the best profits and balance sheets, but rather its the corporations that can adapt to the changing economic conditions and market forces in order to perform consistently well.

Since 'statistics never lie', we can look for answers by comparing some of the numbers reported on Yahoo by the Gap and its major competitors (with revenues over $1 Billion):


Revenue ($B)

Full-Time Employees

Employee Productivity

Gross Profit ($B)

Employee Profitability

Abercrombie & Fitch (NYSE:ANF)






American Eagle (AEOS)






Ann Taylor (NYSE:ANN)






Chico's (NYSE:CHS)






Claires (CLE)






Gap (GPS)






Jones (NYSE:JNY)






Limited (LTD)






Nordstrom (NYSE:JWN)












Urban Outfitters (NASDAQ:URBN)






Click to enlarge

Gap has the most full-time employees of all its major competitors. With so much resources, the Gap should be outperforming all its competitors. But instead, Gap's employee productivity (revenues per employee) is the lowest of its competitors. Gap also has the lowest employee profitability (gross profit per employee); since outsourcing is already subtracted before calculating profits, this quells any thought that Gap's competitors might outsource more work as an argument for having less full-time employees.

To experienced Industrial Engineers, it is clear from the comparative statistics that Gap has burdened itself with a lot of unnecessary work. Unnecessary work impedes creativity, wastes resources that could be used else where in the company, and leaves employees less time to focus on their customers.

Frederick W. Taylor:
"Productivity of work is not the responsibility of the worker but of the management."

Historically and typically, unnecessary work is created when growing companies just keep adding employees to solve the problems of growth; and they just keep doing more of the same work that they had been doing when there were a smaller company; instead of taking an educated approach of changing and eliminating functions to reduce costs and take advantage of the economies of scale. It seems the Gap had never transitioned to being an efficient larger company.

As stated in several news reports on Gap's history, the Gap had changed CEO and upper management a few times over the years. At other successful companies, one of the first acts of new administrations is to flush out all non-professional middle management. This probably never occurred at the Gap, since over the years, no major layoffs were reported there.

Non-professional middle management lack the knowledge (do not have the appropriate education for their appropriate position) and also lack experience at larger companies. Hence, they are unable be adapt to the changing economic conditions and market forces; they are unable to streamline business processes to eliminate unnecessary work for their employees; instead, they just keep adding more unnecessary work. As a result, the employees are unnecessarily impeded from continuously and consistently producing more creative market-focused designs, having more time to be more customer focused, etc.

Due to the psychology of non-professionals, their goals are usually opposed to the corporate goals of a CEO. CEOs' corporate goals are to increase profits by increasing sales revenues and efficiency while reducing costs. As corporations grow from small to large, they usually become more and more professional in order to assure larger and more astute investors. Swimming against this tide, non-professionals try to justify their importance and positions by increasing their budgets (costs). They do this by increasing the number of employees under them and promoting other non-professionals. This perpetuates more unnecessary work for the corporation, making it less efficient.

Peter F. Drucker:
"But nothing is as dangerous as a decrease in productivities. It makes a shrinking of the economy inevitable."

Product designs, store layouts, customer demographics, etc., are all mere symptoms of the Gap's real problem. Instead of depending on hit or miss luck for its sales, Gap needs needs to take a more scientific and professional approach in order to pro-actively adapt to the changing economic conditions and market forces. Since there is 'no gain without pain', the Gap needs efficiency or business process re-engineering experts to streamline its business processes and eliminate unnecessary work for its employees by first flushing out the root cause of all its problem symptoms -- non-professional middle management.