As the whole of the retail sector will attest to, in the current marketplace, Darwin’s theory of evolution has never been more keenly observed. Strolling down the high-street, the windows feature a myriad of brightly coloured discount signs, retailers pleading with consumers to buy their margin squeezed goods over the margin squeezed goods of their contemporaries.
We are all under pressure to do more with less these days. Pinching pennies across every area of the Business is the key challenge for all thrifty retailers, but in the fight for survival, should you be cutting corners on one of their most powerful weapons – your employees?
Zeynep Ton is a teacher of management at M.I.T Sloan School of Management. She recently completed a study into the success of discount, low-cost retailers, such as Costco. Her study showed that these companies spent more on employee salaries, training and wellbeing than their peers, and that there was a correlation between this and their profitability. Zeynep believes that if you pay your employees more, you attract a better group of employees, and you retain a better group of employees.
Surely the greatest testament to this theory is John Lewis. This year John Lewis’ 75,000 employees shared a pot of £165.2m, with staff awarded bonuses equivalent to 14pc of their salaries. The employee-owned partnership, comprising the John Lewis department store chain, and Waitrose the grocer chain, has always strived to position itself as the ‘caring capitalist’. By giving every employee from the bottom to the top the same proportional bonus, each member of staff feels that they are valued equally for the contribution to the business. It follows then, that each member of staff, whether their role be that of a shelf stacker, a customer sales operative, a back office administrator, or a board member at the very top of the tree feels valued, and strives to repay that ‘value’ in their everyday role.
How much of The John Lewis Partnership’s success be directly attributed to the hard-work of its staff? Do you view the role of your employees in the success of your retail organisation as fundamental?
The role of your employees in the success of your retail organization isn’t necessarily complicated, but there are lots of factors that can negatively affect the customer buying experience when their roles are performed badly by low paid, disinterested employees.
Another recent example is the fast growing Japanese chain, Uniqlo. In the past few years Uniqlo has become one of the most successful retail chains in the world. Uniqlo’s success is in part due to the fact that it sells simple affordable clothing, without compromising on style and durability. But there’s another contributing factor to Uniqlo’s success, a differentiator from its contemporaries – Uniqlo hires a lot of people, and it spends a lot of time training them. When the company launched its flagship New York store in Autumn last year, it hired six hundred and fifty employees, and promised to have four hundred and fifty of them working at any one time. This is of course in stark contrast to the way many retailers have been forced to operate in recent years, competing on price by keeping labour costs down, hiring as few workers as you can get away with and paying them as little as possible. Being lean in business is generally a positive, but in this market, too much cost cutting can become a bad strategy, for workers feeling over worked and underpaid, for customers who receive poor customer service, and for businesses which generate lower profits.
Failing to invest in your people will mean that execution at your stores will suffer. Poor customer experiences due to un-helpful staff on a fitting room, slow moving and lengthy queue on tills, staff who fail to point out promotions or miss the valuable opportunities to up-sell, simply because they lack the skills or the passion for your business to do so – this will impact your bottom line! What’s more, if your competitors are recruiting and retaining better, happier, more expert staff, they will be taking business from you. Employees are not a cost, they are an investment, and its more important than ever to ensure you put your business in the position to capitalize upon them. Simple changes to the way you interact with your staff could change the way they in which they view your business, and in turn, the way in which they drive your profits.
According to Proudfoot’s recent study into employee productivity, every worker wastes over two and a-half hours each week, simply because of poor communication. Spending time with your employees, ensuring that they understand your business goals, and clearly communicating to them what their contribution should be, will help in ensuring that you reach them. It’s easy to look at weekly-missed targets and blame the team on the front line, sending them out feeling miserable and resentful of ‘the people at the top’ rather than disappointed for the business. How many times do we honestly sit down and talk about the importance of their role, make sure they are confident with all of the tools at their disposal, let them know that they are vital to driving the business forward?
In large retail organizations especially, it’s easy for employees to hide behind senior, under deputy, under manager, under regional manager…the list goes on. Make sure even the most junior of employees is accountable, set individual targets and processes to make sure that these targets are monitored, and not forgotten on a busy trading week, or when the person directly above them feels too busy to make time to check whether the employee is on track. You may decide not to simply set sales targets, but also targets on efficiency – can your marketing team get a project completed in a certain timescale, can your finance team knock half a day off the time it takes to produce weekly reports? We’d all like to think that our employees understand what is expected of them each day, and we hope that once we have told them something once they will continue to do as we have asked, but do we really take enough time to constantly drive them to give their best, and to make them truly accountable if they have failed to?
The training budget may be one of the areas most under pressure, but the need to up-skill your staff remains critical. The IoD says that 58% of its member businesses state skills gaps are holding back their growth. The way to make your training most effective is to speak to your employees – ask them what they need to do their job better. A recent study conducted by American Express showed that consumers thought that in the current economy companies are paying less attention to customer service than in the past, with 46% of those surveyed stating that retailers did not make any effort to retain their business. Yet the difference between well trained staff delivering good customer service that encourages customers to return, and having poorly trained staff delivering bad customer service, is the difference between having lots of customers and not enough! When people have less money to spend, they will spend what they do have with retailers they trust. Insist that your employees provide a great experience every time and teach them how to do it. Train every employee in proper customer service procedures and ensure they clearly understand the importance of the customer to your business, and their own, survival. Ensure they realise that they may not get a second chance to make a good impression!
If your employees are rewarded they will give back to you, if they are happy they will stay with you, and if they are stimulated they will work harder. It’s true that some point, hiring more people will yield diminishing returns, and if your products aren’t of good quality, having extra employees on the payroll won’t help. But happy workers tend to stay with their employer, which saves the costs associated with employee turnover, like hiring and training, or worse, costly redundancy payouts and dismissals as a result of poor hiring.
The key to remember when you’re looking at your cost base is that in retail, scrimping on your employees won’t save you money; it just means you get less for less.