In her book “The Good Jobs Strategy,” professor Zeynep Ton of the MIT’s Sloan School of Management, examines how today’s smartest retail companies invest in their employees to lower costs and boost profits. With today’s retail companies being challenged more than ever to motivate customers to visit their stores, retailers are continuously innovating to enhance their customers’ experience to set them apart from competitors who might be ahead of the game. Although much of the focus is on attracting and retaining loyal customers, like Ton suggests, the most successful retailers are starting by attracting the best talent with the promise of “good” jobs. So, in the ever-changing retail space, what actually makes a job “good”?
After more than a decade of studying retail operations, Ton determines that high performing retail companies operate in a Virtuous Cycle. The Virtuous Cycle starts with higher wage rates, which lead to good quality and quantity of labor and provides effective and engaged operational execution. In turn, this enhances the customer experience and leads to higher sales and profits. Companies with low labor budgets struggle with low morale. An under-trained staff that is under committed to their work leads to higher turnover rates. These companies operate in what Ton calls the Vicious Cycle of retail. This cycle leads to lower operational execution, lower customer satisfaction, and lower sales and profits.
Image Source: Why “Good Jobs” Are Good for Retailers
At West Monroe, our Workforce Optimization team specializes in designing the most organized and effective workplace for our clients’ employees to maximize their productivity and front-line effectiveness. By establishing clear methods and process flows, equipping the employees with the proper tools and training, and setting performance standards, we help our clients put the right labor in the right place at the right time to best serve the customer. More than just designing the optimal workplace, we strive to provide the framework for our clients to sustain this environment.
We have found that in order make this a reality, execution management is critical. In the retail industry, where turnover is high and schedules are inconsistent, managing the workforce becomes an important challenge. The traditional model of execution management has been a top down training of managers and supervisors. They are, in turn, responsible for transferring their knowledge and expertise to the employees. However, a new strategy has emerged around workforce management that starts at the front line. We see today’s leading retail companies focus more and more on empowering their employees to take on more responsibility.
Taking the time and dedicating the resources to cross-train your workforce not only increases scheduling flexibility, but it boosts the morale of the employees by giving them meaningful and important work. Many companies are hesitant to make this kind of investment into their labor because labor is often one a company’s largest controllable expenses. It is also an easy metric to see immediate and measurable costs savings. Cross-training takes a lot of time and effort and the increase in developed skills leads to an increase in wages. However, we are seeing that today’s industry leaders are realizing that investing in higher labor budgets and committing to extensive training is an effective and profitable long-term strategy.
Our West Monroe team instructs on the importance of lean and streamlined processes. We stress continuous improvement to constantly eliminate waste and increase efficiency. By investing in and empowering your workforce, the continuous improvement mindset becomes organic. Empowered employees are driven to succeed and become the subject matter experts that drive a culture of continuous improvement. Employees that are committed to their work perform at higher levels, which leads to a multitude of advantages: increased customer satisfaction, higher sales, increased scheduling flexibility, more consistent shifts, and higher retention rates.
We now know that it is no longer a trade-off between investing in employees and offering the lowest prices. Large manufacturing companies, such as Toyota, and retail companies, such as Trader Joe’s, Costco, and QuikTrip, have shown that investing in people and processes drives quality up and costs down. However, it is more than just paying employees higher wages. Now more than ever, it is about the work the employees do and how they do it that makes a job “good” — and “good” jobs are needed to secure the future of retail operations management.