The Cost of Doing Business? - employee turnover and retention in the retail sector

HR Magazine, Dec, 1999 by Carla Joinson

Improve retention in the retail sector, save money, enhance customer service and reduce theft.

Competing for market share is a given for most successful businesses, but battling for what Aon Consulting's America @ Work 1999 study calls "workforce share" may be a new challenge for HR. Unfortunately, most companies' need for qualified employees co-exists with a shrinking labor pool and a workforce that feels little compunction about jumping ship for a better offer. The study indicates that roughly 25 percent of surveyed employees would change jobs for a 10 percent pay raise, while more than half would leave for a 20 percent pay raise.

And in the world of retail, turnover comes with the territory.

Figures supplied by the Santa Clara, Calif.-based Saratoga Institute's Human Resource Financial Report show a dismal picture when retailers consider front-line workers--those who meet and establish relationships with their customers. Exempt turnover is 17.7 percent--in line with many other industries--but nonexempt turnover jumps to 78.8 percent. Due to this, many retailers resign themselves to accepting this kind of turnover rate as the cost of doing business.

Some companies defy the norm, however, proving that the revolving door isn't "just the way it is" in retail.

Don't Let Wages Be the Issue

If workers will cut and run for a 10 percent raise, it makes sense to keep employee pay at a level that discourages casual movement. Good wages and benefits are critical to most retention programs, but successful retail companies often tie money to longevity or employee ownership in the company or to the employee's own efforts.

Nordstrom Inc., an upscale retailer based in Seattle, tries to attract people who want to earn good money and then creates an environment where they can. Joe Demarte, vice president of human resources, says that Nordstrom pays well and gives employees the opportunity to make even more money with its pay-for-performance commission system.

"We have salespeople on the floor that made $100,000 last year," he notes. Scheduling also rewards merit and ability: employees who rate high in sales and customer service get the busiest hours. These practices enable Nordstrom to build a staff that sticks around; even including part-time employees, turnover is a low 35 percent.

"Our company culture places an emphasis on trust and respect, and we try to follow the golden rule," says Demarte, who considers much of what the company does for employees simply an extension of that philosophy. Nordstrom offers one of the best benefits packages in the industry, promotes from within, gives an employee discount on merchandise and offers profit-sharing.

"We really believe that if we have salespeople who stay with us and build a relationship with customers, we'll also see a positive relationship to our sales and customer service." He adds simply, "People who are around longer sell more."

Employers Aren't Helpless

"Actually, retention is not just a money issue," says Dick Summers, director of corporate human resources, at Kinko's Inc. in Ventura, Calif. "It's what our customers wanted. Kinko's is not a copy center anymore--we create a product for people who come to us with very important, complex presentation material. It may not matter so much to walk into a fast-food place for a hamburger and not get the same person all the time, but our customers told us they wanted to see a familiar face taking care of them."

Summers explains that the company was formerly composed of workers, or what he calls partners, who operated autonomously. "About two-and-a-half years ago, we rolled all the partners into one big company. With a central management, we had a chance to control things that we couldn't control before."

Turnover stood at 78 percent, and the company took some specific measures that brought the figure down to its current 50 percent. "First of all, we implemented a common compensation plan to replace about 127 different plans that were in existence," says Summers. "We also implemented a common training program that gave our co-workers a training path and sense of career."

The company issued a founder's grant, consisting of $300 worth of stock to all employees who had been there a year or more, "trying to give co-workers a piece of the rock," Summers explains. Other long-term incentives include a 100 percent matched 401(k) plan that puts one-quarter of that match in company stock.

"You can do all these things, but if you treat people badly, they'll leave," says Summers. "Our managers and the company have a real drive to care for employees from the top down to the store co-worker."

Jay Lawrence, CEO of Lawrence Management Services Inc. in Sweet-water, Texas, didn't think much about employee retention in his 20 grocery stores until a consultant at an industry conference urged attendees to look at the issue. "I went back and looked," Lawrence says, "and I was appalled at the number of new hires we had. Our best store had a 70 percent turnover [rate], and the worst had 140 percent."