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

HR Magazine, Dec, 1999 by Carla Joinson

These figures were actually typical for a retail grocer, but Lawrence asked the consultant for help in bringing the figures down. "We were doing pretty good with our managers and supervisors," says Lawrence. "Where we failed was with entry-level employees.

"We're a family-owned business," Lawrence goes on, "and our first step was to re-emphasize that associates were part of the family and not just a payroll number." Lawrence asked managers to upstream information about employees (anniversaries, death in the family, etc.) to the corporate office, while the four partners in the business made a point of getting out to the stores and "visiting" with employees.

"Then we expanded our pool of applicants, since you can only select the best of who applies," says Lawrence. The company developed a recruiting brochure, created a flier to insert into shoppers' bags, concentrated on associate referrals and targeted senior citizens.

Lawrence cut his turnover in half. "Hiring people is expensive," he asserts. "With advertising, interviewing, drug tests, training and lost productivity, we figure it costs about $6,000 to hire a new person." But, he adds, "how do you measure the cost of a dissatisfied customer who always gets a 'Partner in Training' every time she comes into the store?"

By-Product of Good Practices

An establishment such as Starbucks Coffee Co. should weigh in with 300 percent turnover--the National Restaurant Association's figure for fast-food establishments. Starbucks' core employees are under the age of 30--the age group with the least commitment to employers, according to the America @ Work study. But, the company has a low 16 percent turnover of full-time employees, and only a 60 percent turnover when the average includes part-timers.

"We've historically been in this range," says Jim Flanagan, Starbucks' vice president of retail in Seattle. "Our cafe atmosphere has a texture and a brand image that makes people comfortable working for us. Though much of our workforce is in a transition phase where they haven't determined what to do with their lives, working at Starbucks is a socially acceptable way station for them."

Flanagan says his company sees no disadvantage in its youthful workers, and believes it would be a mistake not to pursue them. "We don't have any figures on it, but we do see these people coming back to work for us, or they'll give referrals because they've enjoyed working here. Or, they may become a customer for life, and I'll take that, too."

Though the company is becoming a little more thoughtful going forward, Flanagan says that when Starbucks started many of its benefits programs, the philosophy was that the front-line people were important and deserved these benefits. Besides the famous pound of coffee a week (or substitute tea), benefits offered to both full- and part-time workers include a 30 percent employee discount, medical and dental coverage, a stock investment plan and Bean Stock, the company's stock option plan. Flanagan points out that because they are a high-growth company, employees also have tremendous advancement and development opportunities.