CHAPTER 11: RETAIL ORGANIZATION AND HUMAN RESOURCE MANAGEMENT

Chapter Objectives To study the procedures involved in setting up a retail organization To examine the various organizational arrangements utilized in retailing To consider the special human resource environment of retailing To describe the principles and practices involved with the human resource management process in retailing

Figure 11-1a: Planning and Assessing a Retail Organization

Figure 11-1b: Planning and Assessing a Retail Organization

Figure 11-1c: Planning and Assessing a Retail Organization – Management Needs

The Value Profit Chain and Human Resource Management Satisfaction Mirror– Employee satisfaction and loyalty (due to fairness of management, the quality of one’s peers in the workplace, employee empowerment and monetary compensation) translates into high levels of customer service and customer loyalty. Recognizes that employees interact with customers not management

Trader Joe’s Employee Statement “We will have well-trained, knowledgeable employees that create a fun store that is clean, WOW merchandised, informative, and one that continually kaizens (constantly improves) the customer experience.”

Wegman’s Employee Satisfaction In a recent survey of Wegman’s employees, 33,000 of 37,000 employees responded (close to 90 percent). When asked, “Does management know what it’s doing?”, 96 percent responded with a “Yes” answer. The most common response to another question to describe Wegman’s management, was the word “family.”

Figure 11-2: The Process of Organizing a Retail Firm

Figure 11-3: Division of Tasks in a Distribution Channel

Figure 11-4: A Job Description for a Store Manager

Table 11-1: Principles for Organizing a Retail Firm Show interest in employees Monitor employee turnover, lateness, and absenteeism Trace line of authority from top to bottom Limit span of control Empower employees Delegate authority while maintaining responsibility Acknowledge need for coordination and communication Recognize the power of informal relationships

Figure 11-6: Organization Structures Used by Small Independents

Mazur Plan Merchandising—buying/selling, stock planning, Publicity—displays, event planning, advertising research Store management—customer service, merchandise protection, receiving Accounting and control—credit, expense budgeting, inventory management

Figure 11-7: The Basic Mazur Organization Plan for Department Stores

Chain Retailer Organizations Centralized functional divisions– real estate, distribution, human resources (top management) Elaborate information system and management controls Centralization of much of buying with room to adapt to local markets

Department Store Organization Formats Main store control– flagship executives oversee store units. Extreme centralization Separate store organization—each store buys for itself and maintains sales responsibility Equal store organization– buying is centralized; branch stores are sales units

Figure 11-8: Equal-Store Organizational Format Used by Chain Stores

Figure 11-9: The Organizational Structure of Kroger

Human Resource Management in Retailing Recruiting Selecting Training Compensating Supervising

Employee Turnover Costs The Coca-Cola Retailing Research Council found that the supermarket industry’s annual turnover costs can exceed its entire profits by over 40 percent Annual employee turnover for Publix, Stew Leonard’s and Wegman’s is 5-6 percent versus 19 percent overall (Fortune and Coca-Cola data)

Direct and Indirect Costs of Employee Turnover Direct Costs include: separation costs, exit interviews, replacement costs (advertising, screening, new employee orientation) and training costs Indirect costs include: customer dissatisfaction, reduced suggestion selling, pricing errors, reduced morale among co-workers

Table 11-2: True Cost of Employee Turnover Costs of using fill-in employees Severance pay for exiting employees Costs of hiring new employees Training costs Costs of mistakes and lower productivity while new employees gain experience Customer dissatisfaction due to the loss of prior employees and the use of inexperienced workers. Lower continuity among co-workers. Poor employee morale when turnover is high.

Women in Retailing Issues to address with regard to female workers Meaningful training programs Advancement opportunities Flex time: the ability of employees to adapt their hours Job sharing among two or more employees who each work less than full time Child care Retailing empires Mary Kay Avon

Wal-Mart Sex Discrimination Case Class action case involving 500,000 to 1.6 million women Filed ten years ago when female average salary was $13,000 about $1,100 less than average male salary Largest single litigation ever faced by Wal-Mart Wal-Mart seeking to throw case out –argues that its policies prohibit discrimination, many different positions are involved, and personnel decisions are made at store level– not centralized ‘

Minorities in Retailing Issues to address with regard to minority workers Clear policy statements from top management as to the value of employee diversity Active recruitment programs to stimulate minority applications Meaningful training programs Advancement opportunities Zero tolerance for insensitive workplace behavior

Diversity Two premises: That employees be hired and promoted in a fair and open way, without regard to gender, ethnic background, and other related factors That in a diverse society, the workplace should be representative of such diversity

Labor Law Considerations Retailers must not Hire underage workers Pay workers “off the books” Require workers to engage in illegal acts Discriminate in hiring or promoting workers Violate worker safety regulations Disobey the Americans with Disabilities Act Deal with suppliers that disobey labor laws

Figure 11-10: A Goal-Oriented Job Description for a Management Trainee

Figure 11-10: A Goal-Oriented Job Description for a Management Trainee (cont.)

Figure 11-11: A Checklist of Selected Training Decisions

Components of Compensation Total compensation Salary plus commission Profit-sharing

Employee Behavior and Motivation Several attitudes may affect employee behavior Sense of accomplishment Enjoyment of work Attitude toward physical work conditions Attitude toward supervisors Confidence in company Knowledge of business strategy Recognition of employee role in achieving corporate objectives

Employee Motivation I Employee centered approach—Whole Foods team based hiring decision after 4 week trial period. Needs 2/3’s vote Hire salaries– Publix store manager=$113,000 ; Nordstrom has salespeople making $100,000 Continuous assessment-Trader Joe’s every three months (punctuality, is always friendly, knows product features, promotes high store morale. For part-time as well as full-time employees

Employee Motivation II Profit sharing—Publix current and former employees own 85 percent of company. If price earnings multiple is 20; every $1 of extra profit equals $20 in additional wealth. Encourages harder work for self and fellow workers Au Bon Pain– store managers have compensation linked to profit goals at specific locations

Style of Supervising Retail Employees Management assumes employees must be closely supervised and controlled; only economic inducements motivate Management assumes employees can be assigned authority and be self-managers; motivation is intrinsic Management applies self-management approach

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