Workplace Improvements

Increased pay is only part of the equation for retailers to minimize turnover, increase productivity and improve customer service now that unemployment is back to pre-recession levels.

Kroger, which hired more than 12,000 new store associates in 2016, recently announced about 1,300 non-store workers are expected to take its voluntary retirement offer, which it extended as it strives to control administrative costs in a period of price deflation. The workforce reduction was announced after the company reported its first quarterly decline in comparable store sales in 50 quarters and said same-store supermarket sales would likely range from flat to 1 percent growth in 2017.

With growing uncertainty from advances in e-commerce, new competition from nontraditional players, and a slow-growing economy, many retailers are re-evaluating their labor allocation as they seek to manage costs while still catering to consumers' differing desires for how to shop and what to buy. But retailers also are paying attention to management styles and how workers perceive them.

"Overall, employees are just disgruntled, just flat out disgruntled."

Kelly Hughes,
Ogletree Deakins.

In part, the heightened attention on workplace issues stems from legislation at the state and local level, including wage, hour and scheduling regulations. "We're going to see more actual legislation, a lot that kind of bleeds over to the workplace flexibility (piece)," says Kelly Hughes, attorney and co-chair of the retail industry group at Ogletree Deakins, a Charlotte, N.C. specializing in labor and employment. "Overall, employees are just disgruntled, just flat out disgruntled."

Retailers face growing hostility from low-wage workers and lawmakers taking the workers' side. Complaints about low wages have fueled protests in many cities and contributed to Walmart, McDonald's and other large corporations decisions in recent years to hike wages. Giving an inch can be a strategic move over the long term. A small increase in wages can be offset by increased productivity and improved service, while below-market wages are certain to boost turnover over time. With turnover comes higher costs for recruiting, onboarding and training.

"There's definitely a lot of trends that we see forcing retailers to look at how they manage their labor and the business as a whole," says Joshua Ostrega, chief operating officer and co-founder of WorkJam in Montreal. "Labor costs are going up."

"Labor costs are going up."

Joshua Ostrega,
COO and co-founder, WorkJam.

That was evident at the start of the year. Nineteen states raised their minimum wages because of ballot measures or legislation passed in 2016 or before, according to the Economic Policy Institute. It computed the economic gains at about $4.2 billion in additional wages for a total of 4.3 million workers in 2017.

"Our industry as a whole has done a lot of growing up about doing the right thing for the employee," says Lauren Johnson, CEO of Newport Avenue Market, an employee-owned retailer in Bend, Ore., where minimum wage is going up 50 cents a year until it reaches $15 an hour. Newport Avenue Market currently pays above the current $12 an hour minimum, except for students who serve as "box kids."

But wages alone won't satisfy a retail workforce increasingly comprised of Millennials. Retailers are heeding employees' expectations in a variety of ways from transparency about schedules and new avenues for advancement.

Fast growing player in the food retailing industry, such as Sprouts, are expanding and emphasizing their worker-friendly workplaces. Sprouts, which has announced plans to open 32 new stores in 2017 and about 30 stores per year for the next several years, says it will be hiring about 100 workers per new location. The company ended last year with 253 stores.

With efficiency an important factor in the success of the new locations, Sprouts will use scheduling technology and invest in employee training, CEO Amin Maredia told investors during the company's fourth quarter conference call. "We will continue to focus on our team members, their training and strengthening their road map for career success so that we can scale with great leadership in our stores," Maredia said.

Improved scheduling has become a focus for many retailers, thanks to new technology designed to provide more transparency and improved communication among employees and managers. Ceridian's technology platforms aim to help retailers manage scheduling, payroll and other workforce management tasks — before retailers are given a government mandate to change the way they do business.

"If retailers don't act on their own, (changes) will be legislated," says John Orr, senior vice president of retail at Ceridian, a provider of human resources software and services.

"We will continue to focus on our team members, their training and strengthening their road map for career success so that we can scale with great leadership in our stores."

Amin Maredia,
CEO, Sprouts.

Seattle and San Francisco have passed new scheduling laws that address the way retailers manage labor by requiring employers to provide workers with more advanced notice of work schedules or compensate them for last-minute changes. In Seattle, companies also must offer part-time workers more hours before making additional hires and they must pay part-timers at the same rate as full-time workers. But the laws have resulted in new complaints about less flexibility for workers.

Technology companies say their solutions can alleviate the issues without legislation. For example, last-minute schedule changes wreak havoc on workers' personal or family plans, but they also cost retailers money when they pull managers away from other more productive tasks to handle staffing issues.

PSK Supermarkets has held the line on overtime compensation by monitoring workers' hours more closely. The retailer, which operates 66 Foodtown stores in New York, New Jersey and Pennsylvania, now relies on Dayforce HCM scheduling and payroll technology to add transparency and automate what previously was a headache for many managers. "With the technology, managers can see their payroll dollars spent, midweek, in real time. If someone works beyond their schedule, we know about it right away, before the workweek ends," Noah Katz, co-president of PSK Supermarkets said.

"Our industry as a whole has done a lot of growing up about doing the right thing for the employee."

Lauren Johnson,
CEO, Newport Avenue Market.

Before adding the system, the company's payroll reports weren't in real time. Managers didn't know what they had spent on payroll until about five days after the week ended, Katz said. By then, it was too late to correct the problem. With Dayforce HCM, managers can check their spending every day, and Katz asks them to stick with the payroll amount they agreed to spend.

By adding transparency, the scheduling technology can remove the guesswork and some of the last-minute reshuffling that can take a toll on workers and managers alike. New scheduling apps, available from many providers, offer various options for automating workforce scheduling. Most can be accessed from smartphones, so workers can check their schedules in real time whenever they want, says of Ostrega of WorkJam.

The return on investment of Ceridian's scheduling technology stems from more precise staffing levels, increases in sales and transaction size due to the appropriate staffing, and reduced payroll costs, including the amount of time required to file payroll, says Orr. Managers also can see their labor budgets in real time, he says.

"If retailers don't act on their own, (changes) will be legislated."

John Orr,
SVP retail, Ceridian.

Perhaps more importantly, workers like having their schedules at their fingertips and being able to communicate schedule requests instantly. They are more engaged in their work, and retention improves as a result. Employee productivity can increase up to 20 percent annually, thanks to the technology, Orr says.

In the end, improved productivity and fewer worker complaints should translate to satisfied customers, experts say. "How the customer experience is being delivered is what really matters," Ostrega says.

At Newport Avenue Market, workers receive their schedules by email but also can access them on their phones using the Orbital Shift app, Johnson says. While the company tries to accommodate workers' requests for days off, Johnson says, "We write our schedule to the business."

"These workers want to be able to make extra money."

Eddie Lou,
CEO and co-Founder, Shiftgig.

When conflicts arise, employees can send out a request on Orbital Shift for another worker to cover their shift."That's been a really nice tool," says Joe Anzaldo, general manager. "A lot of stores they transfer the problem to the department head. Then the department head has to deal with the shift-changing. It's all on them. It's one of the more frustrating things."

The system also manages payroll and computes gross profit history by department, so department level heads can see it. "They can see their profits and what they're putting in week by week and quarter by quarter," Anzaldo says. "It's really rare for department heads to know this much information."

Automated scheduling and electronic communication with workers are designed to eliminate the type of workforce management issues that can be frustrating, such as being short staffed, but they don't always solve the problem of finding enough workers for a busy weekend — a more pressing issue now that the U.S. economy is at a sub-five percent unemployment rate.

Apps like Shiftgig strive to make it easier for retailers to hire additional contractors when their schedules demand it. In a model similar to Uber, the mobile platform connects available workers with employers on an as-needed basis. It currently offers 16,000 pre-vetted "specialist" workers who earn on average $12.50 an hour, and it serves 1,700 corporate customers in the retail and hospitality industries. "They're coming to us because they're short staffed. If they can't get products on their shelves...if they can't provide customer service, customers are going to go to another dollar store or another grocery store," says Eddie Lou, Shiftgig's CEO and co-founder.

For workers, Shiftgig simplifies the process of finding a temporary shift. "These workers want to be able to make extra money," Lou says. "These are people who are underemployed, or they're very employable but want to work 60 hours a week."

"How do you attract people with ways that are not just with dollars, but with advancement?"

Tina Syring,
Partner, Barnes & Thornburg.

But increased reliance on technology also brings new risks. Retailers could be on the hook for extra hours if they expect employees to check their smartphones during off hours for schedule changes or messages from their supervisors, says Kelly Hughes, the attorney at Ogletree Deakins. "If you require your nonexempt employees to check their emails and voicemails when they are not expected to work, that can be a problem," Hughes says. "I would encourage employers to be very, very careful any time they are using tech to communicate with their workers when they are not clocked in."

At any given time in the current environment, experts say slightly more than half of workers are actively looking for a new job or keeping an eye on career development opportunities so they can make a move in the future. One reason is a lack of engagement. According to WorkJam's study on "Factoring People into the P&L Equation: Retail Managers Reveal the Drivers and Dividends of Hourly Employee Engagement," about 17% of retail managers said employees were very motivated and engaged, while 89% of managers said keeping workers happy was a challenge.

"Engagement tends to drop the longer people are with an organization," says Jim Harter, chief scientist for workplace and wellbeing at Gallup. Disengagement often leads workers to pursue new opportunities at other companies. "The really progressive organizations have fixed that problem. They have longer tenured employees who are just as engaged as others."

Often a manager can set the tone for an engaged workforce and can affect the company's performance. The most effective managers inspire workers by taking an interest in them and working with their strengths, instead of focusing on their weaknesses, Gallup research suggests. "You have to move from an annual review to more conversations," Harter says.

Offering a change in position can keep employees motivated because they will be learning a new set of skills or tasks. As retailers expand their e-commerce services, such as click-and-collect or home delivery options, many are creating new positions and often eliminating some existing jobs.

"If someone works beyond their schedule, we know about it right away, before the work week ends,"

Noah Katz,
co-President, PSK Supermarkets.

When changes in the retail operation affect job duties, companies should proactively explain what's going on. "The key is communication to the employee, and ensuring the individual understands the job is changing," Hughes says. Retailers should post the new position, she says, then explain to affected workers: "Your position is going away. This is a new position we're creating."

Companies have the right to make changes to their business, but they should think about the best way to present the change to workers to avoid any potential discriminatory impact, says Tina Syring, a labor and employment partner at law firm Barnes & Thornburg LLP in Minneapolis. Retailers should "work with their legal to make sure there is no disparate impact on the protected classes," Syring says.

For example, transferring only women, minorities or older workers to what could be considered a lower-status job could raise a flag. Instead, Syring says, retailers should consider, "How do you attract people with ways that are not just with dollars, but with advancement?" When feasible, consider structuring a new assignment as a promotional opportunity and offer training as part of the move.