Can you cut it?

Collecting supermarket trolleys from car parks might look like a fairly straightforward task, but did you know that it costs some of the largest grocers as much as £20m in labour each year? Equally, if these retailers shave one second in time off each till transaction, the money saved can run into millions. In retail, people are very, very expensive. And as one of the biggest costs to the business, it comes as no surprise that staffing budgets take a hit when times are tough.

The trouble is, retailers’ approach to saving money in their staffing budget is not always one based on clever scrutiny but more often axe-wielding.

And just as people are very expensive, they are also integral to retail success. These are the people who liaise with customers, fill the shelves and sell the products. Cut budgets badly, and the effects can be catastrophic.

The cost of cuts

Niche war games specialist Games Workshop is a case in point. At the end of January it admitted its bottom line had been hit almost solely because of a decision to slash store staff levels. Yes it saved them money, but it also resulted in direct fall in sales as its reliance on inexperienced employees increased - disastrous for a retailer for which its store experience is vital. In the six months to November 28, pre-tax profit fell to £6.7m from £7.9m, while turnover fell from £62m to £60m.

At the same time, the BRC-Bond Pearce Retail Employment Monitor revealed at the end of January that a third of retailers planned to reduce staffing levels in the first three months of this year, compared with just 13% last year.

But as Marks & Spencer divisional director Steve Finlan says: “Someone’s not going to come along with a wheelbarrow of money for your staffing budget. Staffing cuts are a way of life and you have to respond to it in a way that suits your staff and your customers.” So how can it be done judiciously? Kurt Salmon director Sue Butler says it’s something many retailers struggle with. “It’s quite common for head office to say to stores: ‘You need to be doing exactly what you’ve always done but with fewer people’.”

Scott Deacon, senior consultant at retail productivity consultancy SWL, says the mistake most retailers make is “trying to work it out in simple currencies”. He explains: “They’ll say: ‘Right, we need to take £1m out of the staffing budget or half a million hours out of the staffing budget’. If you do that you have no concept of which stores you should do it in, which formats, which time of the year, or which day of the week.” The store manager will then be presented with a number that they have to work to, regardless of whether it is adversely affecting the service model. And as SWL chief executive Matthew Buckley points out: “Anyone can cut the budget but if it damages the service model, you’ve damaged the growth of the business.”

An ultimate goal is to ensure they have the right number of people in the right place at the right time. There are several solutions, with fully automated labour scheduling at the most complex end of the spectrum. This uses algorithms to get the best fit between what it calculates the store will need in terms of staff hours, and will then automatically schedule specific members of staff to specific hours. Such technology has both benefits and drawbacks depending on the nature of the retailer. It is typically well suited to complex retail environments such as grocery, but it’s not for everyone. For instance a complex autoscheduling system requires that you update people’s holiday as well, so the retailer needs to invest time and money in updating the system. As Envision Retail managing director Jason Kemp says: “The more automated it is, the more accuracy is required.”

Automatic for the people

M&S, for one, doesn’t use such labour scheduling systems. Its approach is more manual. Finlan says: “In some ways it’s nice not having one. Sometimes we can all be a bit of a slave to systems.” Instead, the retailer “analyses the hell” out of its store service and operational models to work out who should be where and when. It develops an ideal operating matrix and three times a year, checks staff deployment in each store against its ideal. Constant monitoring is crucial. “You have to keep working at it,” says Finlan. Even something as small as a change in local authority car parking times or charges can have an impact on footfall and therefore required staffing levels.

At the other end of the scale, the simplest solution to reducing staff expenditure is to give the store manager a budget in terms of hours and ask them to draw up a rota to cover the stores’ needs. But, says Kemp: “This has a high reliance on store managers’ knowledge of customer footfall patterns and when staff are available to work.” In many cases this might be fine, but for those managers in charge of a larger store with a high proportion of part-time workers and people on different contracts it becomes very difficult. “Problems arise if the store manager lacks the knowledge or skills to do this well, and therefore the same rota will be trotted out week after week,” adds Kemp.

Store 21, which has about 2,200 store staff in its 215 stores, has come up with a straightforward solution that saved it £1m in the first 12 months of being introduced about three years ago. Chief executive Anupam Jhunjhunwala says it based its very simple system on the amount sold in each store, with these stats being reviewed on a quarterly basis. From there, each store is allocated a base number of staff hours per week, upon which there is a degree of flexibility.

Regional managers are given a certain amount of leeway to take into account local trading issues at any particular time. In addition, more hours are given for peak trading based on sales forecasts. “It’s dynamic,” he says. “Everyone can see that if they sell more they get more hours, and there is a logic and science to this whole process rather than just sticking a finger in the air and coming up with a figure.”

However, pouring energy into better scheduling is fairly inconsequential if store employees have rigid working hours from one week to the next. The best systems in the world can only schedule people when they are available to work.

As M&S HR director Tanith Dodge says: “A lot of it boils down to good will and flexibility and that has to come from both sides - employees and employer.”

The role of HR in bringing about flexibility is crucial and all retail HR teams should therefore spend time supporting store managers around managing store staff’s contracts. Finlan adds: “You have to be very sensitive to the people in your stores if you’re asking them to change what they’re doing. They might have childcare considerations or other jobs that needs to be taken into account.”

Cutting down on cuts

Retailers should also remember that cutting hours is not the only solution if they need to address costs. Improving efficiency also saves money. Finlan says that as budgets have come under pressure during the recession, M&S has made every effort to step up staff productivity - for instance quicker replenishment - than cut hours. “Our first instinct when we need to reduce our staffing bill is to understand how we could recoup that with efficiencies,” he says.

Paying close attention to how much store staff time costs in terms of certain tasks may unearth some surprises. For instance, Deacon refers to an in-store offer that Woolworths once wanted to introduce to coincide with the World Cup. The plan was for customers to take a voucher into the store on one specific date. It didn’t get off the ground after closer analysis revealed that it was going to cost the retailer about £1m in store labour alone.

In order to improve productivity, Kemp advises retailers to look at all activities that either happen frequently - such as till transactions - or tasks that don’t happen that frequently but take a long time. From there, efficiency can be greatly enhanced. Butler agrees: “Can you do more with the staff that you already have?” she asks.

Kurt Salmon says that typically, 40% of store staff hours are taken up by back office support processes that are often riddled with inconsistent procedures and the duplication of tasks, and yet arbitrary staff budget cuts usually affect not back office activities but customer facing ones, which in turn can have a huge impact on customer service, conversion rates and, ultimately, the bottom line.

Up to the task

Another problem, adds Butler, is that many store managers allocate more hours and focus on those tasks on which they are more rigorously monitored, such as management reporting, queue length and availability of promotion lines, but don’t necessarily allocate it to improve efficiency.

But if closer attention is paid to those tasks that are most inefficient - particularly in the back office - it can free up time on the shopfloor to improve customer service. Kurt Salmon predicts that retailers can boost conversion rates by at least 10% by focusing store staff on customer-facing activities.

A huge amount of money is wasted on inefficient staffing in stores - the British Retail Consortium estimates this is as much as 7.5% of retailers’ wage bill. But it is not one department’s responsibility. Results will only be realised with a combined improvement in budgeting, staff scheduling, operational efficiency and staff flexibility that requires the close collaboration of finance, operations, HR and store managers alike. And that, perhaps, is one of the biggest challenges of all.