Chapter 9 Human Resource Management Mc Graw-Hill Irwin Retailing

Chapter 9 Human Resource Management Mc. Graw-Hill/Irwin Retailing Management, 7/e © 2008 by The Mc. Graw-Hill Companies, All rights reserved.

Retailing Strategy Retail and Site Locations Chapter 7, 8 Retail Market & Financial Strategy Chapter 5, 6 Organizational Structure & Human Resource Management Chapter 9 Information and Distribution Systems Chapter 10 Customer Relationship Management Chapter 11 2

Questions ■ In what way does the management of human resources play a vital role in a retailer’s performance? ■ How do retailers build a sustainable competitive advantage by developing and managing their human resources? ■ What activities do retail employees undertake, and how are they typically organized? ■ How does a retailer coordinate employees’ activities, and motivate them to work toward the retailer’s goals? ■ What are the human resource management programs for building a committed workforce? ■ How do retailers manage diversity among their employees? 3

A study of Sears’ employees found a 5% increase in employee satisfaction resulted in a 1. 3% increase in customer satisfaction. This led to a 0. 5% growth in sales. 4

Gaining Competitive Advantage through Human Resource Management Why does human resource management give a sustainable competitive advantage? ■ Labor costs account for a significant percentage of a retailer’s total expenses ■ The customer experiences are determined by the activities of employees (selecting merchandise, providing information and assistance, etc. ) ■ These potential advantages are difficult for competitors to duplicate 5

Objectives of Human Resource Management ■ Short Term n n Increasing Employee Productivity = Sales/ Number of Employees ■ Long-Term n n n Employee attitude customer satisfaction and loyalty long-term performance Increasing Employee Satisfaction Reducing Turnover Employee turnover = # of employees leaving their job during the year # of positions 6

Human Resource Management Challenges in Retailing Work Environment ■ Open Long Hours ■ Peak Sales Periods ■ Emphasis on Cost Control Employees ■ Unskilled ■ Part-Time ■ Diverse Backgrounds High Turnover 7

Downward Performance Spiral 8

Human Resource Triad 9

Special HR Considerations Facing Retailers ■ ■ Need for Part-Time Employees Demand on Expense Control Changing Employee Demographics International HR Issues 10

Increasing Workforce Diversity ■ Workforce employing more minorities, handicapped people, and the elderly ■ Older workers are more reliable than younger workers ■ Cost effective as training and recruitment costs are low Royalty-Free/CORBIS 11

Strategic Issues Facing Retail HR Professionals ■ The design of the organization structure for assigning responsibility, and authority for tasks to people and business units ■ The approaches utilized coordinate the activities of the firm’s department and employees, while motivating employees to work toward achieving company goals ■ The programs used to build employee commitment, and retain valuable human resources 12

Designing the Organizational Structure Organizational structure Identifies the activities to be performed by specific employees, and determines the lines of authority and responsibility in the firm 13

Tasks Performed in a Retail Firm 14

Strategic Management Tasks Performed in a Retail Firm ■ ■ ■ Develop a retail strategy Identify the target market Determine the retail format Design organizational structure Select locations 15

Merchandise Management Tasks Performed in a Retail Firm ■ Buy merchandise n Locate vendors n Evaluate vendors n Negotiate with vendors n Place orders ■ Control merchandise inventory n Develop merchandise n Budget plans n Allocate merchandise to stores n Review open-to-buy and stock position ■ Price merchandise n Set initial prices n Adjust prices 16

Store Management Tasks Performed in a Retail Firm ■ ■ ■ Recruit, hire, and train store personnel Plan work schedules Evaluate performance of store personnel Maintain store facilities Locate and display merchandise Sell merchandise to customers Repair and alter merchandise Provide services Handle customer complaints Take physical inventory Prevent inventory shrinkage 17

Administrative Management Tasks Performed in a Retail Firm ■ Promote the firm, its merchandise and its services ■ Manage human resources ■ Distribute merchandise ■ Establish financial control 18

Assignment of Responsibility for Tasks ■ ■ Strategic – Top Management, Board of Directors Merchandise Management – Merchandise Division Store Management – Stores Division Administrative – Corporate Specialists 19

Organization of a Small Retailer 20

Organization of Macy’s Florida 21

Merchandise Division Organization: Macy’s Florida 22

What does a Buyer do? A buyer is responsible for: ■ ■ ■ procuring merchandise setting prices and markdowns managing inventories building and maintaining relationships attending trade and fashion shows negotiating with vendors on price, quantities, assortments, delivery dates and payment terms ■ specifying private label merchandise © Digital Vision 23

What does a category manager do? ■ A category manager n n Is responsible for a set of products that are viewed as substitutes by customers (Ex: all pastas – fresh, frozen, packed, or canned) Is evaluated on the profitability of category Is motivated to eliminate “me to” products and keep essential niche products Is used primarily by supermarkets, big box retailers 24

Allocator vs. Planner Allocator – responsible for allocating the merchandise and tailoring the assortments in several categories for specific stores in a geographic area. Planner – responsible for the financial planning and analysis of the merchandise category. They develop the budget plan and monitor performance 25

Stores Division: Organization of Macy’s Florida Store 26

Corporate Organization of Macy’s Inc. 27

Activities Performed at the Macy’s Inc. Corporate Office ■ Support services and counsel to operating divisions ■ Conceptualizing, designing, sourcing, and marketing private label and exclusive merchandise sold at Macy’s and at Bloomingdale’s ■ Overall strategy, product development, merchandising and marketing of home-related merchandise ■ Logistics, distribution, and operations functions ■ Services all proprietary and VISA credit card accounts ■ Performance of most other non-store services for customers and employees ■ Development of distinctive sales promotions ■ Provision of an integrated electronic commerce, and data warehouse systems 28

Retail Organization Design Issues ■ The degree to which decision making is centralized or decentralized ■ The approaches used to coordinate merchandise and store management 29

Centralization vs. Decentralization Advantages of Centralization Disadvantages of Centralization ■ Reduce costs (overhead falls with fewer managers) ■ Coordinated buying achieve lower prices from suppliers ■ Opportunity to have the best people make decisions for the entire corporation ■ Increases efficiency ■ It is difficult for a retailer to adapt to local market conditions ■ It may have problems responding to local competition and labor markets ■ Personnel policies make it hard for local managers to pay competitive wages 30

Methods for Coordinating Buying and Store Management Royalty-Free/CORBIS ■ Improving buyer’s appreciation for store environment ■ Buyers making store visits ■ Assigning employees to coordinating roles 31

Winning the Talent War ■ Retailers are engaged in a “war” with their competitors for talent – for effective employees and managers – who can effectively deal with the incased complexities of retail jobs (the use of new technologies, increased profit & loss responsibilities, increased global competition, a diverse workforce). ■ Develop programs to attract, develop, motivate, and keep talent 32

Attracting Talent – Employment Marketing Employment marketing (branding) Marketing programs that attract “best and brightest” potential employees n n Starbucks – “Love What You Do” Southwest – “Free to Actually Enjoy What You Are Doing” 33

Attracting Talent – Employment Marketing JCPenney To build its employment brand, JCPenney uses the tagline “A Perfect Fit” on all correspondence and advertising directed toward potential employees 34

Developing Talent – Selection and Training ■ Selective Hiring: n n Recruit “the right people” Simply seeking the best and the brightest may not always be the most effective approach ■ Training: n n Increasing investments in management training programs and developing leaders Increasing attention to college graduates - Generation Y 35

Motivating Talent – Aligning Goals ■ Policies and Supervision n Indicate what employees should do n Behavior Enforced by Managers ■ Incentives n Commission, Bonus, Stock Options ■ Organization Culture n The set of values, traditions, and customs of a firm that guides employee behavior n Behavior enforced by social pressure 36

Use of Incentives Advantages ■ Aligns Employee and Company Goals ■ Strong Motivating Force Disadvantages ■ Employees Only Focus on Sales ■ Less Commitment to Retailer 37

Developing and Maintaining a Culture ■ Stories n n Nordstrom – Hero Service Stores Ritz-Carlton – “wow story” reading Whole Foods – working in teams and using its employees in the hiring process Wal-Mart – Saturday Morning Meeting ■ Symbols ■ CEO Leadership 38

Keeping Talent – Building Employee Commitment ■ Empowering Employees n Empowerment is the process of managers sharing power and decision-making authority with employees • Gives employees confidence • Provides greater opportunity to provide service to customers • Employees are more committed to firm’s success ■ Creating Partnering Relationships with Employees n n n Reducing Status Differences Promotion From Within Balancing Careers and Families • Flextime, job sharing 39

Issues in Retail Human Resource Management ■ Managing Diversity n n n Diversity Training Support Groups and Mentoring Career Development and Promotions ■ Growth in Legal Restrictions on HR Practices n n n Equal employment opportunity Compensation Labor relations Employee safety and health Sexual harassment Employee privacy ■ Use of Technology to Increase Employee Productivity Keith Brofsky/Getty Images 40