To drive myself towards continuous learning, I will occasionally revisit my library and re-read a book that I have found impactful…
I recently revisited a book I read a while ago titled: The Good Jobs Strategy, by Zeynep Ton. Ton’s primary emphasis of the strategy is to establish a “virtuous cycle” by creating sustainable, good jobs for employees, which in turn will promote operational excellence in the stores, which in-turn will result in higher conversion, basket size, and sales. While this book was originally published almost ten years ago, I was struck by how incredibly relevant it remains today, and how closely her arguments align with the fundamental beliefs of the Connors Group.
There has been a lot of talk in recent years about the “Amazon Effect” and the coming retail apocalypse. While there is no denying the impact of the omnichannel shift, it should be noted that physical retail is still not only alive, but an integral piece of the shopping cycle…What is no longer tenable, however, is a physical retailer that is not focused, well-run and purposeful. Retailers cannot afford waste. Unfortunately, in the mindset of many retail executives this translates to minimizing labor.
Labor is essential to delivering the physical experience to the customer, but as Ton points out it is often managed as a short-term controllable expense:
- Stores cut the quantity of labor to hit short-term financial objectives, which creates unpredictability within the workforce.
- The focus of hiring models is on part-time employees to reduce benefits liabilities and to maintain perceived flexibility in scheduling.
- Employees are assumed to be able to operate in the retail environment with minimal training.
- Wages are kept as low as possible while remaining somewhat competitive.
All these tactics are aimed at “optimizing” the second-largest expense line on the P&L. As the book illustrates, though, the longer-term impact of these tactics is often not seen until it is too late.
The “Good Jobs Strategy” proposes a different approach…
It is important to note that the motivation for this strategy is not altruistic in nature. It is founded on a genuine belief that if retailers offer better jobs it will establish a “virtuous cycle” that will pay off in increased top-line sales that far exceed the increased labor costs. Following this strategy, retailers invest in labor rather than cut costs. These investments are manifested in higher wages, fuller training, better benefits, and more-convenient and consistent schedules. While this is a sound strategy, it is important to note that this is predicated on an assumption that the employees are focused on doing the right thing.
Investing more in labor is not an altruistic endeavor…
The companies that Ton points to as examples not only invest more in their labor, but they expect more from their labor. This means that these are companies that understand the importance of labor in their service model. If an outlet brand invests more in their labor and expects proactive high-touch selling, it may not pay off if their customers value clean stores and full shelves.
Successful retailers have integrity in their expectations. They understand the balance between the customer value proposition, the associate investment and the profit model, and leadership systems are focused on maintaining and executing on this model.
At Connors Group our philosophy is aligned around this cycle…
We believe that first and foremost, companies need to understand and be honest about their service model. The cornerstone for all operations is understanding, through data not opinion, what customers value and how store behavior impacts their behavior. Once this understanding is established, successful retailers align the staffing model around the service model. This is where the good jobs strategy actualizes; but again, although this is necessary, it is not enough…In order to achieve high execution of the service model, a robust and focused leadership model must also be in place. This involves, among many other things, established expectations, accurate and relevant reporting and metrics, capable and trained leadership, and accountability through the constant and calibrated use of assessments…With these three elements (service model, staffing model and leadership model) in place, the optimization of the labor model is possible. Without any of those three in place, the returns from any optimization effort will be compromised.
The “Good Jobs Strategy” can work. It is true that good employees are a necessary component of delivering a good customer experience. However, this is predicated on an ecosystem that is balanced and aligned between the service, staffing and leadership models. This is what enables the return on investment that establishes the “virtuous cycle” espoused by Ton in her book… Connors Group was established to help our clients establish and maintain this balance, and it is why I am proud to be a part of this organization.