Chapter 9

Human Resource Management

McGraw-Hill/Irwin Retailing Management, 7/e

2008 by The McGraw-Hill Companies, All rights reserved.

Retailing Strategy
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
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Retail and Site Locations Chapter 7,8

Questions
In what way does the management of human resources play a vital role in a retailers 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 retailers goals? What are the human resource management programs for building a committed workforce? How do retailers manage diversity among their employees?

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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.

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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 retailers 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

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Objectives of Human Resource Management

Short Term

Increasing Employee Productivity Productivity = Sales/ Number of Employees

Long-Term

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
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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
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Downward Performance Spiral

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Human Resource Triad

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Special HR Considerations Facing Retailers

Need for Part-Time Employees Demand on Expense Control Changing Employee Demographics International HR Issues

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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

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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 firms department and employees, while motivating employees to work toward achieving company goals The programs used to build employee commitment, and retain valuable human resources

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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

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Tasks Performed in a Retail Firm

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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

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Merchandise Management Tasks Performed in a Retail Firm

Buy merchandise Locate vendors Evaluate vendors Negotiate with vendors Place orders Control merchandise inventory Develop merchandise Budget plans Allocate merchandise to stores Review open-to-buy and stock position Price merchandise Set initial prices Adjust prices
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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

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Administrative Management Tasks Performed in a Retail Firm

Promote the firm, its merchandise and its services Manage human resources Distribute merchandise Establish financial control

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Assignment of Responsibility for Tasks

Strategic Top Management, Board of Directors Merchandise Management Merchandise Division Store Management Stores Division Administrative Corporate Specialists

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Organization of a Small Retailer

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Organization of Macys Florida

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Merchandise Division Organization: Macys Florida

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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

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What does a category manager do?

A category manager

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

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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

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Stores Division: Organization of Macys Florida Store

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Corporate Organization of Macys Inc.

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Activities Performed at the Macys Inc. Corporate Office

Support services and counsel to operating divisions Conceptualizing, designing, sourcing, and marketing private label and exclusive merchandise sold at Macys and at Bloomingdales 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

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Retail Organization Design Issues

The degree to which decision making is centralized or decentralized The approaches used to coordinate merchandise and store management

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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
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Methods for Coordinating Buying and Store Management

Improving buyers appreciation for store environment Buyers making store visits Assigning employees to coordinating roles

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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

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Attracting Talent Employment Marketing

Employment marketing (branding)
Marketing programs that attract best and brightest potential employees

Starbucks Love What You Do Southwest Free to Actually Enjoy

What You Are Doing

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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

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Developing Talent Selection and Training

Selective Hiring:

Recruit the right people Simply seeking the best and the brightest may not always be the most effective approach Increasing investments in management training programs and developing leaders Increasing attention to college graduates - Generation Y

Training:

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Motivating Talent Aligning Goals

Policies and Supervision Indicate what employees should do Behavior Enforced by Managers Incentives Commission, Bonus, Stock Options Organization Culture The set of values, traditions, and customs of a firm that guides employee behavior Behavior enforced by social pressure
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Use of Incentives
Advantages Aligns Employee and Company Goals Strong Motivating Force Disadvantages Employees Only Focus on Sales Less Commitment to Retailer
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Developing and Maintaining a Culture

Stories

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

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Keeping Talent Building Employee Commitment

Empowering Employees

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 firms success Reducing Status Differences Promotion From Within Balancing Careers and Families Flextime, job sharing
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Creating Partnering Relationships with Employees

Issues in Retail Human Resource Management

Managing Diversity

Diversity Training Support Groups and Mentoring Career Development and Promotions

Growth in Legal Restrictions on HR Practices

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

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