CHAPTER 9 HUMAN RESOURCE MANAGEMENT ANNOTATED OUTLINE INSTRUCTOR NOTES • Retailers achieve their financial objectives by effectively managing their five critical assets: locations, merchandise inventory, stores, employees, and customers. • Human resource management is particularly important in retailing because employees play a major role in performing critical business functions. • Retailers rely on people to perform the basic retailing activities such as buying, displaying merchandise, and providing service to customers. I. Gaining Competitive Advantage through Human Resource Management • Human resource management can be the basis of a sustainable competitive advantage for three reasons. • First, labor costs account for a significant percentage of a retailer's total expenses. Thus, the effective management of employees can produce a cost advantage. • Second, the experience that most customers have with a retailer is determined by the activities of employees who select merchandise, provide information and assistance, and stock displays and shelves. Thus, employees can play a major role in differentiating a retailer's offering from its competitor's offering. • Finally, these potential advantages are difficult for competitors to duplicate. See PPT 9-3 Ask students why managing people is so important to retailers? Will the number of retail employees decline? Will these be replaced by automation? Discuss these issues in relation to the REFACT: Labor costs typically are over 25% of sales and 50% of operating costs in fashion-oriented department and specialty stores. The people employed in retailing are often low in motivation and thus difficult to manageme and motivate. Ask students who have worked retail to relate their experiences. How were they motivated? What skills and characteristics did their co-workers have? A. Objectives of Human Resource Management See PPT 9-4 • The strategic objective of human resource management is to align capabilities and behaviors of employees with the short-term and long-term goals of the retail firm. • One human resource management performance measure is employee productivity--the retailer's sales or profit divided by the number of employees. • Employee productivity can be increased by increasing the sales generated by each employee or reducing the number of employees, or both. • Employee productivity is directly related to the retailer's short-term profits, while employee attitudes have important effects on customer satisfaction and subsequent long-term performance of the retailer. • Another behavioral measure of employee attitudes is employee turnover. • Employee turnover = number of employees leaving their job during the year / number of positions • A failure to consider both long- and short-term objectives can result in mismanagement of human resources and a downward performance spiral. Short term cost reductions often have an adverse effect on long-term performance. Ask students which types of retailers have low and high labor productivity. [Department stores have low productivity because they have high labor costs to provide customer service. Category specialists and other self-service discount stores have low labor costs and thus high productivity.] Discuss the downward performance spiral as shown in PPT 9-7 B. The Human Resource Triad • The full potential of a retailer's human resource is realized when three elements of the human resource triad work together – HR professionals, store managers, and employees. See PPT 9-8 C. Special HR Conditions Facing Retailers • Human resource management in retailing is very challenging due to (1) the need to use part-time employees, (2) the emphasis on expense control, and (3) the changing demographics of the workforce. 1. Expense Control • Retailers often operate on thin margins and must control expenses. Thus, they are cautious about paying high wages to hourly employees and often hire people with little or no sales experience in order to control their costs. High turnover, absenteeism, and poor performance often result from the use of inexperienced, low- wage employees. Also, poor appearance, manners, and attitudes can have a negative effect on sales and customer loyalty. See PPT 9-9 2. Part-Time Employees • To deal with peak periods such as lunch hours, night and during sales, as well as the long hours they are open, retailers have to complement their full-time employees with part-time workers. Part-time employees are difficult to manage since they are less committed to the company and their jobs, and they're more likely to quit than full-time employees. See PPT 9-10 3. Employee Demographics • The changing demographic pattern will result in a chronic shortage of qualified sales associates. Thus, retailers need to explore approaches for operating effectively in a tight labor market. • These approaches include: (1) increasing retention; (2) better recruitment, training and management of minorities, handicapped, and See PPT 9-11 mature workers; and (3) use of incentives and technology to increase productivity. 4. International Human Resource Issues • The management of employees working for an international retailer is especially challenging because differences in work values, economic systems, and labor laws mean that human resource practices effective in one country might not be effective in another. • The legal-political system in countries often dictates the human resource management practices that retailers can use. • The staffing of management positions in foreign countries raises a wide set of issues, including those involving use of local or expatriates and the selection, training and compensation of local managers and/or expatriates. See PPT 9-12 Ask students to consider what might be some unique challenges of hiring employees in foreign countries. II. Designing The Organization Structure For A Retail Firm • The organization structure identifies activities to be performed by specific employees and determines the lines of authority and responsibility in the firm. • The first step in developing an organization structure is to determine the tasks that must be performed. • These tasks are divided into four major categories: strategic management, administrative management (operations), merchandise management, and store management. See PPT 9-13 Before you begin this lecture, ask students to diagram how they think a retail organization is structured. Discuss the differences between their diagrams and the way that most retailers are actually structured. A. Matching Organization Structure to Retail Strategy • The design of the organization structure needs to match the firm's retail strategy. For example, category specialists and warehouse clubs target price-sensitive customers and thus are very concerned about building a competitive advantage based on low cost. • They minimize the number of employees by having decisions made by a few people at corporate headquarters. • Retailers targeting less price sensitive customers tend to have more managers and decision making at the local store level. B. Organization of a Single-Store Retailer • Owner-managers of a single store may be the entire organization. Coordinating and controlling employee activities is easier in one store than in a large chain of stores. • Since the number of employees is limited, small retailers have little specialization. • When sales increase, specialization in management may occur when the owner-manager hires management employees. See PPT 9-19 Small stores typically violate the principles of organization --unity of command and specialization. Ask students why? C. Organization of a National Retail Chain • In contrast to the management of small retailers, retail chain management is complex. • Managers must supervise units that are geographically distant from each other. • Traditionally, department stores were family owned and managed. Organization of these firms was governed by family circumstances -- See PPT 9-20 The Mazur plan emphasized the separation of buying and store management functions. What are the advantages of different employees doing each of these activities? What are the disadvantages? executive positions were designed to accommodate the number of family members involved in the business. • In 1927, Paul Mazur proposed a functional organization plan that has been adopted by most retailers. The organization structures of retail chains continue to reflect principles of the Mazur plan such as separating the merchandising and store management tasks into separate divisions. • In most retail firms, the two senior executives, typically called the CEO and COO work closely together in managing the firm. They are frequently referred to as principals or partners. • One member of the partnership is primarily responsible for the merchandising activities of the firm-- the merchandise, stores, and marketing divisions. • The other partner is primarily responsible for the human resource, distribution, information systems, and finance divisions. 1. Merchandise Division • The merchandise division is responsible for procuring the merchandise sold in stores and ensuring that the quality, fashionability, assortment, and pricing of merchandise are consistent with the firm’s strategy. See PPT 9-16 2. Buyers • Buyers are responsible for procuring merchandise, setting prices and markdowns, and managing inventories for specific merchandise categories. • They attend trade and fashion shows and negotiate with vendors on prices, In discussing each division, mention the skills needed to be successful in each type of job. Ask students in which division they would like to work. Why? quantities, assortments, delivery dates, and payment terms. • They might specify private-label merchandise or request modifications to tailor the merchandise to the retailer's target market and differentiate it from competitive offerings. • Buyers are given considerable autonomy, but they must adhere to an inventory budget that will vary from season to season. • In recent years, the buyer’s role in supermarket chains has evolved into category management. • Category managers are responsible for a set of products that customers likely view as substitutes. Ask students to help identify merchandise categories from the local supermarket. 3. Planners • The merchandising planner is responsible for allocating merchandise and tailoring the assortment of several categories for specific stores in a geographic area. 4. Stores Division • The stores division is responsible for the group of activities undertaken in stores. • A store manager is responsible for activities performed in each store. The merchandising division has traditionally been most important. Why are store operations becoming more important? 5. Corporate Organization of Macy’s Inc. • The decisions made at the corporate office involve activities that set strategic directions and increase productivity by coordinating the regional divisions’ activities. 6. Organization Structures of Other Types of Retailers • Most retail chains have organization structures very similar to the Macy’s Florida structure. • The primary difference between the organization structure of a department store and other retail formats is the number of people and management levels in the merchandising and store management areas. Many national retailers centralize merchandise management at corporate headquarters. III. Retail Organization Design Issues A. Centralization versus Decentralization • Centralization is when the authority for retailing decisions is delegated to corporate managers rather than to geographically dispersed regional, district, and store managers. Decentralization is when authority for retail decisions is assigned to lower levels in the organization. • Centralization offers several advantages: • Retailers can reduce costs when decision making is centralized in corporate management. • Overhead falls because fewer managers are required to make the merchandise, human resource, marketing and financial decisions. • By coordinating its efforts across geographically dispersed stores, the company achieves lower prices from suppliers. • Centralization produces an opportunity to have the best people make decisions for the entire corporation. See PPT 9-24 Ask students what types of merchandise would be better managed centrally? Decentralized? What about toys and games? High fashion clothing? Groceries? • Finally, centralization increases efficiency since standard operating policies are used for store and personnel management and these policies limit the decisions made by store managers. • Centralization has disadvantages as well: • While centralization has advantages in reducing costs, it is more difficult for a retailer to adapt to local market conditions, to respond to local competition, and to adapt to local labor markets. • In addition, the centralized retailer may have difficulty responding to local competition and labor markets. • Finally, centralized personnel policies can make it hard for local managers to pay competitive wages in their area or to hire appropriate types of salespeople. • Centralized retailers are relying more on their information systems to react to local market conditions. Large retailers are using their information systems to make more and more merchandise and operations decisions at corporate headquarters. B. Coordinating Merchandise and Store Management • Small, independent retailers have little difficulty coordinating their stores' buying and selling activities. Owner- managers typically buy the merchandise and work with their salespeople to sell it. Being in close contact with customers, they know what their customers want. • On the other hand, large retail firms organize the buying and selling functions into separate divisions. See PPT 9-25 Why is there a need to coordinate buying and store management activities? Buyers specialize in buying merchandise and have little contact with the store management responsible for selling it. • While this specialization increases buyers' skills and expertise, it makes it harder for them to understand customers' needs. • Three approaches large retailers use to coordinate buying and selling are: (1) improving buyers' appreciation for store environment, (2) making store visits, and (3) assigning employees to coordinating roles. 1. Improving Appreciation for Store Environment • Management trainees, who eventually become buyers, are required by most retailers to work in the stores before they enter the buying office. 2. Making Store Visits • Another approach for increasing customer contact and communication is to have buyers visit the stores and work with the departments they buy for. • This face-to-face communication provides buyers with a richer view of store and customer needs than they can get from impersonal sales reports from the company's management information system. What are the benefits and costs of having buyers visit the stores frequently? 3. Assigning Employees to Coordinating Roles • Some retailers, like TJX, have people in the merchandise division (the planners who work with buyers) and the stores (the managers of operations who work for the store managers) who Would being a coordinator be an interesting job? Would it be stressful? Why or why not? are responsible for coordinating buying and selling activities. • Most national retail chains have regional and even district staff personnel to coordinate buying and selling activities. IV. Winning the Talent War • The pool of potential retail employees is decreasing due to changing demographics. However, retailers have a critical need for managers that can effectively deal with the increased complexities of retail jobs, such as the use of new technologies, increased global competition, and a diverse workforce. • Thus retailers are engaged in a “war” with their competitors for talent, that is for effective employees and managers. • Retailers generally use three methods to motivate and coordinate their employees' activities: (1) written policies and supervision, (2) incentives, and (3) organization culture. See PPT 9-26 A. Attracting Talent: Employment Marketing • HR departments for large, national retailers develop marketing programs to attract excellent potential employees. Employment marketing or employment branding programs involve learning what employees are looking for and creating a brand image to reach potential employees. See PPT 9-27 B. Developing Talent: Selection and Training 1. Selective Hiring See PPT 9-28 • The first step in building a committed workforce is recruiting the right people. The job requirements and firm strategy dictate the type of people hired. 2. Training • Training is particularly important in retailing because more than 60% of retail employees have direct contact with customers. • Investing in developing employee skills tells employees that the firm considers them important. • An interesting challenge facing retailer is how to train younger employees. They have recognized that Generation Y, the first generation to grow up with the Internet and Internet- based games, learns differently than previous generations. C. Motivating Talent: Aligning Goals • The task of aligning employees’ and the firm’s goals is often difficult, because employees’ goals usually differ from those of the firm. • Retailers generally use three methods to motivate their employees’ activities: 1. Policies and Supervision • Perhaps the most fundamental method of coordination is to prepare written policies that indicate what employees should do and have supervisors enforce these policies. Ask students whether written policies provide enough control? Why or why not? Would written policies be more useful for salespeople in a department store or for employees in a discount store? Why? 2. Incentives • Incentives can be used to motivate employees to perform activities See PPT 9-29 consistent with the retailer's objectives. a. Types of Incentive Compensation • Two types of incentives are commissions and bonuses. • A commission is compensation based on a fixed formula such as 2 % of sales. Many retail salespeople's compensation is based on a fixed percentage of the merchandise they sell. • A bonus is additional compensation awarded periodically based on an evaluation of the employee's performance. • Besides incentives based on individual performance, retail managers often receive additional income based on their firm's performance. • These profit-sharing arrangements can be offered as a cash bonus based on the firm's profits or as a grant of stock options that link additional income to performance of the firm's stock. What is the difference between commissions and bonuses? When should retailers use bonuses rather than commissions for salespeople? b. Drawbacks of Incentives • Incentives are very effective in motivating employees to perform the activities on which the incentives are based. But incentives may cause employees to ignore other activities. • Excessive use of incentives to motivate employees also can reduce employee commitment. Company loyalty falls because employees feel that the firm hasn’t made a commitment to them (since it’s unwilling to guarantee their compensation). Commissions motivate salespeople to make more sales. Ask students why some retailers use commission if it is not good for improving customer service and developing customer loyalty? 3. Organization Culture Ask a student to describe the organizational culture at Disney World. • An organization culture is the set of values, traditions, and customs in a firm that guides employee behavior. These guidelines aren't written in a set of policies and procedures, but experienced employees do pass along traditions to new employees. • Many retail firms have strong organization cultures that give employees a sense of what they ought to do on their jobs and how they should behave to be consistent with the firm's strategy. • An organization culture often has a much stronger effect on employees' actions than rewards offered in compensation plans, directions provided by supervisors, or written company policies. Have the students give their own descriptions of the "culture" of organizations they belong to such as clubs, teams, fraternities or sororities. This will help the students to identify the meaning of "corporate culture." They can also consider the culture of the college. 4. Developing and Maintaining a Culture • Organization cultures are developed and maintained through stories and symbols. Values in an organization culture are often explained to new employees and reinforced to present employees through stories. • Using symbols is another technique for managing organization culture and conveying its underlying values. Symbols are an effective means of communicating with employees because the values they represent can be remembered easily. See PPT 9-31 Ask students about the culture of their living group -- dormitory, fraternity, or sorority. Are there stories, customs, and symbols used to convey that culture to new people? D. Keeping Talent: Building Employee Commitment • An important challenge in retailing is to reduce turnover. High turnover reduces sales and increases costs. See PPT 9-32 • To reduce turnover, retailers need to build an atmosphere of mutual commitment in their firms. • When a retailer demonstrates its commitment, employees respond by developing a loyalty to the company. • Some approaches that retailers take to build mutual commitment are: (1) empowering employees, and (2) creating a partnering relationship with employees. Ask students who work, what keeps them motivated and committed to their jobs? What keeps them motivated to work in student groups or engage in team sports. 1. Empowering Employees • Empowerment is the process of managers sharing power and decision making authority with employees. • When employees have the authority to make decisions, they are more confident in their abilities, have greater opportunity to provide service to customers, and are more committed to the firm’s success. • The first step in empowering employees is to review employee activities that require a manager’s approval. Empowerment of retail employees transfers authority and responsibility for making decisions to lower levels in the organization. These employees are close to the retailer's customers and in a good position to know what it takes to satisfy customers. • For empowerment to work, managers must have an attitude of respect and trust, not control and distrust. Ask students for examples of a service encounter with a retailer in which the employee was/was not empowered to solve a problem. 2. Creating a Partnering Relationships • Three human resource management activities that build commitment through developing partnering relationships with employees are: (1) reducing status differences, (2) Ask students if they believe that their employer has reached out to develop a relationship with them. Then ask what their employers did to develop that relationship. promoting from within, and (3) enabling employees to balance their careers and families. a. Reducing Status Differences • By reducing status differences, employees feel they play an important role in the firm's achieving its goals and that their contributions are valued. • Status differences can be reduced symbolically through the use of language and cut substantively by reducing wage differences and increasing communications between managers at different levels in the company. b. Promotion from Within • Promotion from within is a staffing policy that involves hiring new employees only for positions at the lowest level in the job hierarchy and then promoting employees for openings at higher levels in the hierarchy. • Promotion-from-within policies establish a sense of fairness. When employees do an outstanding job and then outsiders are brought in over them, employees feel that the company doesn’t care about them. • Promotion-from-within policies also commit the retailer to develop its employees. c. Balancing Careers and Families • The increasing number of two income and single parent families makes it difficult for employees to effectively do their jobs and manage their households. • Retailers build employee commitment by offering services like job sharing, childcare, and employee assistance programs to help their employees manage these problems. • Flextime is a job scheduling system that enables employees to choose the times they work. • With job sharing, two employees voluntarily are responsible for a job that was previously held by one person. • Both programs let employees accommodate their work schedules to other demands in their life such as being home when children return from school. • Many retailers offer child care assistance. • Some companies will even arrange for a person to be at an employee’s home waiting for the cable guy to come or to pick up and drop off dry cleaning. VI. Issues in Retail Human Resource Management • Three issues in human resource management are: (1) the increasing importance of having a diverse workforce, (2) the growth in legal restrictions on HR practices, and (3) the use of technology to increase employee productivity. A. Managing Diversity • Managing diversity is a human resource management activity designed to realize the benefits of a diverse work force. • Managing a diverse work force isn't a new issue for retailers. The traditional approach for dealing with diverse groups was to blend them into the "melting pot." Minority employees See PPT 9-34 Why are retailers interested in programs for managing diversity? How do they benefit from these programs? How do their customers benefit? were encouraged to adopt the values of the majority, white, male-oriented culture. • But times have changed. Minority groups now embrace their differences and want employers to accept them for who they are. • To compete in this changing marketplace of diversity, retailers need management staffs that match the diversity of their target markets. • Besides gaining greater insight into customer needs, retailers must deal with the reality that their employees will become more diverse in the future. • Many retailers have found that these emerging groups are more productive than their traditional employees. • The fundamental principle of managing diversity is the recognition that employees have different needs and require different approaches for accommodating those needs. • Managing diversity means accepting and valuing differences among employees. • Some programs that retailers use to manage diversity involve offering diversity training, providing support groups and mentoring, and managing career development and promotions. Ask the students if any one has had the opportunity to be involved in a corporate diversity training program. If so, have them describe their experiences. 1. Diversity Training • Diversity training typically consists of two components: developing cultural awareness and building competencies. The cultural awareness component teaches people about how their own culture differs from the culture of other employees and how stereotypes they hold influence the way they treat people often in subtle ways they might not realize. Then role-playing is used to help employees develop better interpersonal skills, including showing respect and treating people as equals. 2. Support Groups and Mentoring • Mentoring programs assign higher- level managers to help lower-level managers learn the firm's values and meet other senior executives. • Many retailers help form minority networks to exchange information and provide emotional and career support for members who traditionally haven't been included in the majority's networks. 3. Career Development and Promotions • Although retailers provide entry-level opportunities for women and minority groups, these employees often encounter a glass ceiling as they move through the corporation. • A glass ceiling is an invisible barrier that makes it difficult for minorities and women to be promoted beyond a certain level. • Many retailers monitor the promotion process to eliminate these barriers. B. Legal and Regulatory Issues in Human Resource Management • The major legal and regulatory issues involving the management of retail employees are (1) equal employment opportunity, (2) compensation, (3) labor relations, (4) employee safety and health, (5) sexual harassment, and (5) employee privacy. See PPT 9-35 1. Equal Employment Opportunity • The basic goal of equal employment opportunity regulations is to protect employees from unfair discrimination in the workplace. • Illegal discrimination is the actions of a company or its managers that result in members of a protected class being treated unfairly and differently as compared to others. • A protected class is all of the individuals who share a common characteristic defined by the law. • Companies cannot treat employees differently simply based on their race, color, religion, sex, national origin, age, or disability status. • It is illegal to engage in a practice that disproportionately excludes a protected group even though it might seem to be nondiscriminatory. Discuss the impacts of the equal employment opportunity law in changing the retail landscape. Do you think that these laws are effective? What are impacts of these laws on large retail chains versus small independent retailers? 2. Compensation • Laws relating to compensation define the 40-hour workweek, the pay rate for working overtime, and the minimum wage, and they protect employee investments in pensions. • In addition, they require that firms provide the same pay for men and women doing equal work. 3. Labor Relations • Labor relations laws describe the process by which unions can be formed and the ways in which companies must deal with unions. 4. Employee Safety and Health • The basic premise of these laws is that the employer is obligated to provide each employee with an environment that is free from hazards that are likely to cause death or serious injury. 5. Sexual Harassment • Sexual harassment includes unwelcome sexual advances, requests for sexual favors, and other verbal and physical conduct. • Simply creating a hostile work environment can be considered sexual harassment. 6. Employee Privacy • Employees' privacy protection is very limited. For example, employers can monitor e-mail and telephone communications, search an employee's workspace and handbag, and require drug testing. However, there must be a strong suspicion that employees are acting inappropriately before employers can undertake these activities. 7. Developing Policies • The human resource department is responsible for developing programs and policies to make sure that managers and employees are aware of these restrictions and know how to deal with potential violations. These legal and regulatory requirements are basically designed to treat people fairly. • Perceptions of fairness are based on two factors: the perceptions of (1) distributive justice and (2) procedural justice. • Distributive justice arises when outcomes are viewed as fair with respect to outcomes received by others. • Procedural justice is based on the fairness of the process used to determine the outcome. C. Use of Technology • Retail chains are using intranets to automate and streamline human resource operations. The use of intranets and connections to a centralized base dramatically reduces the time human resource administrators spend on paperwork. VII. Summary • Human resource management plays a vital role in supporting a retail strategy. The organization structure defines relationships and responsibilities. • Retailers must make trade-offs between the cost savings gained through centralized decision-making and the benefits of tailoring the merchandise offering to local markets – benefits that arise when decisions are made in a decentralized manner. • Retailers are engaged in a war over talent. To win the war, retailers develop programs to attract, develop, motivate, and keep talent. ANSWERS TO “GET OUT AND DO ITS” 2. INTERNET EXERCISE Go to the Society of Human Resource Management’s home page, www.shrm.org. An organization of human resource professionals, SHRM publishes HR Magazine, with articles available online at www.workforceonline.com. Find and summarize the conclusions of articles addressing the challenges that retailers are facing, such as management of a diverse workforce, international expansion, and the use of technology to increase productivity. This website has numerous articles on topics ranging from benefits and compensation to strategic planning. Summarizing all of the articles on this website would be too much. Students should select certain topics that are of interest to them and relate to retailing and review the articles on those topics. 3. INTERNET EXERCISE The Fair Measures Law Consulting Group provides training and legal services for employers. Go to its website, www.fairmeasures.com, and choose one of the legal areas to investigate (sexual harassment, wrongful termination, and so forth). Another source of information about legal issues regarding employees is http://www.law.cornell.edu/wex/employment. Read the most recent court opinions and articles on employment issues, and summarize the implications for human resource management in retailing. Students’ answers will vary depending on what topic they chose to investigate. Students’ answers should include information on suits that were filed and how the courts responded. This exercise should really help students understand the legal implications of HR violations and HR practices. 4. INTERNET EXERCISE Go to the National Retail Federation’s Foundation (NRFF) homepage at http://www.nrffoundation.com/CareersCenter/default.asp and click on “Experience Retail” to read about the different career paths in Marketing/Advertising, Store Operations, Loss Prevention, Store Management, Finance, Human Resources, IT and E-Commerce, Sales and Sales-Related, Distribution/Logistics/Supply Chain Management, Merchandise Buying/Planning, and Entrepreneurship. Which area(s) appeals to you the most? Explain your preference for this career direction. Responses here will vary for students. This is a good homework assignment to gain insight to your students and their preferred career directions. http://www.nrffoundation.com 5. LIBRARY EXERCISE Go to one of your college/university's library business databases and find a recent newspaper or journal article that discusses human resources management in the retail industry. Briefly tie the concepts in the article back to the chapter or your Continuing Case Assignment (Question 1 above). If time is short, here are a few articles that you could assign versus having students search for their own articles: - Coaching helps Tesco HR stretch managers. By: Churchard, Claire. People Management, 8/12/2010, p10-10. - To Train and Nurture. By: Lewis, Len. Stores Magazine, Aug 2010, Vol. 92 Issue 8, p64-66. - Human resource management practices affecting unit managers in franchise networks. By: Castrogiovanni, Gary J.; Kidwell, Roland E.. Human Resource Management, Mar/Apr 2010, Vol. 49 Issue 2, p225-239. ANSWERS TO DISCUSSION QUESTIONS AND PROBLEMS 1. Why is human resource management more important in retailing than in manufacturing firms? Human resource management is particularly important in retailing because employees play the major role in performing retail functions. In many manufacturing firms, capital equipment (machinery, computer systems, and robotics) is now used to perform jobs employees once did. But retailing and other service businesses remain labor-intensive. Retailers still rely on people to perform the basic retailing activities such as buying, displaying merchandise, and providing service to customers. 2. How can retailers use hiring, selecting, training and motivating employees in their human resource management practices to gain competitive advantage? • Human resource management can be the basis of a sustainable competitive advantage for three reasons: (1) First, labor costs account for a significant percentage of a retailer's total expense. Thus, the effective management of employees can produce a cost advantage. (2) Second, the experience that most customers have with a retailer is determined by the activities of employees who select merchandise, provide information and assistance, and stock displays and shelves. Thus, employees can play a major role in differentiating a retailer's offering from its competitor's offering. (3) Finally, these potential advantages are difficult for competitors to duplicate. 3. Describe the similarities and differences between the organization of small and large retail companies. Why do these similarities and differences exist? Retail organization structures differ according to the type of retailer and the size of the firm. For example, a retailer with a single store will have an organization structure quite different from a national chain. Owner-managers of small stores may be the entire organization. Coordinating and controlling employee activities is easier in a small store than in a large firm. The owner-manager simply assigns tasks to each employee and watches to see that these tasks are performed properly. Since the number of employees is limited, small retailers have little specialization. Each employee must perform a wide range of activities, and the owner-manager is responsible for all management tasks. If sales increase, specialization in management may occur when the owner-manager hires management employees. In contrast to the management of small retailers, retail chain management is complex. Managers must supervise units that are geographically distant from each other. Vice presidents responsible for specific merchandise, store, and administrative tasks report to the chairperson and president. In most retail firms, the chairperson and president work closely together in managing the firm. They are frequently referred to as principals or partners. One member of the partnership is primarily responsible for the merchandising activities of the firm--the merchandise, stores, and marketing divisions. The other partner is primarily responsible for the human resource, distribution, information systems, and finance divisions. Most managers and employees in the stores division work in stores located throughout the geographic region. The distribution center employees and managers work in one or two distribution centers in the region. Senior executives and the merchandise, marketing and human resource division employees work at corporate headquarters. 4. Some retailers have specific employees (merchandise assistants) assigned to restock the shelves and maintain the appearance of the store. Other retailers have sales associates perform these tasks. What are the advantages and disadvantages of each approach? Some retailers have specific employees assigned to restocking the shelves and maintaining the appearance of the store. When merchandise assistants perform these tasks, there is more control by upper management because there are fewer people involved. Retailers can also spend time specifically training these specific employees to perform these tasks. Retailers can then have specific categories of merchandise handled by the merchandise division. However, this may be costly to the retailers while also making sales associates feel less empowered. Retailers that use sales associates to restock the shelves and maintain the appearance of the store are motivating their employees at a different level. Sales associates will feel empowered which may decrease employee turnover. Sales associates also would have a greater knowledge of where all items are in the store, so they will have more information for customers as well as management on the store level. Retailers might also save money, by delegating the work to sales associates with their other job functions instead of hiring specific employees, which would be costly. However, there are security and control issues over inventory when using sales associates. The more people that handle the inventory, the more items are stolen or misplaced. 5. How can national retailers like Best Buy and Victoria's Secret, which both use a centralized buying system, make sure that their buyers are aware of the local differences in consumer needs? Retailers with a centralized buying system can implement an extensive management information system that can track sales, and thus local customer preferences, by various categories. While most large chains, like Best Buy and Victoria's Secret, are too big to allow for consistent and individual contact between each store manager and the buyer, the buyer can make a point to keep in contact with some managers. The managers who are contacted should be diverse and reliable so that the information obtained is accurate and helpful. Buyers involved in centralized buying systems should make a point to keep up with the changing regional demographics as well as possible. Keeping informed through trend reports, news services, and (to some degree) travel will help a buyer to keep up with differences. Finally, satellite communications allow information to be collected through POS and transmitted via EDI. 6. Reread Retail View 9.4 on REI’s internal use of social media. What are the positive and negative aspects of this internal use of social media in general, and more specifically, REI’s use of an internal intranet rather than a platform like Facebook. REI uses the “campfire” to share ideas with employees and get their comments and feedback. A positive aspect of this method is that it creates employee engagement and provides employees with a less formal environment to express their opinions. It also allows employees to have an interaction with a senior executive that they might not normally interact with. A negative aspect of this is that there are no filters or censors. In addition, some employees might see the blog as impersonal. Using an intranet platform like “campfire” though is probably better than using a forum like Facebook that could potentially be accessed by consumers. 7. To motivate employees, several major department stores are experimenting with incentive compensation plans, although compensation plans with a lot of incentives often don’t promote good customer service. How can retailers motivate employees to sell merchandise energetically and at the same time not jeopardize customer service? Retailers need to emphasize to their employees that there is a danger in focusing every effort on simply selling as fast as one can. It is important that employees realize that customers must be served properly, and that customer satisfaction (not one-time individual sales) should be the primary goal. When helping a customer, sales personnel should focus on fulfilling a customer's needs. If a salesperson is concerned solely with making the sale, the customer is likely to be disappointed and/or return the merchandise. Both scenarios will affect the employee's ability to take advantage of the incentive. Retailers need clear-cut policies that sales at the expense of good customer service will not be tolerated. This implies that the retailer will have to outline customer service standards before implementing incentive compensation plans. 8. Assume that you're starting a new restaurant that caters to college students and plan to use college students as servers. What human resource management problems would you expect to have? How would you build a strong organization culture in your restaurant to provide outstanding customer service? A fundamental task of human resource management is to motivate and coordinate employees to work toward achieving the firm's goals and implementing its strategy. Most human resource management problems in any organization stem from an employer's difficulty in so doing. The task is often challenging because employees' goals may differ from the firm's. For example, a waiter/waitress might find it more personally rewarding to socialize with patrons than to provide efficient service to all of his/her customers. Other problems may include conflicts with work due to school and personal life. Retailers generally use three methods to motivate and coordinate their employees' activities: (1) written policies and supervision, (2) incentives, and (3) organization culture. A strong organizational culture in the restaurant can be created by having a strong charismatic leader; a manager that the students respect. The restaurant should also do the following: Have contests and rewards for outstanding service. Have meetings in which employees can interact and tell stories about how they handled service issues. Lead by example, even with little things. For instance, the managers should step in and bus tables or pick up things on the floor. In general, organizational cultures are developed and maintained through stories and symbols. Values in an organization culture are often explained to new employees and reinforced to present employees through stories. For example, Nordstrom's service culture is emphasized by stories describing the "heroic" service undertaken by the firm's salespeople. Using symbols is another technique for managing organization culture and conveying its underlying values. Symbols are an effective means of communicating with employees because the values they represent can be remembered easily. 9. Three approaches for motivating and coordinating employee activities are policies and supervision, incentives, and organization culture. What are the advantages and disadvantages of each? Retailers generally use three methods to motivate and coordinate their employees' activities: (1) Written Policies and Supervision: If employees and supervisors use written policies to make decisions, their actions will be consistent with the retailer's strategy. But strict reliance on written policies can reduce employee motivation. Employees might have little opportunity to use their own initiative to improve performance of their areas of responsibility. (2) Incentives: Incentives such as commissions and bonuses are generally designed to reward individual performance. Such incentives are usually very effective in motivating employees and managers to perform the tasks on which the incentives are based. Profit sharing and stock based incentives reward individuals when the entire firm does well. These stock incentives align the employees' interests with those of the company. However, if the growth in stock prices declines, employee morale declines, the corporate culture is threatened, and demands for higher wages and more benefits develop. Also, incentives may cause employees to ignore activities that are not specifically rewarded. For example, salespeople whose compensation is based entirely on their sales may be reluctant to spend time arranging merchandise. Excessive use of incentives to motivate employees also can reduce employee commitment. Company loyalty falls because employees feel that the firm hasn't made a commitment to them (since it's unwilling to guarantee their compensation). (3) Organization Culture: An organization culture is the set of values, traditions, and customs in a firm that guides employee behavior. These guidelines aren't written in a set of policies and procedures, but are traditions that are passed along by experienced employees to new employees. An organization culture often has a much stronger effect on employees' actions than rewards offered in compensation plans, directions provided by supervisors, or written company policies. This may be viewed as positive in that, employees may feel a greater sense of belonging and commitment to an organization that has a strong culture. But it could also be negative if the culture creates “groupthink” and contradicts the firm's overall strategy. 10. What HR trends are helping meet employees’ needs, increase job satisfaction, and lower turnover? Several HR trends are taking place in the retail industry to address employees’ needs, job satisfaction, and turnover. Two of these activities that retailers undertake to develop knowledge, skills and abilities in their human resources are selective hiring, finding employees who truly fit with the strategic position of the firm, and training. Other trends include empowering employees, reducing status differences among employees, promoting from within, flextime and job sharing. ANCILLARY LECTURES LECTURE # 9-1: LEGAL ISSUES IN HUMAN RESOURCES Instructor's Note: This lecture consists of a potpourri of legal issues dealing with human resource management. It can be used in its entirety, or the instructor can pick and choose items of interest. The lecture can be used in either Chapter 9 or 17. Introduction • Within the realm of human resource management in retailing there are a number of legal issues that are of significant importance. 1. Equal opportunity & anti-discrimination laws, 2. What can (or can't) be asked, 3. Drug testing, and 4. Sexual harassment. Equal opportunity & anti-discrimination laws • The following laws in some way pertain to the legal rights as a present or future employees under the general guidelines of an equal opportunity: 1. Equal Pay Act of 1963 2. Title VII of Civil Rights Act of 1964 -- Amended in 1972 & 1978 3. Age Discrimination in Employment Act of 1967 4. Rehabilitation Act of 1972 5. Immigration Reform & Control Act of 1986 6. Polygraph Protection Act of 1988 • Now let's talk briefly about each one of these laws: Equal Pay Act of 1963 • Deals only with wages—no other aspect of employment process • Men & women are to receive same pay for jobs requiring same skills, effort, responsibility, and working conditions • Criteria used to evaluate "equal jobs" are: Duties, responsibilities, and work environment. • The job description alone is not sufficient to show "equal jobs." • Differences in jobs can legally exist on only four grounds: 1. Seniority 2. Merit 3. Quality/Quantity of Work 4. "Any factor Other Than Gender" Title VII of Civil Rights Act of 1964 (As Amended) • Forbids discrimination based on: 1. Race 2. Color 3. Religion 4. National Origin 5. Sex • "Disparate Treatment"—to what extent can you treat people differently under the law? 1. Cannot treat people different due to these aforementioned characteristics. 2. Cannot exclude people from employment solely on basis of these characteristics. 3. Example: One cannot ask women their marital status. • "Disparate Impact"—to what extent does discriminatory actions impact different groups of people? 1. Otherwise harmless criteria may exclude protected groups. 2. Cannot exclude people solely on basis of these characteristics. 3. Example: Requirement for a particular degree, GPA, or major may exclude a large portion of a given race or ethnic group. Another example: a maximum weight restriction will discriminate against people suffering from obesity. • Protects Against Sexual Harassment Age Discrimination in Employment Act of 1967 • No Discrimination Against Persons Over the Age of 40 Rehabilitation Act of 1972 • Applies specifically to federal contractors and federal aid recipients • Prohibits discrimination based on physical handicap Immigration Reform & Control Act of 1986 • Companies are required to: 1. Ensure that new employees are citizens or legally authorized to work in the United States 2. Immediately report to INS (Immigration and Naturalization Service) within 3 days of hiring Polygraph Protection Act of 1988 • Prohibits use of lie detector tests by most employers • Exemptions from law: 1. National security 2. Drug manufacturers 3. Armored car firms 4. Security guard firms 5. So, most retailers cannot use lie detector tests. Discriminatory questions and what can or can't be asked? • Federal laws don't specifically prohibit types of question • EEOC looks with "Extreme Disfavor" on questions re: Race, color, religion, national origin, age, marital status, sexual preference, and politics. • State laws are more specific. • Most states have question lists. Drug testing - before and after an employee is hired • Depends upon nature of company or industry 1. 1986 - 25% of Fortune 500 companies did drug testing 2. 1990's - 47-54% of companies now doing testing • Most do testing after hire - part of employment physical. • Hire is contingent upon passing physical. • In most cases - refusal to test = no hire. • Failure = no hire. Sexual Harassment • What is it? • Language - Verbal abuse, vulgar or sex-related jokes. • Touching - Unwanted patting, kissing, hugging, or even cornering. • Unwelcome advances - Offensive and repeated requests for dates. • Advancement favors - Requests for sexual favors accompanied by threats concerning one's job, advancement, grades, etc. • Remarks & Innuendo - Subtle remarks concerning one's clothing, body, or sexual activity. • Statutory Protection Against Sexual Harassment. • June 1986 - U.S. Supreme Court ruling on Title VII of Civil Rights Act of 1964 - Protects against sexual harassment. • 46 states now have separate sexual harassment laws. • What should be done if one believes they have been sexually harassed? • Take at least the following steps: 1. Inform violator that the incident constitutes "sexual harassment", 2. Report the incident to his/her supervisor, 3. Document claim - secure testimony from witnesses, 4. Discuss with others in the office or company, 5. Report occurrence to the EEO Office, and 6. Speak to your attorney. [Source: Barry Shiflit—granted full reproduction rights] Chapter 9 – Human Resource Management Employment Branding Assignment Please review the efforts of the efforts of the retailers below (as reflected in their websites) to attract the best and brightest college students in to their management training programs. JCPenney http://jobs.jcp.com/go/College-Jobs/329042/ Sears Holding http://www.searsholdings.com/careers/learnmore.php#college Macy’s http://www.macysjobs.com/college/ Walmart http://careers.walmart.com/ Which of these retailers do you think is most effective and attractive? Which is the least effective and attractive? Which is the least effective? Why? What should each of these retailers do to increase their effectiveness? Solution Manual for Retailing Management Michael Levy, Barton A. Weitz, Dhruv Grewal 9780078028991
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