Case questions

own company for years, and refined their business model after each spent a great deal of time

learning about the retail industry by working in different retail organizations. The product mix

and high-quality products Chern’s sells made it rapidly successful, and the company developed

a loyal following. The firm quickly expanded its product line and began opening additional locations

15 years ago. Ryan and Ann have turned their basic idea of providing customers with the

best service, selection, quality, and value into a thriving business. The two are now co-presidents

of Chern’s: Ryan serves as the company’s chief executive officer; Ann serves as the company’s

chief operating officer.

Chern’s pursues an aggressive growth strategy. Currently the company has 140 stores in

28 states on the East Coast and in the Midwest. Chern’s employs an average of 19,000 full- and

part-time employees. Providing superior customer service has been the company’s main business

strategy and has successfully differentiated it from its competitors. Although the company’s products

are expensive, the high product quality and excellent customer service have made the company

successful. Because customers’ tastes can differ from one store to the next, the company tries to be

as decentralized as possible. Therefore, it gives its store managers a considerable amount of discretion

in terms of how they run their stores. Likewise, each manager runs his or her own department

as a small business and is rewarded according to the department’s and the store’s overall success.

Because customer service lies at the heart of the company’s business strategy, it is a core

part of the corporate culture of Chern’s. Ann and Ryan believe that customer service is the essence

of selling and that because the firm’s sales associates are in direct contact with customers, they are

the core drivers of the company’s performance. Both department managers and assistant department

managers support the sales associates. Besides giving the sales staff their full support, the

department managers at Chern’s are, in turn, supported by their store managers, assistant department

managers, buyers, and merchandising managers. Figure A–1 illustrates these relationships.

Core values are an essential part of the Chern’s brand and are the foundation of its culture.

The company’s family ownership contributes to its desire to make every employee and customer

feel valued and cared for. The firm is known for its strong and unique culture, which it feels is due

to its belief that the best approach to business is to hire good people. As such, Chern’s tries to identify

and select the right people, train them, and give them the tools and autonomy they need to succeed.

Successful employees are rewarded with above-market base salaries and generous bonuses.

The management philosophy at Chern’s is based on empowerment. Chern’s believes that

by hiring well it can trust its employees to use their own judgment. Consequently, the firm

gives them a considerable amount of freedom in terms of how they do their jobs. By striving to

create a fair and positive environment and giving each employee the tools and autonomy he or

she needs to succeed, the company feels it has created an environment in which its sales associates

can truly excel. In fact, last year, 42 Chern’s sales associates sold at least $1,000,000 in

merchandise—

a company record.

Because Chern’s has a strong reputation for customer service, quality, and selection, it

enjoys very positive brand recognition among its targeted customers. It is consistently named

one of the top three retailers in regional customer surveys and has been listed among Fortune

magazine’s top 100 best companies to work for. Last year the company ranked number 72 on

Fortune’s list, down from 44 the previous year. It was the second-highest retailer on the list,

behind Nordstrom’s. It also ranked as having the best customer service among retailers for the

past three years in customer surveys developed by the National Retail Federation.

In addition to focusing on customer service, selection, quality, and value, Chern’s has

invested heavily in information-technology tools to improve its inventory management and help

its sales associates make efficient transactions with customers. The company recently implemented

a Perpetual Inventory System to help its buyers react more quickly to the feedback given

to them by its sales associates and to track inventory to quickly adjust each store’s product mix

and clothing sizes available. The technology has helped the company increase its efficiency and

lower its costs as well as add value for its customers.

Chern’s Financial Performance

Chern’s has enjoyed a strong financial performance over the last few years. Over the past five

years, the company’s share price has increased 134 percent and the company’s revenues have

grown at an annualized rate of 9 percent. Revenues and net income have grown as all of the

firm’s stores have reported sales increases every year over the past three years. Growing revenues

and income have provided the company with the financial base and stability it needs for

further expansion. The five-year growth strategy at Chern’s is to open 15 new stores a year and

to continue to grow at an annual rate of 9 percent. Figure A–2 shows the company’s revenue,

gross profit, and net income trends for the last three years.

The company’s good financial performance has translated into strong operating cash flow,

giving it the option of reinvesting in its business, buying back shares, or passing some of its earnings

to investors in the form of dividends. Figure A–3 shows the operating cash flow trend at

Chern’s over the past three years. Chern’s has funded its expansion using its earnings rather than by taking on debt. The company believes that its conservative debt policies and strong cash flow help create shareholder value by enabling it to expand into new markets.

Chern’s Human Resources

Chern’s averages 1 store manager, 8 department managers, 8 assistant department managers,

and approximately 100 full-time and 25 part-time sales associates per store. Full-time employees

receive a generous benefits package, two weeks paid vacation, and are eligible for bonuses. Parttime

employees are considered members of the core workforce and receive prorated benefits and

bonuses. Because it feels that they would not reinforce its culture, Chern’s does not currently

utilize temporary or contingent workers of any kind. Turnover among its full-time sales associates

has been relatively stable, averaging 20 percent over the past three years. Turnover among

the company’s part-time sales associates has also been relatively low compared to similar retail

operations, averaging 15 percent over the past three years. The part-time sales associates are

used to increase the number of sales associates on the floor during peak periods.

The human resources department at Chern’s generally does a good job supporting the

company’s business strategy. The company’s compensation, performance management, and

training are all designed to get sales associates up to speed and selling quickly. The base pay

they earn is 20 percent above the market average, and Chern’s matches in their 401(k) plans up

to 10 percent of their base pay. Twenty percent of a sales associate’s bonus is tied to the person’s

customer service performance as rated by his or her department manager, 40 percent is based on

individual sales performance in relation to that person’s sales target, and 40 percent is based on

overall store sales. New employees have a reduced sales target for their first year. Sales associates

can earn up to 150 percent of their base pay in bonuses based on both sales and customer

satisfaction ratings. Top performers at Chern’s earn well above the market average in pay.

Semiannual performance evaluations assess sales associates’ initiative, customer service

behaviors, coworker support behaviors, and leadership. Raises to an associate’s base salary

include a cost-of-living adjustment based on inflation, and from 0 to 10 percent based on the

department manager’s perception of the sales associate’s performance, adherence to company

values, and leadership contributions. Sales associates are also given 10 personal days, including

sick days, and generous health and dental benefits. If a sales associate refers a candidate to

Chern’s, and the person is hired, the company gives the employee a $1,000 referral bonus after

the new hire passes the six-month mark with strong performance.

Chern’s largely focuses its training and development activities on its new hires. New hires

undergo a two-day orientation. Each then receives on-the-job training from his or her department

manager and shadows another sales associate for one week. Employees receive additional training

only if they fail to reach their sales quotas two months in a row. Sales associates who fail to

reach their quotas four months in a row are given a warning. Those who fail to meet their quotas

five months in a row are terminated.

Sales associates can use the store’s technology to identify how they are performing relative

to their quotas. Chern’s expects its employees to be relatively “tech savvy” and be willing and

able to quickly learn its systems. Customer information, including information about their previous

purchases and fashion preferences, is stored in the company’s computer for fast retrieval.

Chern’s also uses technology to give its buyers feedback about its customers’ preferences and

purchasing trends. The company’s sales associates are also required to record information about

customers’ inquiries and unfilled requests for particular types of clothing. This is critical because

it helps each department better track its inventory and quickly adjust its product mix and sizes to

meet the changing demands of its customers. Sales associates can also use the store’s computers

to check inventory at other Chern’s locations to better assist clients in locating desired products.

The Competition Chern’s Faces

Chern’s primary competitors include Nordstrom, Dillard’s, Barney’s, Nieman Marcus, and Saks

Fifth Avenue. Table A–1 shows the previous and current year’s sales, net income, and employee

headcount for Chern’s relative to its competitors.

At Chern’s, sales associates execute the company’s customer service strategy by building

long-term relationships with their clientele. Sales associates feel empowered, and their business

freedom is strongly supported by the corporation as long as the employees work hard and do

their best. Chern’s tries to hire sales associates with an entrepreneurial spirit, a drive to be successful,

and a desire to make money. The sales force’s accountability for results and Chern’s

high expectations of them means that Chern’s wants to hire only elite sales associates.

The levels of customer service excellence and sales skills required by Chern’s employees

are not the same for most other retail firms. High-end retailers, such as Neiman Marcus and

Nordstrom, tend to compete more directly with Chern’s for hires than do competitors such as

Dillard’s and Federated Department Stores, which focus less on customer service. The quality of

Chern’s sales force has enabled it to offer employees considerable upward mobility within the

company, which is unusual for a retailer. Chern’s fills 75 percent of its department manager and

assistant department manager positions internally, whereas most of its competitors fill their management

positions externally; 80 percent of the current store managers at Chern’s once worked

as sales associates for the firm. Promotion from within is important to the company. Both Ryan

and Ann strongly believe that internal hires reinforce the company’s strong culture.

In order to provide the highest-quality customer service and capture market share, Chern’s

knows it needs to hire the right sales associates. Although the company’s strong culture and high

quality initially attracted a sufficient number of talented sales associates who shared the firm’s

values, the competition for talented sales associates has been heating up. As a result, Chern’s

is finding it harder to staff and retain the level of sales talent it needs. The sales associates at

Chern’s are usually the top performers in the retail industry, so they are never easy to find.

Because of the importance of hiring the right salespeople, and their expectation that staffing

this important position will become more difficult in the future, Ann and Ryan have decided to

launch a strategic analysis of how Chern’s staffs its sales associate positions and have asked for

your help.

Strategic Staffing at Chern’s: Chapter-by-Chapter

Case Assignments

At the end of each of the chapters in this book, you will have an assignment for the case study

that applies concepts from that particular chapter. The entire list of assignments can be found

at the end of this appendix, just before the candidate résumés are presented. The assignments

put you in the role of an external staffing consultant hired by Chern’s. Your job is to conduct

a strategic analysis of how it staffs its sales associate positions. Your final product will require

you to combine each of the assignments into a cohesive report, including a table of contents and

any necessary appendices. Format your report as a professional product that you would give

to the organization. Chern’s is decentralized, which means that your report will be distributed

to many store managers, many of whom are unfamiliar with staffing terminology and jargon.

Write your report so that they understand and adopt your recommendations and are committed to

implementing the changes you’ve suggested. You might want to keep a copy of the final report

to show potential employers the type of strategic staffing work you are capable of performing.

Questions

Chapter 4: Strategic Job Analysis and Competency Modeling

Referring to the information presented in the chapter and case, by researching the “retail salesperson”

position on O*Net (http://online.onetcenter.org), and by interviewing a sales associate

in a similar company if possible (an associate at Saks Fifth Avenue, Nieman Marcus, Nordstrom,

and so forth), create a job requirements matrix for the sales associate position at Chern’s. Be

sure to consider the company’s business strategy and corporate culture in creating job duties and

identifying competencies or KSAOs. For each competency or KSAO, decide if Chern’s should

hire people who already possess the characteristic or if the firm should train them to develop

it. Also, estimate to the best of your ability how important each characteristic is relative to the

others as well as the relative time associates spend on each job duty. You may have to use some

judgment to come up with the answers to these questions. You will use this information later to

determine how to weight the assessment information obtained on each job candidate.

Given the information contained in the Chern’s case description and your own knowledge

of this type of position, create a job rewards matrix for the sales associate position. If possible,

interview a sales associate in a similar company to obtain additional job rewards information.

Chapter 5: Forecasting and Planning

Chern’s has never examined its internal labor market. The company asks you to perform a transition

analysis for full-time sales associates. It asks you to conduct relevant analyses to describe

the internal labor market for its flagship store.

Summarize the flagship store’s internal labor market and highlight any trends or forecasted

gaps based on the transition probability matrix in Table A–5. The probabilities are based on

annual rates that are averaged over a span of three years. In other words, they are the average rate

per year. If Chern’s wants to keep its flagship store staffed with 140 full-time sales associates,

how many full-time sales associates should it expect to have to hire from outside the company

annually?

Traditionally, 25 percent of the store’s job applicants for sales associate positions become

job candidates, and 20 percent of the job candidates receive job offers, 75 percent of which are

accepted. Chern’s asks you how many applicants it will need to generate each year to acquire the

number of new hires you forecasted.

Chapter 6: Sourcing: Identifying Recruits

Chern’s currently uses six different sources for sales associate applicants: colleges, employee referrals,

Cherns.com, a search firm, walk-ins, and local newspaper ads. The company just finished

analyzing the effectiveness of each of these sources, and the results are summarized in Table A–6.

Chern’s asks you to prioritize its recruiting sources to maximize the effectiveness of

the company’s future hiring initiatives. Based on what you have read in this case, prioritize

the staffing outcomes and rank order the recruiting sources based on their ability to maximize the

company’s staffing goals for the sales associate position.

Ryan and Ann have heard a lot lately about using the Internet to source passive job candidates.

The two are wondering how well this technique would work for its sales associate positions.

Referring to the Develop Your Skills feature in Chapter 6, choose an area of the country. First, provide

some suggestions on how the Internet might be more effectively used to source and recruit

applicants. Second, conduct a Boolean search to source two promising sales associate applicants

using the Internet. You may need to try different search engines and different syntax, as highlighted

in the chapter. You can also try x-raying and flipping. For example, on Yahoo.com you could try

“linkdomain:ffany.org shoes blog” to pull up blogs linked to the Fashion Footwear Association of

New York with the word “shoes” in the blog. You should experiment with searches based on your own

ideas. Include the various search engines and search terms you used for your final search and provide

information about your two leads in an appendix to your final report. Justify each recommendation. To best serve its diverse clientele and to establish the most positive employer image possible,

Chern’s wants to hire diverse sales associates. The company also asks you how it can

improve the diversity of its applicant pool.