data analysis-jam007

602-096 Store24 (A): Managing Employee Retention

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Posing the Questions Jenkins headed over to Gordon’s office curious about the sudden Friday afternoon meeting. After

briefing Jenkins, the group began discussing specific questions to be addressed before the Monday morning meeting. Doucette explained:

We are considering many strategies for increasing manager and crew tenure. We would like to use our data to get some estimate of the actual financial impact of increased tenure so that we can make more informed decisions when considering increasing wages and bonuses or how much to spend on training and development programs.

Gordon added:

While site-location factors such as population, number of competitors, and pedestrian access are traditionally considered the primary drivers of store success, I have always been a big believer in the power of ‘people factors,’ such as employee skill and experience, in optimizing a given site’s performance.

Gordon reflected on the analysis that Hart had presented earlier and added ”I wonder if you might be able to use our data to help us understand how important manager and crew tenure are relative to site-location factors in determining store level financial performance.”

Hart agreed with Gordon’s sentiment on the importance of managers and crew at the store level. Having spent a lot of time in the field at various stores prior to becoming the COO, Hart understood that managers and crew affected store performance in a variety of ways including ensuring compliance with Store24 merchandising and operating standards, maintaining in-stock position, and managing shrink and cash control. Hart mentioned:

The relationship between tenure and financial performance might not be that straightforward. Many of our stores have very low levels of tenure. Increasing tenure in these stores may have a relatively large impact on financial performance since managers and crew are developing new skills on a daily basis if we are able to retain them. In stores with our most experienced employees, these skills have already largely been developed and, hence, an increase in tenure may have a relatively small impact on financial performance.

Jenkins understood that Hart was essentially saying that the relationship between tenure and financial performance might vary with the level of tenure. She recalled that this meant there could be a nonlinear relationship between tenure and financial performance; however, she was not sure how she would incorporate this into her analysis. Jenkins knew that she had to find out what the implications of such a relationship would be in determining how bonuses and other incentives should be tied to retention.

Getting the Data Knowing that time was short, Jenkins headed straight for Controller John O’Connell, who was very

familiar with Store24’s performance reporting system, and could gather store level operating data quickly. “John, I need a quick favor. I’ve been asked to analyze the relationship between tenure and financial performance. Can you help me access some data for this project?”

This document is authorized for use only in Dr. Alex Yang's Competitive Strategy FTPT 2017-18 course at Hong Kong University (HKU), from December 2017 to June 2018.

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Exhibit 3 Summary Statistics from Sample Stores

Store Sales Profit MTenure CTenure Pop Comp Visible Ped Count Res Hours24 1 1,060,294 265,014 0 24.8 7,535 2.80 3 3 1 1 2 1,619,874 424,007 86.2 6.6 8,630 4.24 4 3 1 1 3 1,099,921 222,735 23.9 5.0 9,695 4.49 3 3 1 1 4 1,053,860 210,122 0.0 5.4 2,797 4.25 4 2 1 1 5 1,227,841 300,480 3.9 6.9 20,335 1.65 2 5 0 1 6 1,703,140 469,050 149.9 11.4 16,926 3.18 3 4 1 0 … … … … … … … … … … … 74 1,782,957 518,998 171.1 29.5 10,913 2.32 3 4 1 0 75 1,321,870 296,826 2.3 8.7 8,966 1.89 4 4 0 1 Mean 1,205,413 276,314 45.3 13.9 9,826 3.79 3.08 2.96 0.96 0.84 Standard Deviation 304,531 89,404 58 18 5,912 1 1 1 Minimum 699,306 122,180 0 1 1,046 2 2 1 Maximum 2,113,089 518,998 278 114 26,519 11 5 5

Source: Company information.

This docum ent is authorized for use only in D

r. A lex Yang's C

om petitive S

trategy FTP T 2017-18 course at H

ong Kong U niversity (H

K U

), from D

ecem ber 2017 to June 2018.