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Retail Management: A Strategic Approach

Thirteenth Edition

Chapter 11

Retail Organization And Human Resource Management

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Learning Objectives

11.1 To study the procedures involved in setting up a retail organization

11.2 To examine the various organizational arrangements utilized in retailing

11.3 To consider the special human resource environment of retailing

11.4 To describe the principles and practices involved with the human resource management process in retailing

There are three steps to properly operating a retail business: setting up an organization structure, hiring and managing personnel, and managing operations—financially and nonfinancially. This chapter covers the first two steps. Chapters 12 and 13 deal with operations management.

Steps in Operating Retail Business

Setting up an organization structure

Hiring and managing personnel

Managing operations—financially and nonfinancially

Factors in Planning and Assessing a Retail Organization

Target market needs

Employee needs

Management needs

Through a retail organization, a firm structures and assigns tasks (functions), policies, resources, authority, responsibilities, and rewards to efficiently and effectively satisfy the needs of its target market, employees, and management. A firm cannot survive unless its organization structure satisfies the target market, no matter how well employee and management needs are met. A structure that reduces costs via centralized buying but leads to a firm’s insensitivity to geographic differences in customer preferences will lose market share. Although many retailers perform similar tasks (buying, pricing, displaying, and wrapping merchandise), there are many ways of organizing to conduct these functions.

Figure 11.1a Planning and Assessing a Retail Organization

Target Market Needs

Are there sucient personnel to provide appropriate customer service?

Are personnel knowledgeable and courteous?

Are store facilities well maintained?

Are the specific needs of branch store customers met?

Are changing needs promptly addressed?

Figure 11.1b Planning and Assessing a Retail Organization

Employee Needs

Are positions challenging and satisfying enough?

Is there an orderly promotion program from within?

Is the employee able to participate in the decision making?

Are the channels of communication clear and open?

Is the authority-responsibility relationship clear?

Is each employee treated fairly?

Is good performance rewarded?

Management needs to examine employees’ needs to be challenged, to feel secure and esteemed, and so on. Those who perceive that they are challenged by their positions, treated fairly, rewarded for good performance, and feel that they are on a specific career path, etc. should be more highly motivated and conscientious. Promoting from within, developing continuous training programs, motivating employees through specific benchmarks, and providing adequate health insurance are ways a retailer can fulfill employee needs.

Figure 11.1c Planning and Assessing a Retail Organization – Management Needs

Management Needs

Is it relatively easy to obtain and retain competent personnel?

Are personnel procedures clearly defined?

Does each worker report to only one supervisor?

Can each manager properly supervise all the workers reporting to him or her?

Do operating departments have adequate staff support (e.g., marketing research)?

Are the levels of organization properly developed?

Are the organization’s plans well integrated?

Are employees motivated?

Is absenteeism low?

Is there a system to replace personnel in an orderly manner?

Is there enough flexibility to adapt to changes in customers or the environment?

The Value Profit Chain and Human Resource Management

Satisfaction Mirror– Employee satisfaction and loyalty (due to fairness of management, the quality of one’s peers in the workplace, employee empowerment and monetary compensation) translates into high levels of customer service and customer loyalty.

Recognizes that employees interact with customers not management

Wegman’s Employees

In a recent survey of Wegman’s employees, 33,000 of 37,000 employees responded (close to 90 percent). When asked, “Does management know what it’s doing?”, 96 percent responded with a “Yes” answer.

The most common response to another question to describe Wegman’s management, was the word “family.”

Figure 11.2 The Process of Organizing a Retail Firm

Figure 11.3 Division of Tasks in a Distribution Channel

Performer	Tasks
Retailer	Can perform all or some of the tasks in the distribution channel, from buying merchandise to coordination.
Manufacturer or Wholesaler	Can take care of few or many functions, such as shipping, marking merchandise, inventory storage, displays, research, etc.
Specialist(s)	Can undertake a particular task: buying oce, delivery firm, warehouse, marketing research firm, ad agency, accountant, credit bureau, computer service firm.
Consumer	Can be responsible for delivery, credit (cash purchases), sales effort (self-service), product alterations (do-it-yourselfers), etc.

Grouping Tasks into Jobs

Tasks	Jobs
Displaying merchandise, customer contact, gift wrapping, customer follow-up	Sales personnel
Entering transaction data, handling cash and credit purchases, gift wrapping	Cashier(s)
Receiving merchandise, checking incoming shipments, marking merchandise, inventory storage and control, returning merchandise to vendors	Inventory personnel
Window dressing, interior display setups, use of mobile displays	Display personnel
Billing customers, credit operations, customer research	Credit personnel
Merchandise repairs and alterations, resolution of complaints, customer research	Customer service personnel
Cleaning store, replacing old fixtures	Janitorial personnel
Employee management, sales forecasting, budgeting, pricing, coordinating tasks	Management personnel

After the retailer decides which tasks to perform, they are grouped into jobs. The jobs must be clearly structured. While grouping tasks into jobs, specialization should be considered so each employee is responsible for a limited range of functions (as opposed to performing many diverse tasks). Specialization has the advantages of clearly defined tasks, greater expertise, reduced training, and hiring people with narrow education and experience. Problems can result due to extreme specialization: poor morale (boredom), people not being aware of their jobs’ importance, and the need for more employees. Specialization means assigning explicit duties to individuals so a job position encompasses a homogeneous cluster of tasks. Once tasks are grouped, job descriptions are constructed. These outline the job titles, objectives, duties, and responsibilities for every position. They are used as a hiring, supervision, and

evaluation tool. Figure 11-4 (next slide) contains a job description for a store manager.

Figure 11.4 A Job Description for a Store Manager

Classifying Jobs: Jobs are broadly categorized by one of these classifications:

Functional (e.g., sales promotion).

Product (e.g., clothing department).

Geographic (e.g., branch store).

Combination (e.g., sales promotion manager for clothing in branch stores).

Jobs are then broadly grouped into functional, product, geographic, or combination classifications. Functional classification divides jobs by task—such as sales promotion, buying, Web design, and store operations. Expert knowledge is used. Product classification divides jobs on a goods or service basis. A department store hires different personnel for clothing, furniture, appliances, and so forth. This classification recognizes differences in personnel requirements for different products. Geographic classification is useful for chains operating in different areas. Employees are adapted to local conditions, and they are supervised by branch managers. Some firms, especially larger ones, use a combination classification. If a branch unit of a chain hires its selling staff, but buying personnel for each product line are hired by headquarters, the functional, product, and geographic formats are combined.

Table 11.1 Principles for Organizing a Retail Firm

Show interest in employees

Monitor employee turnover, lateness, and absenteeism

Trace line of authority from top to bottom

Limit span of control

Empower employees

Delegate authority while maintaining responsibility

Acknowledge need for coordination and communication

Recognize the power of informal relationships

An organization should show interest in its employees. This can be done through job rotation, promotion from within, participatory management, recognition, job enrichment, and so forth. Employee turnover, lateness, and absenteeism should be monitored, because they may indicate personnel problems. The line of authority should be traceable from the highest to the lowest positions. In this way, Employees know to whom they report and who reports to them (chain of command). A subordinate should report to only one direct supervisor (unity of command). This avoids the problem of workers receiving conflicting orders.

There is a limit to the number of employees a manager can directly supervise (span of control). A person responsible for a given objective needs the power to achieve it. Although a supervisor can delegate authority, he or she is still responsible for subordinates.

The greater the number of organizational levels, the longer the time for communication to travel and the greater the coordination problems. An organization has an informal structure aside from a formal organization chart. Informal relationships exercise power in the firm and may bypass formal relationships and procedures.

Figure 11.6 Organization Structures Used by Small Independents

Developing an Organization Chart: An organization chart shows the relationship of all positions.

The hierarchy of authority outlines the job interactions within a company by describing the reporting relationships among employees. It provides coordination and control.

Organizational Arrangements Used by Small Independent Retailers: The organization used by a small independent store is simple because it contains only two or three levels of personnel (owner-manager and employees), and the owner-manager personally runs the firm and oversees workers.

There are few employees, little specialization, and no branch units.

Each employee completes several tasks.

Figure 11-6 shows the organizations of two small independents.

Mazur Plan

Merchandising—buying/selling, stock planning,

Publicity—displays, event planning, advertising research

Store management—customer service, merchandise protection, receiving

Accounting and control—credit, expense budgeting, inventory management

Organizational Arrangements Used by Department Stores: Many department stores use organizational arrangements that are an adaptation of the Mazur plan.

The Mazur plan divides all retail activities into these four functional areas:

Merchandising

Communications

Store management

Financial accounting

The four areas are organized by line (direct authority and responsibility) and staff (advisory and support) components.

Figure 11.7 The Basic Mazur Organization Plan for Department Stores

Figure 11-7 shows the modern version of the Mazur plan.

The merchandising division is responsible for buying and selling.

Merchandise managers supervise buyers, devise financial goals for each department, coordinate department merchandise plans, and interpret the effects of economic data.

Buyers have complete responsibility for expenses and profit goals within a department. They prepare budgets, study trends, negotiate with vendors, plan the number of salespeople, and inform sales personnel about the merchandise purchased. Because buyers are not constantly on the selling floor, training, scheduling, and supervising personnel may suffer.

Chain Retailer Organizations

Centralized functional divisions– real estate, distribution, human resources (top management)

Elaborate information system and management controls

Centralization of much of buying with room to adapt to local markets

The growth of branch stores has led to three Mazur plan derivatives:

Headquarters executives oversee and operate branches (main store control).

Merchandise planning and buying, advertising, financial controls, store hours, and other tasks are centrally managed to standardize performance.

Branch store managers hire and supervise the employees in their stores.

This format is best when there are few branches and the preferences of branch customers are similar to those of the main store’s customers.

As branch stores increase in number, central personnel may become overworked and give too little attention to the branches.

Differences in customer preferences may be overlooked.

Department Store Organization Formats

Main store control– flagship executives oversee store units. Extreme centralization

Separate store organization—each store buys for itself and maintains sales responsibility

Equal store organization– buying is centralized; branch stores are sales units

Each branch has its own buying responsibilities (separate store organization).

Merchandise managers are placed directly in branches.

Each branch has autonomy for merchandising and operations.

Customer needs are quickly noted, but duplication of tasks is possible.

Coordination can be a problem.

Transferring goods between branches is more complex and costly.

This format is best if stores are large, branches are dispersed, or local customer tastes vary widely.

Buying is centralized, and branches become sales units with equal organization status (equal store organization).

Stores try to receive the benefits of both centralization and decentralization.

Buying functions (forecasting, planning, purchasing, pricing, distribution to branches, and promotion) are centrally managed.

Selling functions (presenting merchandise, selling, customer services, and operations) are managed locally. Data gathering is critical since buyers have less customer contact.

Figure 11.8 Equal-Store Organizational Format Used by Chain Stores

Organizational Arrangements Used by Chain Retailers: Various chain retailers use a version of the equal store organization, as depicted in Figure 11-8. The organization structures generally have these attributes:

1. Many functional divisions.

2. Centralized authority, with store managers responsible for sales.

3. Standardized operations.

4. Elaborate control systems.

Limited decentralization, which allows branch stores to adapt to localities.

Figure 11.9 The Organizational Structure of Kroger

Organizational Arrangements Used by Diversified Retailers: A diversified retailer is a multi-line firm operating under central ownership.

Diversified retailers include Kroger (see Figure 11-9) and Japan’s Aeon Co.

They face complex organizational considerations.

Interdivision control is needed.

Interdivision competition must be coordinated.

Resources must be divided among different divisions.

Potential image and advertising conflicts must be avoided.

Management skills must adapt to different operations.

Human Resource Management in Retailing

Recruiting

Selecting

Training

Compensating

Supervising

APPLICATION: How would small and large retailers act differently for each of the following? Diversity, Recruitment, Selection, Training

Strategy Small Retailer Strategy Large Retailer Strategy

Diversity Less emphasis placed on Formal measures taken to

creating diversity have a diverse workforce

Employees hired may be Programs to promote women

ethnically similar and minorities instituted

Recruitment Local recruitment National recruitment

Greater reliance on Greater reliance on mass

word-of-mouth media advertising

Less concern with Concern with affirmative

affirmative action action and unions

Selection Less formal selection Use of psychological testing

process and validation studies

Interview extremely Formal selection process

important in selection

Training Most training informal, on Formalized training program

on the job, and conducted conducted by training

by current employees or department (may be off the

boss job)

Training may be one time Orientation and follow-up training

Paying New Hires to Quit? Zappos

Please click URL to view:

https://youtu.be/cQLTQAv5JQA

URL: https://youtu.be/cQLTQAv5JQA

9:55 mins.

Why Zappos Pays New Employees to Quit--And You Should Too

Harvard Business Review

An interview with Bill Taylor, Game Changer blogger for HarvardBusiness.org. Zappos knows that they can't deliver great customer service unless their employees are committed to the values of the company. So what do they do? They pay employees to quit!

Direct and Indirect Costs of Employee Turnover

Direct Costs include: separation costs, exit interviews, replacement costs (advertising, screening, new employee orientation) and training costs

Indirect costs include: customer dissatisfaction, reduced suggestion selling, pricing errors, reduced morale among co-workers

Table 11.2 True Cost of Employee Turnover

Costs of using fill-in employees

Severance pay for exiting employees

Costs of hiring new employees

Training costs

Costs of mistakes and lower productivity while new employees gain experience

Customer dissatisfaction due to the loss of prior employees and the use of inexperienced workers.

Lower continuity among co-workers.

Poor employee morale when turnover is high.

Women in Retailing

Issues to address with regard to female workers

Meaningful training programs

Advancement opportunities

Flex time: the ability of employees to adapt their hours

Job sharing among two or more employees who each work less than full time

Child care

Retailing empires

Mary Kay

Avon

To attract and retain more women workers, retailers should address the following:

Meaningful training programs

Advancement opportunities

Flexible time arrangement—the ability of women to adapt their hours

Enabling job sharing among two or more women who each work less than full-time

Child care programs and reimbursement policies

Increasing the number of female supervisors

Seeking out women workers

Having a policy of zero-tolerance for insensitive workplace behavior

Employee mentoring programs

Minorities in Retailing

Issues to address with regard to minority workers

Clear policy statements from top management as to the value of employee diversity

Active recruitment programs to stimulate minority applications

Meaningful training programs

Advancement opportunities

Zero tolerance for insensitive workplace behavior

Diversity

Two premises:

That employees be hired and promoted in a fair and open way, without regard to gender, ethnic background, and other related factors

That in a diverse society, the workplace should be representative of such diversity

Labor Law Considerations

Retailers must not

Hire underage workers

Pay workers “off the books”

Require workers to engage in illegal acts

Discriminate in hiring or promoting workers

Violate worker safety regulations

Disobey the Americans with Disabilities Act

Deal with suppliers that disobey labor laws

Figure 11.10 A Goal-Oriented Job Description for a Management Trainee (1 of 2)

Figure 11.10 A Goal-Oriented Job Description for a Management Trainee (2 of 2)

Figure 11.11 A Checklist of Selected Training Decisions

When should training occur? (At the time of hiring and/or after being at the workplace?)

How long should training be?

What training programs should there be for new employees? For existing employees?

Who should conduct each training program? (Supervisor, co-worker, training department, or outside specialist?)

Where should training take place? (At the workplace or in a training room?)

What material (content) should be learned? How should it be taught?

Should audiovisuals be used? If yes, how?

Should elements of the training program be computerized? If yes, how?

How should the effectiveness of training be measured?

Present a plan for the ongoing training of both existing lower-level and middle-management employees without making it seem punitive.

Existing lower level and middle management employees should be sold on training as the basis for promotion. The firm should stress that promotion occurs from within the organization, and that training and learning are continuous activities. A proper environment needs to be developed and maintained for training activities.

Existing employees could be asked about perceived areas of deficiency; the training could be voluntary or promoted in a way that employees want to participate.

Components of Compensation

Total compensation

Salary plus commission

Profit-sharing

A compensation plan can involve direct payments, such as salaries, commissions, and bonuses. Indirect payments include paid vacations, health and life insurance benefits, and retirement plans.

The goals of a compensation plan in a retail setting are to reward initiative and performance, to compensate retail personnel in light of their value to the organization, and to attract and retain competent employees. Compensation includes both direct monetary payments (e.g., salary) and indirect payments (e.g., paid vacation). Some retailers often use profit-sharing plans to motivate employees.

At some large firms, compensation for certain positions is set through collective bargaining. About 800,000 retail employees are represented by labor unions.

Under a straight salary plan, a worker is paid a fixed amount per hour, week, month, or year. The advantages are retailer control, employee security, and known expenses. The disadvantages are retailer inflexibility, limited productivity incentive, and fixed costs.

With a straight commission plan, earnings are directly tied to productivity. The advantages are retailer flexibility, the link to worker productivity, no fixed costs, and employee incentive. The disadvantages are the retailer’s potential lack of control over the tasks performed, the risk of low earnings to employees, cost variability, and the lack of limits on worker earnings.

A salary plus commission plan combines the attributes of salary and commission plans.

Some retail executives are paid via a compensation cafeteria, where they choose their own combination of salary, bonus, deferred bonus, fringe benefits, life insurance, stock options, and retirement benefits.

Employee Behavior and Motivation

Several attitudes may affect employee behavior

Sense of accomplishment

Enjoyment of work

Attitude toward physical work conditions

Attitude toward supervisors

Confidence in company

Knowledge of business strategy

Recognition of employee role in achieving corporate objectives

DISCUSSION: Challenges and differences in supervising and motivating a 19-year-old Old Navy employee vs. a 55-year-old cashier?

Old Navy must be aware of specific problems relating to young workers. For example, do they understand the need to arrive on time? …how to handle long lines? …what to do with an irate customer? ...Old Navy's need to shift the cashier to other important areas when lines are short?

Specific problems regarding supervising and motivating middle-age workers may relate to concerns with not being able to go to work due to family obligations (such as babysitters not being available or grandchildren being ill), or not wanting to work overtime during peak seasons.

Young employees can be motivated through fair compensation, tuition benefits, salary increases based on longevity, social events such as sports teams with contemporaries, and opportunities for advancement.

Older workers can be motivated through discounts on purchases, more flexible hours, social activities with their cohorts, and career paths that can be accelerated due to hard work.

Employee Motivation (1 of 2)

Employee centered approach—Whole Foods team based hiring decision after 4 week trial period. Needs 2/3’s vote

Hire salaries– Publix store manager = $113,000; Nordstrom has salespeople making $100,000

Continuous assessment-Trader Joe’s every three months (punctuality, is always friendly, knows product features, promotes high store morale. For part-time as well as full-time employees

Employee Motivation (2 of 2)

Profit sharing—Publix current and former employees own 85 percent of company. If price earnings multiple is 20; every $1 of extra profit equals $20 in additional wealth. Encourages harder work for self and fellow workers

Au Bon Pain– store managers have compensation linked to profit goals at specific locations

Motivating Millennial Employees

Technologically advanced but often have different work values than older employees

Provide flexible work hours

Support volunteer activities to demonstrate firm’s commitment to society

Provide mentors

Get Millennials actively involved in solving important problems

A recent Gallup Poll found that Millennials are the least engaged group in the work force

Style of Supervising Retail Employees

Management assumes employees must be closely supervised and controlled; only economic inducements motivate

Management assumes employees can be assigned authority and be self-managers; motivation is intrinsic

Management applies self-management approach

Supervision is the manner of providing a job environment that encourages employee accomplishment.

Supervisory goals are to oversee personnel, attain good performance, maintain morale, motivate people, control costs, communicate, and resolve problems.

Supervision is provided by personal contact, meetings, and reports. A key element of supervision is to motivate employees to achieve company goals.

Job motivation is the drive within people to attain work-related goals.

The text lists 10 attitude questions that can be used to help predict employee behavior based on their motivation. These are the three basic styles of supervising retail employees:

Management assumes that employees must be closely supervised and controlled and that only economic inducements really motivate.

Management assumes employees can be self-managers and assigned authority, motivation is social and psychological, and supervision can be decentralized and participatory.

Management applies a self-management approach and also advocates more employee involvement in defining jobs and sharing overall decision making. Mutual loyalty and enthusiasm from both parties benefit the company in the long run.

It is the supervisor’s role to motivate employees in a manner that yields job satisfaction, low turnover, low absenteeism, and high productivity.

Retail 1

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