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Reinventing the Workforce

Photograph by Evan Kaufman and Petya Shalamanova

Don’t look now, but some Publix associates are now sporting beards. Walmart workers are attending night courses at online universities subsidized by their employer. And there’s a legally blind associate bagging groceries at a Market 32 store.

To some degree, all three of these recent developments are minor, but they’re also indicators of a much larger story sweeping the retail food industry today: a historically tight labor market and the adjustments, both big and small, that retailers are making to ensure their stores—renowned employers of millions as a key part of the largest private employer sector in the United States—are staffed and serving the millions more who pass through them.

Interviews with retail executives, labor experts and others who play a direct and indirect role in determining how retailers think about staffing, however, say there is considerably more than just macroeconomics at play. While there is no escaping the supply-and-demand equation that is increasing salaries and subsequently pressuring costs—retail wages have increased by 15% since 2006, according to the Bureau of Labor Statistics—the pay raises for retail workers have come at a time when lifestyles, competition and consumer shopping behaviors, which are disrupting the industry as a whole, are coming to roost. The shifts are exhibited by the bearded Publix stocker, the upwardly mobile Walmart cashier and the vision-impaired bagger.

Other key factors driving workforce reinvention in food retailing include:

  • Pressures of a social media-influenced world and the value-driven preferences of younger consumers who are putting similar pressure on employers to burnish their image and position themselves as places where workers want to work. For some retailers, that has meant a reckoning with the effects of having been guided for so many years by a low-cost service environment.
  • The dissipation of traditional supermarket sales to online channels, which is forcing retailers to reinvent their stores behind experiences and more fresh and prepared foods, bringing with it a challenge to find and train employees capable of prepping and selling them. Traditional stores at the same time have been upended by small boxes and warehouse clubs that, among other differences, tend to pay workers higher wages due to advantages in efficiency and productivity.
  • Stores today are also finding new competition for workers in the “gig economy,” a labor market characterized by contract or freelance work that has grown up alongside the digital revolution. Retailers today are looking to find ways to meld the aspects of freelance and contract work into their stores both directly and indirectly.
  • The level of competition between food retailers in the meantime has escalated as physical store growth slows and companies work to get same-store sales and greater productivity out of their existing assets. This has meant competition for workers on aspects that go beyond hourly pay rates and into areas such as scheduling simplicity and predictability, payroll transparency, and family leave, and extends to seemingly trivial aspects such as dress codes and facial-hair and tattoo policies.
  • Retaining employees, both to seed a company’s future leaders and reduce the value-destroying cycle of high employee turnover that characterizes retail jobs, is also sparking new approaches to training and development, from onboarding and skill-development programs to college education benefits. Companies are also looking harder into previously untapped sources for talent, such as workers with disabilities, veterans and people with checkered pasts.
  • While the current employment picture would indicate that nearly anyone who wants a job can find one today, retailers may still find themselves struggling to satisfy an army of part-time workers looking—not always successfully—to find more work with them. This “underemployed” class is both a challenge for stores that may rely on them and an opportunity for those who would make them full time.

“I’ve been at Golub for 25 years, about 20 of them in human resources, and I can say this is the most challenging environment for jobs I can remember, especially in certain locations like Burlington, Vt., where it’s just been almost impossible to find the right people,” says Mike Miller, VP of human resources at Golub Corp., the Schenectady, N.Y.-based parent of the Price Chopper and Market 32 brands. “For us, it’s been a sheer supply issue that’s forced us to look at unconventional sources of talent.”

Miller is referring to Golub Corp.’s “Hiring AdvantEdge” program, which works with a New York-run initiative to identify companies that can hire and train workers with disabilities, which led to the visually impaired bagger referenced above. Miller, who also lends his HR experience to the Food Marketing Institute’s Future Leaders Planning Committee, says Golub is attacking the tight labor market in a number of ways, including a certification program for skilled workers in stores and higher compensation, but he says the prevailing challenge is selling a young workforce on the potential benefits of food retail work amid a myriad of choices.

Golub is in the process of evolving its store base from its conventional Price Chopper stores to the food-focused Market 32 concept, which Miller says has required the company to hire some 1,500 incremental workers so far, many requiring more developed skills. “We pay for it with sales, and we’ve been lucky that the 23 stores we’ve opened so far are providing that. But it’s been a challenge to find those workers,” he says.

Perhaps no company better illustrates the changing thinking about retail—and retail work—than Walmart, which has always been a lightning rod for labor attention but rarely in the manner it attracted in February 2015, when it unveiled a plan to phase in minimum hourly raises as part of an eye-popping $2.7 billion investment in wages and training. The Bentonville, Ark.-based retailer’s move triggered a wave of similar, often larger, pay increases by competitors, including Target, which notably outlined a plan to pay workers $15 per hour by 2020.

While on some level Walmart’s move acknowledged the growing drumbeat of a wave of state minimum-wage increases and the “Fight for $15” movement, the company couched its initiative in terms of addressing a greater societal good by doing something that also enhanced its business. Its stock fell by 30% that day, foretelling similar drops awaiting retailers such as Kroger and Sprouts Farmers Market, when both chains revealed earlier this year that a portion of the respective tax breaks would be invested in wages and training for workers.

Wall Street may not have gotten the message, at least not immediately, but analysts today would agree with Walmart officials in acknowledging that wage and training improvements—the start of what CEO Doug McMillon calls “changing the way we work”—were foundational toward the big retailer’s sales turnaround since then.

Zeynep Ton, an adjunct professor of operations management at MIT Sloan School of Management in Cambridge, Mass., cites Walmart among the companies heralding a “radical shift” in realizing that a customer-first approach to business to try and turn traditional “bad jobs” into “good jobs” is resulting in lower turnover, higher productivity and better service.

“There are financial, competitive and moral reasons in play here,” says Ton, citing studies that highlight what she calls “the financial costs of status quo,” along with competitive and market saturation issues, higher minimum wages and other new scheduling laws as the motivations for companies to take a new look at work.

“Retailers need to ensure that there is a high return on employee investment. The only way to do that is through operations and a customer first mindset,” Ton says. “Retailers need to redesign their operations in a way that increases the productivity and contribution of their workforce and enables the workforce to create great value for customers. Right now, I see many retailers—out of desperation—trying to lure customers with more new products, more promotions and more last-minute changes. Those not only create chaos at the stores and reduce employee productivity and morale but are also inconsistent with a customer-first mindset.”

Walmart’s wage increases accompanied a new focus on training and development designed to provide stability for the volatile entry-level workers; skill development and mobility for more established workers; and for workers who want it, a college degree at the equivalent of Walmart prices.

According to the Philadelphia-based Hay Group, turnover at retail positions reached 65% in 2016. Walmart acknowledged its own role in such volatility, noting it was not uncommon for retail entry-level workers to spend a few months at one store only to depart for raises as modest as 15 cents an hour at a competitor, all while starting there at the ground floor, then departing for a third entry-level job.

“Retail ought to be an incredible starting place and a ladder for opportunity,” says Kathleen McLaughlin, president of the Walmart Foundation, the charitable arm of Walmart that in concert with Walmart’s initial wage investments made a $100 million, five-year investment in organizations supporting mobility for retail workers sector wide.

Walmart’s support of its own entry-level workers led to the establishment of its Pathways initiative, an onboarding program for all new employees. Walmart followed by founding a series of Walmart Academies providing in-person training for more experienced workers. Drew Holler, VP of associate experience for Walmart, said workers have returned from that program more motivated to provide a better customer experience. This year, Walmart took those efforts a step further by announcing a radical plan to support workers who want to obtain college degrees by subsidizing online university degrees at select schools at a cost to employees of about $1 day. This program, Holler says, would allow workers to obtain degrees without the attendant debt that so often accompanies secondary education while providing Walmart with a “halo effect” he suspects could be an advantage in the battle to attract employees.

“The business case is straightforward,” Holler said at an event earlier this year. “Our badges say, ‘Our People Make the Difference,’ and we really believe that to be the case. We think our associates are a competitive advantage and the more engaged they are [and] the more confident they are in who they are, the better our customer service is going to be and the better our business is going to be.”

Peel away a layer of Walmart’s initiatives and you’ll often find an underlying efficiency program. Utilizing cloud-based apps, robotics and other technologies, Walmart is also changing the nature of work with the intent to automate tasks such as inventory and stocking and redeploy workers to tasks that can have more of an effect on sales in stores.

Consumers are more than willing to accept automation as part of their store experience – as long as they see a clear benefit to them, says Logan Flatt, SVP of Strategy at Ansira, a St. Louis based agency. “They expect automation like robotics, A.I., and apps to reduce time spent in store, reduce prices on core items, and reduce confusion, errors, stock-outs, and other sources of shopping friction they would love to leave in the past, ASAP.

“Woe be the food retailer that integrates automation into its store experience in a manner that fails to make life faster, cheaper, and easier for its customers – not only might customers reject the automation, they may reject the brand as well,” he adds.

As always, Walmart’s moves have not come without critics. The union-backed Our Walmart group argues, for example, that the wage investments were counterbalanced in part by a shift to more part-time workers in stores. This “underemployed” class—about 8% of all American workers, according to the Bureau of Labor Statistics—is still struggling financially, and most (74%) are looking for full-time work, according to a recent report from Snag, the online hourly job board.

These figures illustrate that while rising hourly rates are one avenue to better attraction and retention, they’re not the only one. In fact, while studying employee surveys and their correlation to retention, the Seattle-based firm PayScale revealed that “payroll transparency”—the idea of employees understanding why they’re paid what they’re paid, says Katie Bardaro, VP of data analytics and chief economist at PayScale—was among the strongest indicators of employee-employer loyalty. PayScale’s recent study of this aspect of the hourly job market indicated that hard discount grocer Aldi was the best in any industry in this measure.

“People tend to focus too much on the dollars-per-hour rate, but its more than just that,” Bardaro says. “It’s what else you can do to attract and retain your workforces. It’s offering learning and development opportunities, offering a real sense of belonging, offering training—anything can make workers committed to your store vs. your competitors.”

Gig Economy’s New Wrinkle

For part-time workers especially, the “gig economy”— a class of workers doing contract or freelance work—has become a competitor to retail employers, some sources say. Retailers can respond by having their workforces take advantage of apps, particularly those that can give workers freedom in how they manage their assignments.

Shyft, for example, was born of the idea that retail workers lacked the enterprise software investment afforded to knowledge economy counterparts—at least until smartphone adoption became widespread. The app integrates with HR systems, allowing workers to swap shifts quickly and efficiently. What was once a handwritten schedule sheet adorned with Post-it notes and tacked on a backroom wall—and a huge source of inefficiency in retail workplaces—now allows colleagues to take over shifts in a matter of hours, says Chris Pitchford, VP of workforce solutions and a co-founder of the Seattle-based company.

“Scheduling is cited as the No. 1 reason workers are unhappy at work,” Pitchford says. “Retailers now can create more labor liquidity by reducing the amount of no-shows and improving attendance across a fleet of stores. There’s a lot of employees at a grocery store. And with labor being the most expensive cost, they can see a 1% or 2% reduction in labor inefficiency. Across 50,000 employees, that makes a huge dent in cost savings.”

While Shyft has experimented in grouping jobs by roles to make staffing more “gig-like”—a strategy that works for jobs like bartenders and servers in the restaurant industry, Pitchford says—the training and specific skills associated with the grocery industry is trickier.

“There’s an opportunity to generate interest in grocery, but the training that a Whole Foods wants is such that they can’t just pick up a cashier from Kroger off the street and have them work right away,” he says. “We’re not there yet.”

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