Retail Scheduling: Creating a Win-Win for Employers and Employees

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1 Creating a Win-Win for Employers and Employees Brought to you by: Sponsored by:

2 Introduction There s no question that scheduling optimization software, which uses historical and predictive analytics to assist retail managers with the associate scheduling process, is hot. With razor thin margins and increasingly stiff business competition, retailers are striving to increase revenue while holding down their operational costs. Considering labor s wide acceptance as a retailer s largest controllable cost, scheduling optimization has proven a compelling means to that end. Retail Systems Research reports that half of the retailers surveyed for its 2014 store operations benchmark report have implemented scheduling optimization, and that 64% of retail winners those boasting year-overyear sales growth of more than 3% have successfully leveraged it to prioritize employee work schedules. Those retail leaders report that the time their associates spend with customers is far more in line with corporate objectives than the 68% of retail laggards (those achieving less than 3% sales growth annually) who say their associates don t spend enough time selling and servicing customers (see figures 1 and 2). 1 Without question, the flexible appropriation of labor to meet customer demand can have positive implications on the retailer s balance sheet, and scheduling sophistication is clearly one mark of a winning retailer. But for all its benefits, applying a layer of software automation to retail scheduling practices poses a potential risk to the retail associate s quality of life, the consequences of which can cost retailers in the long run. To be clear, scheduling automation software holds great promise and delivers stellar results for the retailers who have deployed it, but that success is predicated on proper management of the system. In this paper, we ll explore the scheduling challenges inherent in employing a high volume of part-time associates, and we ll address how Figure 1 scheduling software can be leveraged to improve not exacerbate the problem. The Scheduling Problem In Practice Computer-generated schedules have proven their value to the bottom line on the labor budget. They minimize the labor store managers devote to building schedules, giving those managers more time on the store floor where they can influence merchandising and sales. With the proper inputs and work rule controls in place, they also optimize the associate experience by eliminating instances of favoritism and schedules create on intuition. On the other hand, improperly managed scheduling automation can produced negative consequences. A sampling of these unwanted side effects include: So-called clopenings, the newly minted phrase that describes a situation in which an associate closes the store very late at night and is scheduled to open the store early the following morning. Too few or too many hours scheduled per week. Inflexible scheduling that degrades the associate s quality of life. To avoid these consequences, retailers must strike a balance between the software features that enable cost management and those used to create employee-friendly schedules. A July 2014 New York Times article by Jodi Kantor that covered the plight of a non-exempt Starbucks barista and single mom shone a spotlight on the potential pitfalls of automated scheduling. 2 The Kantor piece, which followed the barista through several days of her hectic and erratic schedule, garnered a lot of attention through illustration of an issue that s all too common among 1 What s In Store For Stores? Retail Systems Research, June 2014, 2 Working Anything but 9 to 5, New York Times, August 2014, 3 Employment Situation News Release U.S. Department of Labor, Bureau of Labor Statistics, September 2014, htm 1

3 Figure 2 Retailers must strike a balance between the software features that enable cost management and those used to create employee-friendly schedules. hourly retail associates. While Starbucks characterized the barista s story as an isolated, store-level incident of mismanagement, it s a scene that undoubtedly plays out among thousands of associates across hundreds of retail brands every day. The public outcry and fallout that ensued resulted in some well-publicized, top-down scheduling policy changes at Starbucks. Implementing scheduling optimization is not a set it and forget it proposition. The story serves as a hard reminder that while scheduling optimization software is designed to benefit both retail businesses and their associates, implementing it is not a set it and forget it proposition. Too often, the automated capabilities of the software result in its running autonomously. But managing the retail labor pool pegged by the Bureau of Labor Statistics at more than 15,000,000 in the U.S. alone, 3 comes replete with a number of dynamics that make proactive, software-assisted scheduling prerequisite for most large retail employers. Some of those dynamics include: The fluid and management-intensive non-exempt benefits environment created by the Affordable Care Act (ACA). The ACA mandates applicable large employers (generally those who employed at least 50 full-time employees, including full-time equivalent employees, on business days during the preceding calendar year) to provide health insurance benefits to full-time employees, and it defines a full-time employee as one who is employed on average for at least 30 hours of service per week. 4 Subsequently, retailers are tasked with the relatively new bur- 4 Determining Full-Time Employees for Purposes of Shared Responsibility for Employers Regarding Health Coverage, Internal Revenue Service, Part-Time Hours: Undertake ACA Head Count Strategies Now, SHRM, March 2013, health-care-reform-strategies.aspx#sthash.fcib3nmd.dpuf 6 Millennial Branding and Randstad US Release First Worldwide Study Comparing Gen Y and Gen Z Workplace Expectations, Millennial Branding, September 2014, 2

4 den of managing part-time associate schedules for ACA compliance. Without software-automated work rules, employers are at risk of not only spending too much on labor, but spending more than necessary on benefits, as well. And, if they shirk the benefits responsibilities outlined in the ACA, retailers are exposed to some hefty fines. When a large employer fails to offer coverage to a sufficient number of fulltime workers, it s subject to a penalty that s equal to the number of full-time employees (minus up to 30) multiplied by $2, A changing workforce. Generations Y and Z comprise the bulk of the retail workforce, and their expectations are unlike the labor pool of yesteryear. They re tech-savvy, mobile, and willing to move. In fact, when asked in a recent Millennial Branding/ Randstad Professionals survey, Gen Z (ages 16 to 20) indicated that they plan to work for four companies and Gen Y (ages 21 to 32) said five during the course of their careers. 6 These digital natives are clearly choosier, and the study goes on to illustrate that they re looking for organizations that they trust and believe in, those that exhibit social responsibility, and those that care about their work/life balance. Keeping these associates and avoiding costly attrition requires considerate and flexible scheduling. Competitive wages. The aforementioned Millennial Branding study reports that only 28% of Gen Z said money would motivate them to work harder and stay with their employer longer, as opposed to 42% of Gen Y. However, as Henry Ford taught us in 1914 when he doubled the pay of his assembly line workers to combat turnover, compensation competition plays heavily into the attrition rate among young employees. Perks and benefits not the least of which among young associates is schedule flexibility can pay off significantly in the form of both associate stickiness and an improved labor pool. When workers across the country heard of Ford s goodwill, they flocked to Detroit in droves. Retailers are wise to ensure they use automated scheduling flexibility to create positive outcomes, because organized labor and retail labor advocacy groups are increasingly taking note of exceptions, such as the Starbucks example above. In its report Discounted Jobs: How Retailers Sell Workers Short, the Retail Action Project found that only 17% of the retail workers it surveyed had a set schedule. The majority of workers, it said, face increasingly unpredictable hours, on-call shifts, call-in pay violations, penalties for scheduling requests, and benefits avoidance through legal misclassification. 7 Those employers exhibiting some compassion for associates as their schedules are created which, in high-volume associate environments all but requires some degree of automated schedule management will not only garner positive PR, they ll improve associate satisfaction and reduce their attrition rate in the process. With modern scheduling automation tools, it s possible to achieve these outward-facing benefits while simultaneously refining labor spend on the back-end. Scheduling to both corporate and associate needs works congruently with that initial intent of scheduling optimization; it contributes to a reduction in the high cost of attrition. Long-Term Consequences Of Poor Scheduling While there are many factors that contribute to associate attrition, many of them boil down to job satisfaction. If an associate is appreciated, compensated, and empowered, that associate is less likely to search for greener pastures. As hourly retail associates go, the link between schedules and job satisfaction is inextricably linked. In cases like the Starbucks example cited above, unmanaged optimization of associate schedules lean too heavily to the business side, resulting in a perceived lack of appreciation for the associate s life outside of work, a disregard for their compensation expectations, and a belittling sense that they lack empowerment that they re little more than a business asset. These factors lead to some troubling statistics: 7 Discounted Jobs: How Retailers Sell Workers Short, Retail Action Project, 2012, RAP+cover_lowres.pdf 8 Hay Group survey, May 2012, 9 There Are Significant Business Costs to Replacing Employees, CAP, November, 2012, CostofTurnover.pdf 10 Bureau of Labor Statistics, September 2013, 11 Global Innovation Survey 2013, PwC, 2013, 12 State of the Global Workplace: Employee Engagement Insights for Business Leaders Worldwide, Gallup, 2013, 3

5 In 2012, Hay Group reported a 67% median turnover rate for part-time retail employees. 8 The same year, a CAP (Center for American Progress) study found that it costs, on average, $3,328 to find, hire, and train a replacement for a retail associate earning $10 per hour. 9 More recently, according to the Bureau of Labor Statistics, retail hires were up 5% in June 2014, while separations (quits, layoffs, and discharges) were up 4.6%. 10 These figures are high relative to other industries, and they illustrate the associate churn that s so prevalent in the retail industry. In its 2013 Global Innovation Survey, PricewaterhouseCoopers found that 57% of executives consider finding and retaining the best talent to make innovation happen a challenge. 11 Poor scheduling practices undoubtedly contribute to costly attrition, but just keeping associates around isn t enough. Scheduling automation tools also help retailers keep associates engaged, which is just as important, because dispirited associates are poorly performing associates. This is important to the business, because improving associate well-being and morale of associates isn t just a soft benefit. In fact, organizations in Gallup s Q12 Client Database with an average of 9.3 engaged employees for every actively disengaged employee experienced 147% higher earnings per share (EPS) compared with their competition. In contrast, those with an average of 2.6 engaged employees for every actively disengaged employee experienced 2% lower EPS compared with their competition during that same time period. 12 Scheduling automation tools keep associates engaged, which is important because dispirited associates are poorly performing associates. Organizations with an average of 9.3 engaged employees for every actively disengaged employee experienced 147% higher earnings per share compared with their competition. With sophisticated rules-based scheduling optimization software, industry leaders are avoiding PR nightmares like that experienced by Starbucks. They re building associate-considerate schedules that simultaneously result in higher staff satisfaction, a reduction in associate churn, better customer service, and more efficient labor budgets. Optimized Schedules Require Standards That Benefit Both Parties Contrary to its portrayal in the aforementioned NYT column, properly-managed scheduling optimization software benefits the associate as much as it benefits the merchant. To achieve that mutually beneficial experience, corporate executives should maintain scheduling policies, those policies should be accommodated by the software, and managers should be well-trained on both said policies and the features and functions of the software that enforce them. 4

6 Some best practices include: The development of predictable core schedules that have the ability to flex up as needed. The best way for employers to use scheduling optimization software to improve stability is to standardize a core, repeating schedule that guarantees a baseline number of hours, then use the optimization software to cover needs outside of the norm. The deployment of employee self-service. Give associates the opportunity to choose to work flex-shifts and high demand periods, as opposed to dictating schedules. Establishing rules within the software to guard against certain scheduling scenarios, such as clopenings. o The software should validate a minimum number of hours between shifts in such a way that even the store manager can be forced to comply with a minimum rest period. o Consider software rules that guarantee a minimum number of hours to associates in smaller bits throughout the week, which builds associate satisfaction while enabling retailers to achieve the labor cost minimization and customer service goals they seek. Consideration of fairness rules that manage how many nights or weekends associates are scheduled, helping managers avoid intuition-based mistakes and associate favoritism. Advanced schedule development and posting. The scheduling process should be completed not less than one week, and preferably two weeks, in advance. Managers responsible for this process should be closely monitored by corporate. Monitoring manager performance in the system and coaching them when necessary. Conclusion Scheduling optimization software isn t a product of corporate greed and inhumanity. As part of a holistic WFM solution, it can be leveraged to create stability in the lives of workers while simultaneously helping retailers improve customer service and run more efficient businesses. About Infor Infor is the world s third-largest supplier of enterprise applications and services, helping more than 70,000 large and midsize companies improve operations and drive growth across numerous industry sectors. Infor Workforce Management is the most functionally rich solution for aligning long-term workforce planning with shortterm forecasting and scheduling to optimize budgets, control payroll costs, maintain customer service levels, and comply with labor rules and regulations. With features that address every aspect of effective workforce management today including planning, scheduling, time and attendance, and absence management it also includes sophisticated business intelligence tools for measuring and analyzing workforce performance About ISR Integrated Solutions For Retailers is the premier source for technology solutions in the retail industry. Our goal is to help retail executives make informed decisions about technology and operations solutions for every sales channel. The magazine and website provide insight on how retailers can achieve critical business objectives by integrating leading-edge solutions across the entire retail enterprise Brought to you by: Sponsored by: 5