Enterprise Workforce Management for Retailers

Transcription

1 Enterprise Workforce Management for Retailers Enhanced Customer and Operational Productivity July 2010 Greg Belkin

2 Page 2 Executive Summary Aberdeen surveyed 100 retailers between May and July 2010 to better understand how these organizations are increasing labor management effectiveness enterprise-wide. Our results indicate that, based on a desire to enhance the customer shopping experience, nearly two-thirds of Best-in- Class retailers (64%) are targeting increased workforce management coordination at the headquarters level (compared to just 19% for Industry Average and 16% for Laggard organizations). This report examines the connection between an effective and competitive shopping experience and a singular, consistent enterprise labor management strategy. Best-in-Class Performance Aberdeen used the following three key performance criteria to distinguish Best-in-Class companies: Current gross margin. Best-in-Class retailers achieved a 36% margin during the most recent fiscal period, compared to 28% for Industry Average, and 10% for Laggard organizations Labor turnover rate. Best-in-Class retailers decreased their yearover-year labor turnover rate by 8%, compared to an increase of 1% for Industry Average, and 15% for Laggard organizations Customer retention. Best-in-Class retailers increased their yearover-year labor turnover rate by 20%, compared to an increase of 4% for Industry Average, and a decrease of 5% for Laggard organizations Competitive Maturity Assessment Survey results revealed several salient business performance characteristics of Best-in-Class organizations: Sixty percent (60%) of Best-in-Class retailers are providing storelevel access to product fulfillment data metrics for labor planning, compared to 36% for all other companies (Industry Average and Laggard companies combined) Forty-five percent (45%) of Best-in-Class retailers are using centralized workforce management to form longer-term strategic workforce management strategies, compared to 22% for all others. Required Actions In addition to the specific recommendations in Chapter Three of this report, to achieve Best-in-Class performance, companies must: Incentivize accurate forecasting of future staffing requirements to improve labor sales to forecast rates Embrace BI / workforce analytics applications for enhanced multidepartmental decision-making capabilities Research Benchmark Aberdeen s Research Benchmarks provide an indepth and comprehensive look into process, procedure, methodologies, and technologies with best practice identification and actionable recommendations We see workforce management optimization through the lens of a future global economic recovery. We are taking the opportunity to optimize and adjust our processes now, so that when the economy gets better and spend increases, we will be positioned for growth. ~Tricia Hunt, Store Leadership Manager, The Container Store.

3 Page 3 Table of Contents Executive Summary...2 Best-in-Class Performance...2 Competitive Maturity Assessment...2 Required Actions...2 Chapter One: Benchmarking the Best-in-Class...5 Business Context...5 Competitive Retail Market Pressures Drive Increased Enterprise Workforce Management Adoption...5 The Maturity Class Framework...7 The Best-in-Class PACE Model...7 Top Actions: Retailers Focus on HQ-Based, Long-term Strategic Workforce Management...8 Chapter Two: Benchmarking Requirements for Success...10 Competitive Assessment...11 Capabilities and Enablers...12 Chapter Three: Required Actions...19 Laggard Steps to Success...19 Industry Average Steps to Success...19 Best-in-Class Steps to Success...20 Appendix A: Research Methodology...22 Appendix B: Related Aberdeen Research...24 Figures Figure 1: Top Pressures Driving Best-in-Class WMS Adoption...5 Figure 2: Best-in-Class Actions Driving WFM Adoption...9 Figure 3: Top Process-Related Capabilities for Enterprise WFM...13 Figure 4: WFM-Related Training Requirements for Departmental Managers...15 Figure 5: Top Knowledge Management-Related Capabilities for Enterprise WFM...16 Figure 6: Best-in-Class Integrate Time and Attendance with Scheduling...17 Figure 7: Top Best-in-Class Standards Compliance...18 Figure 8: Top WFM-related KPIs for Enterprise-wide Retail Workforce Management...18 Tables Table 1: Top Performers Earn Best-in-Class Status...7 Table 2: The Best-in-Class PACE Framework...8 Table 3: Pervasiveness of Workforce Management Processes within the Retail Organization...9 Table 4: The Competitive Framework...11

4 Page 4 Table 5: The PACE Framework Key...23 Table 6: The Competitive Framework Key...23 Table 7: The Relationship Between PACE and the Competitive Framework...23

5 Page 5 Chapter One: Benchmarking the Best-in-Class Business Context Aberdeen surveyed 100 retailers between May and July 2010 to better understand how these organizations are increasing labor management visibility and effectiveness enterprise-wide (70 survey respondents of those retailers using enterprise workforce management systems were used for final analysis). Our results indicate that nearly two thirds of Best-in-Class retailers (64%) are targeting increased workforce management coordination at the headquarters level (with appropriate flexibility by store-level supervisors and managers) to achieve this goal. Additionally, nearly half of all Best-in-Class respondents (45%) are using this approach to formulate and execute longer-term strategic workforce management strategies. The impetus for this centralization comes directly from the desire to enhance the customer shopping experience in the face of increased competition (55% of the Best-in-Class). This report examines how retailers are embracing enterprise workforce management (definition in sidebar) to make the connection between an effective, competitive, and profitable shopping experience and a singular, consistent labor management strategy through the organization. Competitive Retail Market Pressures Drive Increased Enterprise Workforce Management Adoption The push toward utilizing enterprise workforce management as a tool to increase labor effectiveness could not be timelier. Slow growth in overall consumer spend, along with the rise of competitive cross-channel shopping alternatives, has put added pressure on brick-and-mortar retailers to differentiate themselves through increased customer service. It is therefore not surprising that "increased consumer shopping alternatives" is the top motivating factor for more than half of Best-in-Class retailers to address their enterprise workforce management strategies (55%), as shown in Figure 1. Figure 1: Top Pressures Driving Best-in-Class WMS Adoption 60% 50% 55% Fast Facts 64% of Best-in-Class retailers are targeting increased workforce management coordination at the headquarters level 45% of Best-in-Class retailers are using this approach to formulate customer-centric, longerterm strategic workforce management strategies to increase operational effectiveness Enterprise Workforce Management Defined Aberdeen defines enterprise workforce management as an effective, consistent, and customer-centric labor management strategy workforce at all points of an organization. These points include the store-level, the Distribution Center (DC), the warehouse, headquarters, and all parts of the internal supply chain. 40% Enterprise workforce 27% 27% 27% 30% management systems may 20% include but are not limited to: 10% Automated time and attendance solutions 0% Increased consumer Customer demand Rapidly changing Inability to fulfill BI / performance analytics shopping for more customized customer demand products during peak applications alternatives services (value-add) selling cycles Automated scheduling solutions

6 Page 6 This finding is consistent with Aberdeen's December 2009 Retail Workforce Optimization: Establishing the Customer-Centric Store-level Employee report, which also found that over half of Best-in-Class respondents (55%) consider increased shopping alternatives (online, catalog, in-store) as the top pressure driving increased store-level workforce management. For retailers, relying on customer service at the store-level to guide enterprise-wide workforce management decision-making is a classic rock in a hard place situation. On the one hand, store managers have first-hand knowledge of how to best address customer service requirements, and are therefore usually given latitude to make significant adjustments to a company's day-to-day scheduling and task allocation amongst store employees. On the other hand, however, store managers cannot effectively deliver on that customer service promise unless certain other conditions are met that are out of their control. These conditions include, for example, placing just enough human resources through out the organization to procure, assemble, and deliver products or services to the store. This can be especially challenging during peak selling times when the entire internal retail supply chain must quickly ebb and flow with rapidly changing demand, or when a customer needs a customized product or service (both conditions were a top pressure for 27% of Best-in-respondents). Complicating this challenge is the fact that retailers employ different types of labor throughout their organization, which can make uniform customer service response all the more challenging. For example: At the Distribution Center (DC), employees bear the responsibility of managing product flow and fulfillment, both for stores and for direct-to-consumer shipments. Associates at this level tend to be skilled employees with specific competencies to pick, pack or ship. At the customer service center, Customer Service Representatives (CSRs) are tasked with managing day-to-day customer support operations. Associates at this level tend to be seasonal and fluctuate depending on market need. At the store-level, associates and managers must optimize the customer interaction to motivate repeat purchases and increase the bottom line. These employees are less skilled and tend to fluctuate depending on market need and available budget. At the headquarters, executives bear the responsibility of overseeing organization-wide operations and strategic decisionmaking. These executives tend to be salaried and highly accustomed to specific retail planning across value chain areas. Each of these departmental roles is focused on managing their own human resources in an effective and competitive way. Therefore, it is necessary for a centralized human resource department to provide high-level organization

7 Page 7 and guidance to points in the human resource supply chain, enterprise-wide. According to Aberdeen respondents, this source is located at the HQ-level. The Maturity Class Framework Aberdeen used three key performance criteria to distinguish the Best-in- Class from Industry Average and Laggard organizations. They are defined as follows: Current gross margin is defined as the ratio of gross profit to sales revenue Year over year labor turnover rate is defined as the year-overyear rate at which retailers gain or loose employees Year over year customer retention rate is defined as the yearover-year difference in the percentage of repeat customers The maturity class has been developed via the weighted average of retail performance within these key metrics. Table 1 provides a framework with which companies can benchmark the effectiveness of their retail business intelligence operations. Table 1: Top Performers Earn Best-in-Class Status Definition of Maturity Class Best-in-Class: Top 20% of aggregate performance scorers Industry Average: Middle 50% of aggregate performance scorers Laggard: Bottom 30% of aggregate performance scorers Mean Class Performance Current gross margin: 36% Decreased year-over-year labor turnover rate: (8%) Increased year-over-year customer retention: 20% Current gross margin: 28% Increased year-over-year labor turnover rate: 1% Increased year-over-year customer retention: 4% Current gross margin: 10% Increased year-over-year labor turnover rate: 15% Decreased year-over-year customer retention: (5%) The Best-in-Class PACE Model Table 2 shows the current retail business Pressures, Actions, Capabilities, and Enablers (PACE) prioritized by Best-in-Class companies for the use and application in various market conditions. The PACE model, when applied, can enable companies of the Industry Average and Laggard maturity class to identify the best practices and fill gaps in the use of critical processes, knowledge, organizational, and performance management capabilities and enablers that are being considered part of the Best-in-Class repertoire for the use of rightly relevant enterprise-wide retail workforce optimization strategies.

8 Page 8 Table 2: The Best-in-Class PACE Framework Pressures Actions Capabilities Enablers Increased customer shopping alternatives Manage workforce management processes at the HQ level Introduce longerterm strategic workforce planning Ability to assign tasks to employees in multiple parts of the enterprise Establish multi-departmental time and attendance Enterprise-wide access to store-level demand data Store-level access to product fulfillment metrics for labor planning (date of delivery, order status, etc.) Incentivize decreased labor turnover enterprise-wide Top Actions: Retailers Focus on HQ-Based, Long-term Strategic Workforce Management According to Aberdeen data, nearly two out of every three Best-in-Class retailers are centralizing workforce management at the headquarters level (64%), as shown in Figure 2. Retailers that operate stores need a certain degree of adjustment flexibility when it comes to business processes such as scheduling and time and attendance. However, a centralized approach allows these organizations to establish a single, cohesive view of enterprise labor management operations from the different departments within their organization. It also allows them to begin to plan for future, longer-term workforce management strategies (45% of Best-in-Class retailers), such as preparing staffing levels for new product rollouts, changes in supply chain strategy, or overall customer service initiatives. One hospitality retailer who has utilized an enterprise workforce strategy to affect long-term change within its organization is Marriott Corporation. In order to reduce overall operating costs, automate back office, finance, and HR processes, and provide hotel-level accessibility for employees to make requests or track time-off requests, the hospitality retailer embraced a HQbased visual labor management system, and an all-encompassing workforce management suite. According to Chhaya Kapilashrami, the Senior Director of Program Management and Enterprise solutions for Marriott, the goal of the project was to, "link the labor scheduling process with the hotel business forecast, improve visibility of labor costs for its hotel managers and corporate executives, and provide flexibility and interactivity." Although many of the labor management functionalities were made at headquarters, hotel-level staff still had the flexibility to make changes on a short-term basis. Time and attendance solution BI / Performance Analytics applications Web-based self-help and other formalized training programs Automated scheduling solution Automated budgeting and demand forecasting solutions Labor management software Automated task management solution

9 Page 9 Figure 2: Best-in-Class Actions Driving WFM Adoption 70% 60% 50% 40% 30% 20% 10% 0% 64% 19% 16% Manage all workforce management processes at the HQ level 45% 23% 21% Introduce longer-term strategic workforce planning Best-in-Class Average Laggard Aberdeen Insights Organization-wide Workforce Management Pervasiveness Different departments within a retail enterprise are likely to have different strategies when it comes to competitively utilizing an existing workforce. To this end, the pervasiveness of technologies such as automated scheduling and time and attendance are likely to differ from one area of the organization to the other. For example, Aberdeen research has found that Best-in-Class retailers are 1.66 times more likely to establish automated scheduling at the store-level than, say, at the warehouse (63% vs. 38%), as shown in Table 3. On the other hand, Aberdeen research also shows that Best-in-Class retailers are 1.55 times more likely to utilize labor forecasting at the HQ-level then at the store-level (86% vs. 57%). However the process distribution may be on a per-departmental and per-organizational basis, centralizing these functions at the HQ-level allows for increased visibility and strategic decision-making from one single, organized source. "Our employees at the storelevel have much different needs than those of our DC employees or within our extended supply chain. We don t have the resources to manage all department types separately, which is why centralizing decision-making at the HQ level was critical. Obviously, the store-level folks are going to need to tweak corporate decisions here and there. Table 3: Pervasiveness of Workforce Management Processes ~ VP of HR, Large US-based within the Retail Organization Apparel Retailer Storelevel Distribution HQ Ware- Call Center house Center Scheduling 63% 50% 38% 0% 13% Time and Attendance 63% 100% 63% 25% 38% Task Management 50% 63% 63% 13% 25% Labor Forecasting 57% 86% 29% 14% 14% Workload Planning 14% 57% 57% 0% 14% Labor Budgeting 50% 63% 75% 13% 25% In the next chapter, we will see what the top performers are doing to achieve these gains.

10 Page 10 Chapter Two: Benchmarking Requirements for Success Retailers are turning to workforce management solutions to increase labor management visibility and effectiveness enterprise-wide. Enterprise workforce management helps retailers establish a single, strategic view of their labor management requirements by centralizing these processes in one place: the headquarters. Take, for example, Red Door Spas. Prior to using a HQ-managed ERP labor management system, its workforce management processes were decentralized throughout the organization, with little control over multi-departmental strategic decision-making. Post implementation, they were able to establish a single view of data for easy labor management accessibility and long-term strategic decision-making. Case Study Red Door Spas Red Door Spa s is a privately held spa products and services retailer based in Stamford, CT. The organization operates over 50 spa and hair salon locations in the United States, and employs over 2,700 individuals organization-wide. Annual revenue for 2009 was $155 million. In 2008, on a quest to gain additional control over its workforce management strategy, Red Door Spas recognized the need to embrace a new ERP-based human capital management solution. The decision to address its workforce management challenges through its ERP system allowed Red Door to simultaneously address other organizational data management challenges as well, such as insufficient warehouse management and store replenishment systems. The result was a single organization-wide strategy, managed at the HQ level that could automatically adjust workforce needs based on available inventory data, and store demand, resulting in higher employee efficiency and productivity. The coordination of enterprise-wide HR data with other organizational information helps us become more strategic for long-term scheduling and task execution, commented Kurt Graham, VP and Controller for Red Door Spas. The solution also makes it easier for us to coordinate this long-term planning with data from other areas of the business, such as supply chain data and warehouse productivity. Red Door Spas noted several benefits from the new ERP solution set, including: Reduction in HR full time equivalents (FTEs) by 67% Reduction in DC FTEs by 15% Annual HR outsourcing coast savings of $250,000 continued Fast Facts Eighty-nine percent (89%) of Best-in-Class retailers are assigning tasks to employees in multiple parts of the enterprise, compared to 58% of Industry Average retailers, and 37% of Laggard retailers Sixty percent (60%) of Bestin-Class retailers are providing store-level access to product fulfillment data metrics for labor planning, compared to 36% for all others

11 Page 11 Case Study Red Door Spas Red Door Spas was also able to benefit from the system's perceived ease of use not only at the headquarters-level, but from a store-level as well. This was a crucial requirement for the organization, as minute changes in overall workforce planning and execution was required from customerfacing executives. "[The system] is so user-friendly that our associates have been able to jump right in and use it," according to Jennifer Hayes, HR IS manager for Red Door Spas. Competitive Assessment Aberdeen Group analyzed the aggregated metrics of surveyed companies to determine whether their performance ranked as Best-in-Class, Industry Average, or Laggard. In addition to having common performance levels, each class also shared characteristics in five key categories: (1) process (the approaches they take to execute daily operations); (2) organization (corporate focus and collaboration among stakeholders); (3) knowledge management (contextualizing data and exposing it to key stakeholders); (4) technology (the selection of the appropriate tools and the effective deployment of those tools); and (5) performance management (the ability of the organization to measure its results to improve its business). These characteristics (identified in Table 4) serve as a guideline for best practices, and correlate directly with Best-in-Class performance across the key metrics. Table 4: The Competitive Framework Best-in-Class Average Laggards Establish multi-departmental time and attendance Process 82% 58% 17% Establish multi-departmental scheduling 64% 46% 16% Assign tasks to employees in multiple parts of the enterprise Organization 89% 58% 37% WFM-based training requirements for all departmental managers 64% 42% 28% Enterprise-wide access to store-level demand data Knowledge 70% 54% 22% Store-level access to product fulfillment metrics for labor planning (date of delivery, order status, etc.) 60% 50% 17%

12 Page 12 Technology Best-in-Class Average Laggards Listed below are the technology tools/applications that support retail enterprise workforce management: Warehouse management systems (73%) Time and attendance solution (73%) BI / Performance Analytics applications (73%) Web-based selfhelp and other formalized training programs (64%) Automated scheduling solution (64%) Automated budgeting and demand forecasting solutions (55%) Automated task management solution (55%) Warehouse management systems (63%) Time and attendance solution (67%) BI / Performance Analytics applications (58%) Web-based selfhelp and other formalized training programs (54%) Automated scheduling solution (46%) Automated budgeting and demand forecasting solutions (46%) Automated task management solution (52%) Warehouse management systems (39%) Time and attendance solution (39%) BI / Performance Analytics applications (21%) Web-based selfhelp and other formalized training programs (33%) Automated scheduling solution (22%) Automated budgeting and demand forecasting solutions (22%) Automated task management solution (28%) Regular measurement of store-level workforce standards Performance Capabilities and Enablers 82% 54% 29% Regular measurement of current workforce against competency profiles to determine skill/ knowledge gaps 64% 58% 17% Regular measurement of enterprise-wide workforce standards 64% 60% 16% The following sections show the key process, organization, knowledge, technology, and performance management capabilities that Best-in-Class companies possess and utilize for cutting-edge enterprise-wide workforce management optimization and associated strategies. "The coordination of enterprise-wide HR data with other organizational information helps us become more strategic for long-term scheduling and task execution. ~ Kurt Graham, VP and Controller Red Door Spas

13 Page 13 Process: Multi-departmental Scheduling and Time and Attendance According to Aberdeen data, 82% of Best-in-Class retailers are working to make time and attendance a multi-departmental initiative, compared to 58% of Industry Average, and 17% of Laggard organizations. Additionally, 64% of these same top organizations are also making scheduling a multi-initiative compared to 46% of Industry Average, and 16% of Laggard organizations (Figure 3). Each solution offers specific benefits for retailers. Time and Attendance A standardized time and attendance system helps organizations keep track of actual hours an employee spends at a job. It helps to collect and manage punch data, ensuring compliance with established internal labor budgets and forecasts, as well as external local, state, and federal law. By making this process multi-departmental, organizations can link together different departments into a single source of information, making the calculation of metrics such as labor cost to budget easier to visualize, and quicker to arrive at actionable conclusions. Additionally, because there is a certain physical, employee-managed aspect to time and attendance, retailers are likely to benefit from organizing training initiatives for multiple departments that have similar employee management techniques (such as store-level and CSRs). One retailer that has benefitted from implementing an enterprise-wide time and attendance system is W.S. Badcock. The company, a furniture retailer headquartered in Florida and employer of more than 1,300 employees, has more than 300 retail stores in eight different US states. Prior to implementing an enterprise-wide solution, the retailer was relying on three different time and attendance systems to manage all employees organization-wide. For every pay period, the retailer was required to integrate data from each of these sources, re-keying hours, and managing discrepancies. Once the new system was deployed enterprise-wide, a single interface managed data from all ends of the organization. It also enabled the retailer to automatically enforce HQdriven initiatives, such as vacation day utilization. Figure 3: Top Process-Related Capabilities for Enterprise WFM Multi-departmental time and attendance 17% 58% 82% Multi-departmental scheduling 16% 46% 64% Multi-departmental task management 33% 52% 64% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% Best-in-Class Average Laggard

14 Page 14 Scheduling The fact that 64% of Best-in-Class retailers are making their scheduling processes multi-departmental is consistent with findings from the May 2009 Workforce Scheduling report. That report found that 88% of Best-in-Class organizations have established a single, standardized scheduling process that is either consistent across the organization, or tweaked by region/business unit to reflect unique business needs. Given that scheduling involves the time and location-based placement of individuals for effective selling, it is understandable that Best-in-Class organizations would need input from at least two departmental sources: 1) the HQ level where staffing would need to reflect overall corporate selling strategy (i.e. re-allocation of staff from one department to another), and 2) the store-level, which needs to make day-to-day changes based on changing market need. Providing a multidepartmental scheduling strategy ensures that these differing departments have a chance to weigh in on different HQ-managed strategies, and tweak as necessary. Organization: Training Requirements for all Dept. Mgrs. According to Aberdeen data, 64% of Best-in-Class organizations are establishing workforce management training requirements for all departmental managers (Figure 4). Training these managers as to proper WFM administration and execution provides retailers with a two-fold benefit in the form of increased intra-departmental labor management coordination, and improved extra-departmental labor visibility. 1. Intra-departmental - coordination of resource allocation and department goals. Departmental managers are responsible for making sure their specific business divisions are executing on overall corporate goals on time and within budget. By properly training these executives to use WFM-based solutions, they can map these goals with necessary available staff, and assign tasks accordingly. The result is a direct match of the overall responsibilities, and the available labor for a more effective execution of corporate goals. 2. Extra-departmental - improved labor management visibility. As different HQ-based initiatives are extended through out the enterprise, departmental managers can help top executives fulfill these initiatives by re-allocating unused human resources. Conversely, if departmental managers are trained to analyze WFMrelated processes, they can easily red flag an initiative they believe they do not have adequate resources to properly address. Red Door Spas, for example, noted that many of their store-level employees were capable of working in many different capacities through out the enterprise, including at multiple store-level locations. When it came for new corporate initiatives, departmental managers relied on their training to identify these workers, and share resources accordingly.

15 Page 15 Figure 4: WFM-Related Training Requirements for Departmental Managers Best-in-Class 64% All Others 36% 0% 10% 20% 30% 40% 50% 60% 70% Knowledge Management: Retailers Aim to Share Data Enterprise-wide According to Aberdeen research, more than two thirds of Best-in-Class retailers are sharing store-level demand data with the entire enterprise (70%), as shown in Figure 5. Additionally, 60% of these same top retailers are reversing this process to provide the store-level with access to important fulfillment metrics, such as product date of delivery and shipment order status. On first glance, the benefits to such a scenario center around an improved internal product supply chain operation (i.e. the more information an organization has around store-level demand, the faster and more accurate it can replenish products). See Aberdeen's June 2010 Inventory Visibility, Tracking, and Traceability: Meeting the Expectations on the Store Shelf report for more information. The same concept of improved logistical visibility applies to the human side of the supply chain as well. If a store-level manager notices an unexpected shift in customer demand, for example, he or she can make sure other departmental leaders within the organization have enough human resources to support this need. This capability is especially relevant at peak selling times such as holiday shopping, when unexpected market shifts must be dealt with quickly and accurately. Conversely, by providing store-level managers with enterprise-wide data such as the occurrence of supply chain transportation disruptions or procurement issues, these managers can adjust store staffing accordingly to prevent wasted labor cost, or establish a strategy to mitigate customer fulfillment delays. Interestingly enough, there is only a 15% delta between Best-in-Class and Industry Average respondents when it comes to enterprise-wide to storelevel data accessibility, and a 10% gap in the store-level to enterprise-wide data accessibility. Considering this reality, retailers of both categories are likely making this capability a top initial requirement as they embrace enterprise-wide workforce management.

16 Page 16 One retailer who is focused on sharing data between the store-level and the enterprise to improve WFM-related effectiveness is Bob's Stores. Bob's Stores is a name brand casual clothing and footwear superstore that employs approximately 2,000 employees with an average store selling size of 40,000 square feet. In order to improve customer service, labor effectiveness and optimize its workforce efficiency organization-wide, Bob's Stores focused on visibility. This visibility included providing store-level sales trends to the organization, and, conversely, organization-wide metrics to the store. After implementation [of scheduling and time and attendance], we were able to coordinate the right amount of receiving associates with the right amount of product being delivered, commented Kevin Campbell, AVP Store Operations, Bob s Stores. Figure 5: Top Knowledge Management-Related Capabilities for Enterprise WFM Enterprise-wide access to store-level demand data 22% 54% 70% Enterprise-wide access to supply chain metrics Store-level access to product fulfillment metrics for labor planning (date of delivery, order status, etc.) 17% 17% 64% 58% 60% 50% 0% 10% 20% 30% 40% 50% 60% 70% 80% Laggard Average Best-in-Class Technology According to Best-in-Class retail respondents, both workforce scheduling and time and attendance have made major inroads in the retail enterprise. Time and attendance, for example, is one of the most popular current technologies used to address enterprise-wide workforce management challenges (73% of Best-in-Class respondents). However, there was only a 9% delta between this technology and workforce scheduling (64% of Best-in- Class retailers), which, according to the December 2009 Retail Workforce Optimization report, is also the number one technology utilized at the storelevel (56% of Best-in-Class). On their own, both time and attendance and scheduling are a key part of the labor management process. A standardized time and attendance system helps organizations keep track of actual hours an employee spends at a job, while scheduling processes help identify previous attendance rate trends and better plan for the future.

17 Page 17 Not content with the benefits from both of these technologies separately, more than three quarters of Best-in-Class retailers are looking for ways to integrate these two processes together (78%), as shown in Figure 6. On first glance, the primary benefit for retailers toward integrating these two business processes together would be to establish more accurate scheduling processes based on actual attendance data. However, additional benefits include a more accurate payroll for contact labor, stricter compliance with workforce regulations, and the ability to verify that billings from consultants accurately reflect their efforts. Figure 6: Best-in-Class Integrate Time and Attendance with Scheduling Best-in-Class 78% Average 57% Laggard 19% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% Percentage of Respondents, n=71 Source: Aberdeen Group, December, 2009 Another top technology-based enabler is the utilization of warehouse management systems (73% of Best-in-Class retail respondents). As noted in the previous section, a successful product supply chain is predicated on effectively managing the human supply chain. By providing HR managers at all points in the enterprise with access to supply chain information such as warehouse management data, you empower these executives to prepare for all contingencies. This could include the necessary hiring of temporary workers to fulfill orders, or the reduction in labor due to decreased warehouse activity. Whatever the situation, the more supply chain-related data an HR executive has, the more effective they will be. Performance Management: Standards Compliance According to Aberdeen data, 82% of Best-in-Class retailers are regularly measuring workforce standards at the store-level, and 64% of these same top organizations are doing the same at the enterprise-level. Different organizations have different policies when it comes to store-level and enterprise-level standards. Some, for example, are likely to allow for overtime, while others are not. Still other retailers will allow for extra days off to be earned, others will keep the amount finite. Whatever the policy may be, standards must be monitored on a regular basis to ensure compliance and consistency cross-department or cross-enterprise.

18 Page 18 Figure 7: Top Best-in-Class Standards Compliance Regular measurement of current workforce against competency profiles to determine skill/ knowledge gaps 44% 82% Regular measurement of enterprise-wide workforce standards 40% 64% Regular measurement of store-level workforce standards ` 41% 64% 0% 20% 40% 60% 80% 100% Best-in-Class All Others Aberdeen Insights Retailers Choose Relevant KPIs for Enterprise WFM Success According to Aberdeen data, nearly two thirds of Best-in-Class retailers are establishing regular measurement of workforce standards enterprisewide (64%), and more than three quarters are regularly measuring these standards at the store-level (82%). Interestingly enough, 56% of retailers consider customer retention metrics of highest importance when asked to rate their most relevant workforce management KPIs. This KPI has trumped one of the most universally recognized labor management metrics, cost to budget, by 6%. This result furthers the notion that customer satisfaction levels are a top priority for enterprise-wide labor management planners, who are thus challenged to tie effective workforce management to increased customer service in the hyper-competitive, consumer-oriented retail industry. Figure 8: Top WFM-related KPIs for Enterprise-wide Retail Workforce Management Customer retention 56% Labor cost to Budget 50% Quality of hire Employee satisfaction 38% 38% Employee retention Employee performance Store labor forecast to need 25% 25% 25% 0% 10% 20% 30% 40% 50% 60%

19 Page 19 Chapter Three: Required Actions Whether a company is trying to move its performance in enterprise-wide retail workforce management processes from Laggard to Industry Average, or Industry Average to Best-in-Class, the following actions will help spur the necessary performance improvements: Laggard Steps to Success Incentivize accurate forecasting of future staffing requirements to improve labor sales to forecast rates. According to Aberdeen data, 89% of Laggard retailers do not incentivize labor forecasting at the HQ-level, compared to 58% of Industry Average and 55% of the Best-in-Class. The more accurate a future staffing requirement forecast is, the easier it is to avoid overor under-staffing a store, which translates into either lost sales due to decreased staff to consumer assistance, or high excesses of payroll expense. By incentivizing this process, managers have a motivational, financial stake in making sure the retailer is paying only for necessary labor. Such accurate predictions are entirely possible based on previous trends, and a solid understanding of employee capabilities. Technologies such as automated scheduling are a key enabler for this capability. Increase self-help and other formalized training programs to decrease organization-wide redundancies. Just 33% of Laggard retailers are utilizing web-based self help technologies for their employees, compared to 54% of Industry Average and 64% of the Best-in-Class. Workforce scheduling and time and attendance are crucial parts of the enterprise-wide retail strategy to optimize labor management process. However, these technologies require a certain level of intervention on the part of the manager. To decrease this burden on a departmental basis and through out the enterprise, as well as to encourage employees to take the next step in their careers on their own, Laggard retailers should embrace web-based self help and other formalized training programs (50% of respondents). These programs allow employees to grow their skill sets and become more valuable to the overall success of the team. The result is an employee who feels empowered, engaged, and more knowledgeable, which immediately reflects well in terms of morale and productivity. Fast Facts 89% of Laggard retailers do not incentivize labor forecasting at the HQ-level 42% of Industry Average retailers are not using BI / performance analytics applications within their enterprise-wide labor management strategies Just 45% of Best-in-Class retailers are utilizing automated triggers for automatic issue escalation Industry Average Steps to Success Move from partially automated to fully automated workforce management for increased enterprise-wide efficiencies. Among Industry Average retail respondents, 17% classified their workforce scheduling as manual, another 52%

20 Page 20 indicated partially automated (i.e. a mix of spreadsheets and software), and 30% indicated fully automated processes. While it is good to see that 82% of respondents are at least utilizing some form of automation, the remaining 18% should examine the benefits of freeing up managerial time for improved selling both on the store floor and throughout the enterprise. Industry Average retailers should make a comparison of one area in their enterprise that is automated, and another that is not (but could benefit from such technology). A resulting cost / benefit analysis may be the missing link between paper-based processes, and real-time data sharing. Embrace BI / workforce analytics applications for enhanced multi-departmental decision-making capabilities. According to Aberdeen data, 42% of Industry Average retailers are not using BI / performance analytics applications within their enterprise-wide labor management strategy, compared to 79% of Laggards and 27% of the Best-in-Class. With the advent of increasingly popular enterprise solutions for core HR and talent management needs, organizations are collecting more workforce and talent data than ever. Once this data is collected, however, retailers must aggregate and analyze these metrics to help identify the current state of their workforce, model future scenarios, and improve overall rigor around human capital decisions. This can be done by embracing a traditional BI system, and begin linking together disparate sources of data - such as scheduling, time and attendance and task management - which will allow actionable conclusions to emerge that have multidepartmental significance. In fact, Aberdeen's December 2008 study The 2009 HR Executive s Agenda found that workforce analytics software was one of the largest areas of planned growth among Best-in-Class organizations, cited by 32% as a technology they would be implementing in Best-in-Class Steps to Success Involve employees in strategic WFM-decision-making to decrease employee turnover. According to Aberdeen data, high employee turnover was one of the top two internal challenges Bestin-Class retailers face when it comes to enterprise workforce management (45%, compared to 35% of the Industry Average and 33% of Laggard organizations). The very nature of retail dictates that many departments hire according to market conditions, which means that turnover rates will fluctuate. In order to help mitigate this challenge, retailers should let employees have a say-so in strategic enterprise-wide decision-making. This can be done, for example, by feedback forms, and increased visibility and maintenance of their own scheduling and time and attendance information. Marriott, a hospitality retailer referred to in Chapter One of this report, is utilizing this exact strategy to decrease overall turnover.

21 Page 21 Automate task management systems for enterprise-wide initiative execution. According to Aberdeen research, 45% of Best-in-Class retailers have yet to automate their internal task management solution. Automated task management involves the coordination of retail strategy and enterprise-wide execution in a singular, organized environment. It allows decision-makers at the highest levels of management to coordinate issue resolution or initiative execution in a single, near real-time environment, visible to all stakeholders. Task management systems can also serve as a virtual measuring stick, determining the success or failure of a particular strategy as it is occurring, rather than when it has already happened. Aberdeen Insights Summary The economic downturn associated with 2008 and 2009, as well as the slow recovery in the first half of 2010 has changed the way many retailers conduct business. Gone are the days where these organizations can expect high levels of customer engagement simply by opening a store, providing a new product, or offering a new promotion. Decreased spend, along with the ability for consumers to conduct massive amounts of product research and purchasing from other channels, has hastened the need to maximize how a retailer supports a consumer through out the entire buying cycle, and from all points of an organization. According to Aberdeen data, it is this exact reason why workforce optimization has grown so much in importance among Best-in-Class retailers not only at the store-level but from an enterprise-wide standpoint as well. These top retailers know that while the consumer usually only interacts with employees at the store, these employees depend on enough human resources through out the organization to procure, assemble, and deliver to satisfy the needs of the consumer. To get there, a majority of Best-in-Class retailers (64%), indicate that they are centralizing workforce management at the headquarters level, and relying on senior executives (with a bit of help from ear-to-theground store-level execs) for execution. This is understandable, considering that retailers have many different types of employees in many different types of departments. While the particulars of this strategy can be seen in Chapter Twp of this report, it is clear that a central goal is to establish a uniform, cohesive labor management strategy that is malleable yet based on long-term strategy. This cohesive strategy could be all that separates an industry contender and a market leader.

22 Page 22 Appendix A: Research Methodology Between May and July 2010, Aberdeen examined the use, the experiences, and the intentions of more than 100 retailers using enterprise-wide workforce management in a diverse set of enterprises. Aberdeen supplemented this online survey effort with interviews with select survey respondents, gathering additional information on enterprise-wide workforce management strategies, experiences, and results. Responding enterprises included the following: Job title: The research sample included respondents with the following job titles: CEO / President (10%); CIO (10%); CFO (3%); EVP / SVP / VP (14%); Director (9%); Manager (25%); Consultant (16%); Engineer (3%); and other (10%). Department / function: The research sample included respondents from the following departments or functions: information technology (13%); corporate management (14%); human resource/talent management (19%); marketing (8%); operations (6%); business development/sales (11%); logistics/supply chain (8%); other (21%). Industry: The research sample included respondents exclusively from retail industries. Big box specialty stores were the largest segment with 11% of the sample. Geography: The majority of respondents (65%) were from North America. Remaining respondents were from the Asia-Pacific region (16%) and Europe (19%). Company size: Twenty-six percent (26%) of respondents were from large enterprises (annual revenues above US $1 billion); 42% were from midsize enterprises (annual revenues between $50 million and $1 billion); and 32% of respondents were from small businesses (annual revenues of $50 million or less). Headcount: Forty-six percent (46%) of respondents were from large enterprises (headcount greater than 1,000 employees); 26% were from midsize enterprises (headcount between 100 and 999 employees); and 28% of respondents were from small businesses (headcount between 1 and 99 employees). Study Focus Responding retail executives completed an online survey that included questions designed to determine the following: The degree to which retail workforce management programs are deployed in their operations and the financial implications of the technology The structure and effectiveness of existing workforce management implementations Current and planned use of workforce management to aid operational and promotional activities The benefits, if any, that have been derived from workforce management initiatives The study aimed to identify emerging best practices for workforce management usage and to provide a framework by which readers could assess their own management capabilities.

23 Page 23 Table 5: The PACE Framework Key Overview Aberdeen applies a methodology to benchmark research that evaluates the business pressures, actions, capabilities, and enablers (PACE) that indicate corporate behavior in specific business processes. These terms are defined as follows: Pressures external forces that impact an organization s market position, competitiveness, or business operations (e.g., economic, political and regulatory, technology, changing customer preferences, competitive) Actions the strategic approaches that an organization takes in response to industry pressures (e.g., align the corporate business model to leverage industry opportunities, such as product / service strategy, target markets, financial strategy, go-to-market, and sales strategy) Capabilities the business process competencies required to execute corporate strategy (e.g., skilled people, brand, market positioning, viable products / services, ecosystem partners, financing) Enablers the key functionality of technology solutions required to support the organization s enabling business practices (e.g., development platform, applications, network connectivity, user interface, training and support, partner interfaces, data cleansing, and management) Table 6: The Competitive Framework Key Overview The Aberdeen Competitive Framework defines enterprises as falling into one of the following three levels of practices and performance: Best-in-Class (20%) Practices that are the best currently being employed and are significantly superior to the Industry Average, and result in the top industry performance. Industry Average (50%) Practices that represent the average or norm, and result in average industry performance. Laggards (30%) Practices that are significantly behind the average of the industry, and result in below average performance. In the following categories: Process What is the scope of process standardization? What is the efficiency and effectiveness of this process? Organization How is your company currently organized to manage and optimize this particular process? Knowledge What visibility do you have into key data and intelligence required to manage this process? Technology What level of automation have you used to support this process? How is this automation integrated and aligned? Performance What do you measure? How frequently? What s your actual performance? Table 7: The Relationship Between PACE and the Competitive Framework PACE and the Competitive Framework How They Interact Aberdeen research indicates that companies that identify the most influential pressures and take the most transformational and effective actions are most likely to achieve superior performance. The level of competitive performance that a company achieves is strongly determined by the PACE choices that they make and how well they execute those decisions.