CHAPTER 9: Human Resource Management

Employee productivity — the retailer’s sales or profit divided by the number of employees.
Employee productivity can be improved by increasing the sales generated by employees,
reducing the number of employees, or both.
Employee turnover equals Number of employees leaving their job during the year divided by
Number of positions.

Downward Performance Spiral Human Resource Triad

ISSUES IN RETAIL HUMAN RESOURCE MANAGEMENT

1. Balancing the Human Resource Triad — the full potential of a retailer’s human resources is
realized when three elements of the HR triad work together—HR professionals, store
managers, and employees
2. Expense Control — retailers must control their expenses if they are to be profitable. Thus,
they are cautious about paying high wages to hourly employees who perform low-skill jobs.
3. Part-Time Employees — retailers’ needs for store employees vary depending on the time of
day, day of week, time of year, and promotion schedule.
4. Utilizing Diverse Employee Groups — retailers are increasing their efforts to recruit, train,
manage, and retain mature, minority, and handicapped workers.
5. International Human Resource Issues — the management of employees working for
international retailers is especially challenging. Differences in work values, economic
systems, and labour laws mean that HR practices that are effective in one country might not
be effective in another.
Three important strategic issues facing retail HR professionals:
 The design of the organization structure for assigning responsibility and authority for tasks to
people and business units.
 The approaches used to coordinate the activities of the firm’s departments and employees
and motivate employees to work toward achieving company goals.
 The programs used to build employee commitment and retain valuable human resources.

Organization Structure — identifies the activities to be performed by specific employees and

determines the lines of authority and responsibility in the firm.

DESIGNING THE ORGANIZATION STRUCTURE FOR A RETAIL FIRM

1. Organization of a Single-Store Retailer — the owner-manager of a single store may be the
entire organization. When he or she goes to lunch or heads home, the store closes. As sales
grow, the owner-manager hires employees.
 Specialization — each employee must perform a wide range of activities, and the owner-
manager is responsible for all management tasks.

Organization Structure for a Small Retailer

The owner-manager continues to
perform strategic management tasks.
The store manager may be responsible
for administrative tasks associated with
receiving and shipping merchandise and
managing the employees.
The merchandise manager or buyer
may handle the advertising and
promotion tasks, as well as merchandise
selection and inventory management
tasks.
2. Organization of a National
Retail Chain — the management of a
retail chain is complex. Managers must
supervise units that are geographically distant from one another.

Organization of a Typical
Department Store

Senior Vice President (SVP) Of Merchandising - works with buyers and planners to develop
and coordinate the management of the retailer’s merchandise offering and ensure that it is
consistent with the firm’s strategy.
Merchandising Planners - are responsible for allocating merchandise and tailoring the
assortment of several categories for specific stores in a geographic area.

Several Levels of Management in the Merchandise Division

 General Merchandise Managers (GMMS)
 Divisional Merchandise Managers (DMMS)
 Buyers.
Senior Vice President (SVP) - supervises all activities related to stores, including working with
the regional managers, who supervise district managers, who supervise the individual store
managers.
Chief Operations Officer (COO) - oversees managers in charge of management information
systems (MISs), supply chain, human resources, and visual merchandising. Also in charge of
shrinkage and loss prevention and the operation and maintenance of the physical assets of the
firm, such as stores, offices, distribution and fulfilment canters, and trucks
Chief financial officer (CFO) - works with the CEO on financial issues such as equity-debt
structure and credit card operations.

Private-label President is Responsible for the conceptualization, design, sourcing, quality

control, and marketing of private-label and exclusive merchandise.

President Of Direct Channels - responsible for the selection and pricing of the merchandise
assortment offered through the catalogue and Internet channels, the maintenance and design of
the retailer’s Web site, customer call centers, and the fulfilment canter’s that fill orders for
individual customers.

Global Operations President - oversees retailing operations outside the home country. The size
and complexity of this operation is determined by the number of countries served and the
number of stores within each country.

Important Issues In The Design Of A Retail Organization Are:

1. The degree to which decision making is centralized or decentralized
2. The approaches used to coordinate merchandise and store management.

RETAIL ORGANIZATION DESIGN ISSUES

1. Centralization versus Decentralization
 Centralization occurs when the authority for retailing decisions is delegated to corporate
managers rather than to geographically dispersed managers.
 Decentralization occurs when the authority for retail decisions is assigned to lower levels
in the organization.
2. Coordinating Merchandise and Store Management
Three approaches large retailers use to coordinate buying and selling are:
1. Improving buyers’ appreciation for the store environment.
2. Making store visits.
3. Assigning employees to coordinating roles.

WINNING THE EMPLOYEE TALENT WAR

1. Attracting Talent: Employment marketing (or Employment branding) - involve
undertaking marketing research to understand what potential employees are seeking.

2. Developing Talent: Selection and Training

Two activities retailers use in their human resources:

a. Selective Hiring - The first step in building an effective workforce is to recruit the
right people.
b. Training - Training is particularly important in retailing because the overwhelming
majority of retail employees have direct contact with customers, which means they are
responsible for helping customers satisfy their needs and resolve their problems.

3. Motivating Talent: Aligning Goals - The task of aligning the employees’ and the firm’s
goals is often difficult, because employees’ goals usually differ from those of the firm.

Retailers generally use three methods to motivate their employees’ activities:

a. Policies and Supervision - Perhaps the most fundamental method of coordination is to
prepare written policies that indicate what employees should do and then to have
supervisors enforce these policies.
 b. Compensation-Based Incentives - The second method of motivating and coordinating
employees involves the use of various forms of compensation to encourage them to
perform activities consistent with the retailer’s objectives.
i. Commission- it is a common type of compensation for retail salespeople. A type
of incentive based on a percentage of their sales or margin.
ii. Bonus - additional compensation awarded periodically on the basis of an
evaluation of the employee’s performance.
iii. Profit sharing - this type of incentive can be offered as a cash bonus based on
the firm’s profits or as a grant of stock options that link additional income to the
performance of the firm’s stock.
c. Organization Culture - The final method for motivating and coordinating employees is
to develop a strong organization culture. It is the set of values, traditions, and customs of
a firm that guides employee behavior.

4. Keeping Talent: Building Employee Commitment - Having attracted and developed

effective employees, an important challenge in retailing is to keep them, that is, to reduce
turnover. High turnover reduces sales and increases costs.

Approaches that retailers take to build mutual commitment:

a. Empowering Employees - A process in which managers share power and decision-
making authority with employees. When employees have the authority to make decisions,
they are more confident in their abilities, have a greater opportunity to provide service to
customers, and are more committed to the firm’s success.
b. Creating Partnering Relationships
a. Reducing Status Differences - With limited status differences, employees feel that they
play important roles in the firm’s ability to achieve its goals and that their contributions
are valued.
b. Promotion from Within - This staffing policy involves hiring new employees only for
positions at the lowest level in the job hierarchy and then promoting experienced
employees to openings at higher levels in the hierarchy.
c. Balancing Careers and Families
i. Flextime - a job scheduling system that enables employees to choose the times
they work.
ii. Job sharing - Two employees voluntarily are responsible for a job that was
previously held by one person.

MANAGING DIVERSITY - A human resource management activity designed to realize the

benefits of a diverse workforce, which includes but is not limited to skin color, nationality,
gender, sexual orientation, and people with disabilities.
Programs that retailers use to manage diversity
a. Diversity training
i. Cultural awareness – a component that teaches people about how their
own culture differs from the culture of other employees and how the
stereotypes they hold influence the way they treat people.
ii. Building competencies – a component that develops interpersonal
skills that enable them to show respect and treat people as equals.
b. Support Groups and Mentoring
i. Support groups - minority employees that exchange information and
provide emotional and career support for members who traditionally
haven’t been included in the majority’s networks.
ii. Mentoring programs - assign higher-level managers to help lower-
level managers learn the firm’s values and meet other senior executives.
c. Career Development and Promotions
 i. Glass ceiling - an invisible barrier that makes it difficult for minorities
and women to be promoted beyond a certain level.

LEGAL ISSUES IN HUMAN RESOURCE MANAGEMENT

1. Equal Employment Opportunity - The basic goal of equal employment opportunity

regulations is to protect employees from unfair discrimination in the workplace.
i. Illegal discrimination - refers to the actions of a company or its managers that result
in members of a protected class being treated unfairly and differently from others.
ii. Protected class - group of individuals who share a common characteristic as defined
by the law. Companies cannot treat employees differently simply on the basis of their
race, color, religion, sex, national origin, age, or disability status.

2. Compensation - the pay rate for working overtime, and the minimum wage, and they protect
employee investments in their pensions. In addition, they require that firms provide the same pay
for men and women who are doing equal work.

3. Labor Relations - laws describe the process by which unions can be formed and the ways in
which companies must deal with the unions. They precisely indicate how negotiations with
unions must take place and what the parties can and cannot do.

4. Employee Safety and Health – The employer is obligated to provide each employee with an
environment that is free of hazards that are likely to cause death or serious injury.

5. Sexual Harassment - unwelcome sexual advances, requests for sexual favors, and other
inappropriate verbal and physical conduct. Harassment is not confined to requests for sexual
favors in exchange for job considerations such as a raise or promotion. Simply creating a hostile
work environment can be considered sexual harassment.

6. Employees’ privacy

7. Developing Policies

Two perceptions of fairness:

a. Distributive justice - arises when the outcomes received are viewed as fair with
respect to the outcomes received by others. However, the perception of distributive
justice can differ across cultures.
b. Procedural justice - based on the fairness of the process used to determine the
outcome.