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CHAPTER 17: MANAGING THE STORE ANNOTATED OUTLINE Store managers are on the firing line in retailing.

. Due to their daily contact with customers, they have the best knowledge of customer needs and competitive activity. From this unique vantage point, retail managers play an important role in formulating and executing retail strategies. Even in national chains, store managers are treated as relatively independent managers of a business within the corporation. Some department store managers are responsible for $150 million in annual sales and manage over 1,000 employees. INSTRUCTOR NOTES

See PPT 17-3, PPT 17-4 Have a store manager or a department manager speak in class about problems they have encountered and how they handled them. Discuss the factors affecting store employee performance and management tools used by store mangers to impact these factors.

I. Store Management Responsibilities The responsibilities of managers are divided into four major categories: managing employees, controlling costs, managing merchandise, and providing customer service. Store managers are responsible for increasing the productivity of two of the retailers most important assets: the firms investment in its employees and its real estate. Store managers increase the productivity of the store's employees by (1) recruiting and selecting effective people, (2) improving their skills through socialization and training, (3) motivating them to perform at higher levels and then, (4) evaluating and rewarding them. Store managers also need to develop employees who can assume more responsibility and be promoted to higher-level management positions. By developing subordinates, the firm benefits from having more effective managers, and the manager benefits because the firm has a qualified replacement when

See PPT 17-5, PPT 17-6 For most retailers, the store management activities are becoming more important while the importance of buying activities is declining. Why is this change occurring?

the manager is promoted. II. Recruiting And Selecting Store Employees To effectively recruit employees, store managers need to undertake a job analysis, prepare a job description, find potential applicants with the desired capabilities and screen the best candidates to interview. See PPT 17-7 Review the steps in the store employee management. Ask students if they think good employees are made or born. In other words, which is more important, recruiting (step 1) or training and motivation (steps 2 & 3). See PPT 17-9 Ask students to analyze the job of a salesperson in a specialty store using the questions and write a job description.

A. Job Analysis The job analysis identifies essential activities and is used to determine the qualifications of potential employees. Managers can obtain the information needed for a job analysis by observing employees presently doing the job and by determining the characteristics of exceptional performers. Information collected in the job analysis is used to prepare a job description.

B. Job Description A job description includes (1) activities the employee needs to perform and (2) the performance expectations expressed in quantitative terms. The job description is a guideline for recruiting, selecting, training, and eventually evaluating employees.

See PPT 17-10

C. Locating Prospective Employees Staffing stores is a critical problem because changing demographics are reducing the size of the labor pool. Suggestions for recruiting in a tight labor market are (1) to look beyond the retail industry, (2) use employees as talent scouts, (3) provide incentives for employee referrals, (4) recruit from minority and immigrant communities, and (5) use your storefront creatively to attract potential employees.

See PPT 17-11 Ask students to list the sources a sporting goods store could use for salespeople, store managers, accountants, and a manager for its computer information system.

Retailers are using the Internet to locate prospective employees. See PPT 17-12

D. Screening Applicants to Interview The screening process matches the applicants' qualifications with the job description. Many retailers use automated pre-screening programs as a low-cost method for identifying qualified candidates. Additional information is collected using application forms, reference checks, and tests. 1. Application Forms Job application forms contain information about the applicant's employment history, previous compensation, reasons for leaving previous employment, education and training, personal health, and references. This information enables the manager to determine whether the applicant has the minimum qualifications and also provides information for interviewing the applicant. 2. References A good way to verify the application form's information is to contact the applicant's references. Due to potential legal problems, however, many companies have a policy of not commenting on past employees. 3. Testing Intelligence, ability, personality, and interest tests can provide insights about potential employees. It is illegal to use tests assessing factors that are not job related or that discriminate against specific groups.

Ask the students to comment on applications they have completed.

Have students role play a telephone conversation requesting references on a specific student being considered for a job. One student can play the employment manager and another can play the student's professor listed as a reference. Ask student how useful they feel references are.

Ask students to indicate the type of tests they would use to hire salespeople, management trainees, and buyers for The Gap, Radio Shack, or Home Depot. Ask students to comment on employment tests they have taken.


Due to potential losses from theft, many retailers require applicants to take drug tests. Some use tests to assess applicants honesty and ethics. The use of lie detectors in testing employees is prohibited. 4. Realistic Job Preview

Turnover is reduced when the applicants understand both the attractive and unattractive aspects of the job. A job preview typically screens out 15% of the applicants who would most likely quit in three months if they were hired. E. Selecting Applicants Should employers use a students grades when determining who to interview and selecting people to hire? Why or why not?

After screening applications, the selection process typically involves a personal interview. Since the interview is usually the critical factor in the hiring decision, the store manager needs to be well prepared and to have complete control over the interview. 1. Preparation for the Interview

The objective of the interview is to gather relevant information, not simply to ask a lot of questions. The most widely used interview technique, the behavioral interview, asks candidates how they handle actual situations they encountered in the past--situations requiring skills outlined in the job description. Managers should develop objectives for what they want to learn about the candidate. The broad opening question is followed by a sequence of more specific questions. Managers need to avoid asking questions that are discriminatory.


2. Managing the Interview Some suggestions for questioning the applicant include (1) encouraging longer responses by asking broader questions, (2) avoiding questions that have multiple parts, (3) avoid asking leading questions, and (4) be an active listener. Some managers interview candidates while giving a candidate a tour through the store. This gives the manager an opportunity to find out if the candidate will jump in and help out in straightening out a display.

See PPT 17-13 and 17-14 Have students role play an employment interview. One student is looking for a management trainee position at J.C. Penney and the other student is looking for a personnel manager position.

F. Legal Consideration in Selecting and Hiring Store Employees Title VII of the Civil Rights Act prohibits discrimination on the basis of race, national origin, sex, or religion in company personnel practices. Discrimination is specifically prohibited in recruitment, hiring, discharge, layoff, discipline, promotion, compensation, and access to training. In 1972, the Civil Rights Act was expanded by the Equal Employment Opportunity Commission (EEOC) to allow employees to sue employers that violate the law. Discrimination arises when a member of a protected class (women, minorities, etc.) is treated differently from nonmembers of that class (disparate treatment) or when an apparently neutral rule has an unjustified discriminatory effect (disparate impact). The Age Discrimination and Employment Act makes it illegal to discriminate in hiring and termination decisions concerning people between the ages of 40 and 70. The American with Disabilities Act (ADA) requires employers to provide accommodating work environments for the disabled. A disability is defined as any physical or mental impairment that substantially limits one or more of an

See PPT 17-15

individual's major life activities or any condition that is regarded as being such an impairment. III. Socializing And Training New Store Employees After hiring employees, the next step in developing effective employees is introducing them to the firm and its policies. Socialization is the set of steps taken to transform new employees into effective and committed members of the firm. Socialization goes beyond simply orienting new employees to the firm. A principle objective of socialization is to develop a long-term relationship with new employees to reduce turnover costs. A key factor in socializing new employees is to create a training and work environment that articulates the retailers culture and strategy. Where should an orientation program take place for newly hired management trainees in the stores or corporate headquarters? How long should the orientation program be a day, a week, or a month? Why? See PPT 17-16 The text indicates that turnover of retail employees is very high. Ask student why they think this is the case? Ask students to comment on the differences between life as a student and what they would expect life to be as a management trainee

A. Orientation Programs Orientation programs are critical in overcoming entry shock and socializing new employees. Orientation programs can last from a few hours to several weeks. Effective orientation programs need to avoid information overload and one-way communication. Managers need to give newly hired employees a chance to have their questions and concerns addressed. The orientation program is just one element in the overall training program. It needs to be accompanied by a systematic follow-up to ensure that any problems and concerns arising after the initial period are considered.

B. Training Store Employees


Effective training for new store employees includes both structured and on-the-job learning experiences. 1. Structured Program

Have a recruiter from a retail recruiting firm on campus describe their company's management training program.

During the structured program, new employees are taught the basic skills and knowledge they will need to do their job. The initial structured program should be relatively short so new employees do not feel that they are simply back in school. Effective training programs try to bring new recruits up to speed as quickly as possible and then get them involved in doing the job for which theyve been hired. 2. On-the-Job Training

Ask students whether they would prefer to go to work for a company with a structured or unstructured training program. Why? From the company's viewpoint, what are the advantages of a structured versus unstructured program?

In the next training phase new employees are assigned a job, given responsibilities, and coached by their supervisor. New employees learn by doing activities, making mistakes, and then learning how not to make those mistakes again. Information learned through classroom lectures tends to be forgotten quickly unless its used soon after the lecture. 3. Analyzing Successes and Failures

Ask students if they would rather work for a company that emphasizes on-the-job training versus classroom training. Why?

Store managers should provide an atmosphere in which salespeople try out different approaches for providing customer service and selling merchandise. Managers should not criticize an individual salesperson for mistakes. Instead, they should talk about the situation, analyze why the approach did not work, and discuss how the salesperson could avoid the problem in the future. Managers can help salespeople to constructively analyze their successes and failures by asking salespeople why

Ask students if they analyze their successes and failures in classes. Why or why not? Have them describe a success and a failure and give the reasons for both. Use this to illustrate that people tend to blame failures on others and take credit for successes. What impact does this bias have on learning?

questions that force them to analyze the reason for effective and ineffective performance. IV. Motivating And Managing Store Employees After employees have received their initial training, managers must work them to help them meet their performance goals. See PPT 17-18 See PPT 17-17

A. Leadership Leadership is the process by which one person attempts to influence another to accomplish some goal or goals. Store mangers are leaders of their group of employees. 1. Leader Behaviors Leaders engage in task performance and group maintenance behaviors. Task performance behaviors are the store manager's efforts to make sure that the store achieves its goals, such as planning, organizing, motivating, evaluating, and coordinating store employees' activities. Group maintenance behaviors are activities store managers undertake to make sure that employees are satisfied and work well together. These activities include considering employees' needs, showing concern for their well-being, and creating a pleasant work environment. 2. Leader Decision Making Store managers vary in how much they involve employees in making decisions. Autocratic store managers make all decisions on their own and then announce them to employees. A democratic store manager seeks information and opinions from employees

Ask students what are the characteristics of a good leader?

Ask students to describe managers who they have worked for that were very effective and not very effective. When it is good for a leader to be task-oriented? Relations-oriented?

See PPT 17-19

and bases decisions on this information. 3. Leadership Styles Store managers tend to develop a specific leadership style. They emphasize either task performance or group maintenance behaviors. They range from being autocratic to democratic in their decisionmaking style. Effective managers use all styles, selecting the style most appropriate for each situation. Effective store managers must consider both their firm's objectives and their employees' needs. They must recognize that employees arent all the same, and use different approaches or styles for managing each employee. Transformational leaders get people to transcend their personal needs for the sake of the group or organization. They generate excitement and revitalize organizations. Transformational store managers create this enthusiasm in their employees through their personal charisma. Finally, transformational leaders delegate challenging work to subordinates, have free and open communication with subordinates, and provide personal mentoring to develop subordinates. Ask students, if they were a store manager, what would they do to motivate their employees.

Ask students to analyze the leadership styles of several retail chain CEOs and identify if anyone fits the role of a transformational leader.

B. Motivating Employees Motivating employees to perform up to their potential is maybe a store managers' most important and frustrating task. One method is to provide more incentive compensation, but there are others that merit attention.

C. Setting Goals or Quotas Employee performance improves when employees feel that (1) their efforts will

See PPT 17-20, 17-21, and 17-22

enable them to achieve the goals set for them by their managers and (2) they will receive rewards they value if they achieve their goals. If goals are set too high, employees might become discouraged, feel the goals are unattainable, and thus not be motivated to work harder. If goals are set too low, employees can achieve them easily and wont be motivated to work to their full potential.

Ask students what happens to motivation if goals are set too low. If they are set too high. How can managers make sure they are set at the right level? Should newly hired salespeople have the same sales per hour selling goal as more experienced salespeople? What are the advantages and disadvantages of having different goals for each employee? What are the advantages and disadvantages of having employees participate in establishing goals?

D. Maintaining Morale Store morale typically goes up when things are going well and employees are highly motivated. But when sales are not going well, morale tends to decrease and employee motivation declines. Store managers could build morale by having storewide or department meetings prior to the store opening, educating employees about the firm's finances and having parties when such goals are met, etc.

See PPT 17-23

E. Sexual Harassment Managers must avoid and make sure that store employees avoid actions that are, or can be interpreted as, sexual harassment. EEOC guidelines define sexual harassment as a form of gender discrimination: "Unwelcome sexual advances, requests for sexual favors, and other verbal and physical conduct of a sexual nature constitutes sexual harassment when submission to or rejection of such conduct by an individual is used as a basis for employment decisions affecting such individual, or such conduct has the purpose or effect of unreasonably interfering with an individual's work performance or creating an intimidating, hostile, or offensive working environment."

See PPT 17-24 and PPT 17-25 Should a manager avoid dating an employee? Based on the EEOC guidelines, when would such a behavior be interpreted as sexual harassment?

V. Evaluating Store Employees And


See PPT 17-26

Providing Feedback The objective of the evaluation process is to identify employees who are performing well and those who are not. Based on the evaluation, high-performing employees should be rewarded. Plans need to be developed to increase the productivity of employees performing below expectations. Ask students to discuss the advantages and disadvantages of having the employee's supervisor evaluate them versus a human resource specialist.

A. Who Should Do the Evaluation? In large retail firms, the evaluation system is usually designed by the human resources department. But the evaluation itself should be done by the employee's immediate supervisor -- the manager who works most closely with the employee. Inexperienced supervisors are often assisted by a senior manager in evaluating employees.

B. How Often Should Evaluations Be Made? Most retailers evaluate employees annually or semiannually. Feedback from evaluations is the most effective method for improving employee skills. Thus, evaluation should be done more frequently when managers are developing inexperienced employees' skills. Manager should supplement formal evaluations with frequent informal ones. See PPT 17-27 Ask students to compare and evaluate the criteria used by Foley's and The Gap to evaluate salespeople. How do the differences in the evaluation affect the motivation and performance of salespeople in the two firms? What problems arise if evaluations are done too frequently? Not frequently enough. Should newly hired salespeople be evaluated more frequently than experienced salespeople? Why? Should senior executives be evaluated more frequently than management trainees? Why?

C. Format for Evaluations Evaluations are only meaningful if employees know what they're required to do, what level of performance is expected, and how they'll be evaluated. An employee's formal, six-month evaluation form may list results for various factors in terms of what's considered average performance for the company, and the

employee's actual performance. D. Evaluation Errors Managers can make evaluation errors by first forming an overall opinion of the employee's performance and then allowing this opinion to influence the ratings of each performance factor (haloing). Managers are often unduly influenced by recent events (recency) and by their evaluations of other salespeople (contrast). Managers have a natural tendency to attribute performance (particularly poor performance) to the salesperson and not to the environment the salesperson is working in. To avoid potential biases in evaluations, most ratings might be based on objective data. To avoid potential bias when making subjective ratings, managers should observe performance regularly, record their observations, avoid evaluating many salespeople at one time, and remain conscious of the various potential biases. See PPT 17-29 Employees work for different reasons. They seek different rewards. Ask students what rewards they are seeking from their first job after graduation. What rewards might a parttime salesperson be seeking? Why does a parent who has been raising children decide to return to the working force when the children are in high school or college? See PPT 17-28 Review the evaluation errors. What can managers do to minimize the effects of these errors?

VI. Compensating And Rewarding Store Employees This is the final step in improving employee productivity. Store employees receive two types of rewards from their work -- extrinsic and intrinsic. Extrinsic rewards are rewards provided by either the employee's manager or the firm such as compensation, promotion, and recognition. Intrinsic rewards are rewards employees get personally from doing their job well.

A. Extrinsic Rewards Store employees dont all seek the same


To illustrate the differences between intrinsic

rewards. Some employees want more compensation; others strive for a promotion in the company or public recognition of their performance. Large retailers find it difficult to develop unique reward programs for each individual. One approach is to offer la carte plans that give effective employees a choice of rewards for good performance. This type of compensation plan enables employees to select the rewards they want. Recognition is an important nonmonetary extrinsic reward for many salespeople. Telling employees they have done a job well is appreciated. It's typically more rewarding when good performance is recognized publicly. Public recognition can motivate all store employees because it demonstrates managements interest in rewarding employees. An emphasis on extrinsic rewards can make employees lose sight of their jobs intrinsic rewards.

and extrinsic rewards have student discuss the rewards they get from attending a class. What are their intrinsic rewards? What are the extrinsic rewards? Are the intrinsic rewards affected when the extrinsic rewards (high grades) are reduced (pass-fail versus grades)?

B. Intrinsic Rewards When employees find their job intrinsically rewarding, they are motivated to learn how to do it better. One approach to making work fun is to hold contests with relatively small prizes. Contests are most effective when everyone has a chance to win. Another approach for motivating more experienced employees is provide intrinsic rewards through job enrichment. Job enrichment is the redesign of a job to include a greater range of tasks and responsibilities. These could include giving employees responsibility for merchandising a particular area, training new salespeople, or planning and managing a special event.

Ask students why employees are motivated to learn and try new, creative approaches when they have a high level of intrinsic interest in their work. How can managers make work fun - intrinsically rewarding? Ask students to share experience when they have had fun doing a job.


C. Compensation Programs The objectives of a compensation program are to attract and keep good employees, motivate them to undertake activities consistent with the retailer's objectives, and to reward them for their effort. A compensation plan is most effective for motivating and retaining employees when the employees feel the plan is fair when their compensation is related to their efforts. 1. Types of Compensation Plans Retail firms typically use one or more of the following compensation plans: straight salary, straight commission, salary plus commission, and quota-bonus. With straight salary compensation, salespeople or managers receive a fixed amount of compensation for each hour or week they work. Under a straight salary plan, the retailer has flexibility in assigning salespeople to different activities and sales areas. The major disadvantage of the straight salary plan is employees' lack of immediate incentives to improve their productivity. Incentive compensation plans reward employees on the basis of their productivity. Under some incentive plans, a salesperson's income is based entirely on commission called a straight commission. By using different percentages for calculating commissions, the retailer provides additional incentives for its salespeople to sell specific items. Incentive plans may include a fixed salary plus a smaller commission on total sales or a commission on sales over a quota. Incentive compensation plans are a

See PPT 17-30 and PPT 17-31 Review the advantages and disadvantages of compensation plans that emphasize incentives versus salary.

Ask students why retailers use incentive compensation plans. What are the positive and negative consequences?

powerful motivator for salespeople to sell merchandise, but they have a number of disadvantages. These disadvantages include employees' reluctance to perform nonselling activities and a lack of loyalty to the firm. To provide a more steady income for salespeople under high incentive plans, some retailers offer a drawing account. With a drawing account, salespeople receive a weekly check based on their estimated annual income. Then commissions earned are credit against the weekly payments. Quotas are often used with compensation plans. A quota is a target level used to motivate and evaluate performance. A quota-bonus plan provides sales associates with a bonus when their performance exceeds their quota. A quota-bonus plan's effectiveness depends on setting reasonable, fair quotas. Quotas should be developed for each salesperson based on his or her experience and the nature of the store area where he or she works. 2. Group Incentives To encourage employees in a department or store to work together, some retailers provide additional incentives based on the performance of the department or store as a whole. The group incentive encourages salespeople to work together on nonselling activities and handling customers so the department sales target will be achieved. D. Designing the Compensation Program A compensation programs two elements are the amount of compensation and the

Why do retailers use drawing accounts? Should drawing accounts be used for all salespeople -newly hired and experienced? For which types of merchandise would the use of drawing accounts make more sense -- underwear and hosiery, toys, men's clothing, women's clothing, gifts?

What factors would you use to set quotas for an incentive compensation plan for buyers, salespeople, store managers, the CEO of the company?

Ask students what are the advantages and disadvantages of individual and group incentives? When are group incentives more important than individual incentives?

See PPT 17-32

percentage of compensation based on incentives. Typically, market conditions determine the amount of compensation. When market conditions are good and labor is scarce, retailers pay higher wages. Incentive compensation plans are most effective when a salesperson's performance can be measured easily and precisely. When the salespersons activities have a great impact on sales, incentives can provide additional motivation. Incentives are less effective with inexperienced salespeople because they inhibit learning. Compensation plans with too many incentives may not promote good customer service. Salespeople on commission become interested in selling anything they can to customers. 1. Setting the Commission Percentage Assume that a specialty store manager wants to hire experienced salespeople. To get the type of person she wants, she feels she must pay $12 per hour. Her selling costs are budgeted at 8 percent of sales. With compensation of $12 per hour, salespeople need to sell $150 worth of merchandise per hour ($12 divided by 8 percent) for the store to keep within its sales cost budget. The manager believes the best compensation would be one-third salary and two-thirds commission, so she decides to offer a compensation plan of $4 per hour salary (33 percent or $12) and a 5.33 percent commission on sales. If salespeople sell $150 worth of merchandise per hour, theyll earn $12 per hour ($4 per hour in salary plus $150 multiplied by 5.33 percent, which equals $8 per hour in commission).

Ask students if people always take the highest paying job? What are the factors they consider in taking a job after graduation? Will they take the best paying job? Why? What can a retailer do to attract and keep good employees and not offer more compensation then competitors? Review the factors used to determine the appropriate use of incentives. For which of the following situations would you place more emphasis on incentives versus salary -- a counter person in a fast food restaurant: the manager of the fast food restaurant; a department store salesperson in the hosiery and underwear department, designer dresses, men' suits, women's sportswear; a department manager in a discount store; the manager of an exclusive restaurant?

E. Legal Issues in Compensation The Fair Labor Standards Act of 1938 set minimum wages, maximum hours, child labor standards, and overtime pay provisions. Enforcement of this law is particularly important to retailers because they hire many low-wage employees and teenagers and have their employees work long hours. The Equal Pay Act, now enforced by the EEOC, prohibits unequal pay for men and women who perform equal work or work of comparable worth. See PPT 17-33

VII. Controlling Costs Labor scheduling, store maintenance, and energy management offer three opportunities for reducing store operating expenses.

A. Labor Scheduling Labor scheduling (determining the number of employees assigned to each area of the store), is difficult because of the multiple shift and part-time workers needed to staff stores 12 hours a day, seven days a week. In addition, customer traffic varies greatly during the day and the week. Bad weather, holidays, and sales can dramatically alter normal shopping patterns and staffing needs. Managers can spot obvious inefficiencies such as long checkout lines or sales associates with nothing to do. Efficient labor scheduling requires POS sales data by day and time of day as well as traffic patterns and the impact of store employees on sales.

See PPT 17-34

B. Store Maintenance Store maintenance entails the activities involved with managing the exterior and

interior physical facilities associated with the store. Store maintenance affects both the sales generated in the store and the cost of running the store. A stores cleanliness and neatness affect consumer perceptions of the quality of its merchandise. See PPT 17-36

VIII. Reducing Inventory Shrinkage An important issue facing store management is reducing inventory losses due to employee theft, shoplifting, mistakes and inaccurate records, and vendor errors. Although shoplifting receives most of the publicity, employee theft accounts for about the same amount of inventory loss. The key to an effective loss prevention program is determining the most effective way to protect merchandise while preserving an open, attractive atmosphere and a feeling among employees that they are trusted.

A. Calculating Shrinkage Shrinkage is the difference between the recorded value of inventory (at retail prices) based on merchandise bought and received, and the value of the actual inventory (at retail prices) in stores and distribution centers divided by retail sales during the period. Retailers annual loss from shrinkage is between 1 and 5 percent of sales. Every dollar of inventory shrinkage translates into a dollar of lost profit.

See PPT 17-35

B. Detecting and Preventing Shoplifting Losses due to shoplifting can be reduced by store design, employee training, and special security measures.

See PPT 17-37 and 17-38


1. Store Design Security issues need to be considered when placing merchandise near store entrances, delivery areas, and dressing rooms. Dressing room entrances should be visible to store employees so they can easily observe customers entering and existing with merchandise. 2. Employee Training Store employees should be trained to be aware, visible, and alert to potential shoplifting situations. Perhaps the best deterrent to shoplifting is an alert employee who is very visible. 3. Security Measures Department stores often chain expensive merchandise to fixtures. Another approach for deterring shoplifting is to embed dye capsules in the merchandise tags. While security measures such as guards, mirrors, TV cameras, and anti-theft devices reduce shoplifting, they can also make the shopping experience more unpleasant for honest customers. The atmosphere of a fashionable department store is diminished when these things are highly visible. When evaluating security measures, retailers need to balance the benefits of reducing shoplifting with the potential losses in sales. In Electronic article surveillance (EAS) systems, special tags are placed on merchandise. When the merchandise is purchased, the tags are deactivated by the POS scanner. EAS tags do not affect shopping behavior because customers do not realize they are on the merchandise.

Many department stores have small boutiques in the store. Does this increase shoplifting? Why?

See PPT 17-39

See PPT 17-40

Security measures reduce shoplifting. What negative consequences do they have?


Some large national retailers insist that vendors install EAS tags during the manufacturing process because the vendors can install the tags at a lower cost than the retailers. In addition, retail-installed tags can be removed more easily by shoplifters.

An example of such a tag is a small strip enclosed within a plastic-wrapped DVD. The POS deactivates the security device without the need to cut open the plastic cover.

4. Prosecution Many retailers have a policy to prosecute all shoplifters. Some retailers also sue shoplifters in civil proceedings for restitution of the stolen merchandise and the time spent in the prosecution. See PPT 17-41 Would you expect employee theft to be higher in an independent, women's specialty store or in a chain like the Limited? Why?

B. Reducing Employee Theft The most effective approach for reducing employee theft and shoplifting is to create a trusting, supportive work environment. Retailers with a highly committed work force and low turnover typically have low inventory shrinkage. Additional approaches for reducing employee theft are carefully screening employees, creating an atmosphere that encourages honesty and integrity, using security personnel, and establishing security policies and control systems.

1. Screening Prospective Employees Many retailers use paper-and-pencil honesty tests and make extensive reference checks to screen out potential employee theft problems. A major problem related to employee theft is drug use. Some retailers now require prospective and current employees with erratic performance to submit to drug tests as a condition of employment. 2. Using Security Personnel In addition to uniformed guards, retailers often use undercover shoppers to discourage and detect employee theft. 3. Establishing Security Policies and Control Systems To control employee theft, retailers need to adopt policies relating to certain activities that may facilitate theft. In addition, computer software is available to detect unusual activity at POS terminals.

Ask students if they have taken drug tests or paper and pencil honesty tests when applying for jobs. What do they think of these screening techniques?

IX. Summary



1. How do on-the-job, Internet training, and classroom training differ? What are the benefits and limitations of each approach? Classroom training might include lectures, audiovisual presentations, manuals, and correspondence distributed to the new employees. The initial structured program should be relatively short so new employees don't feel they are simply back in school. Effective training programs try to bring new recruits up to speed as quickly as possible and then get them involved in doing the job for which they've been hired.

Use of the Internet for training store employees has become increasingly popular. The Internet provides a lower cost alternative, allowing employees a preparation phase before on-the-job training without the costs associated with classroom training. Benefits of training employees online include greater consistency as all employees are trained with the same program, lower costs, and the ability to launch significant programs over a large geographic area quickly.

The next training phase emphasizes on-the-job training. New employees are assigned a job, given responsibilities, and coached by their supervisor. The best way to learn is to practice what has been taught. New employees learn by doing activities, making mistakes, and then learning how not to make those mistakes again. Information learned through classroom lectures tends to be forgotten quickly unless it's used soon after the lecture. The actual hands-on experience and getting feedback provides more complete and lasting knowledge.


Give examples of a situation in which a manager of a McDonald's fast-food restaurant must utilize different leadership styles. In the text, we discuss leadership styles in terms to type of leader behaviors, task performance and group maintenance, and two types of decision-making approaches, authoritative and participative. Task performance behaviors are the McDonalds manager's efforts to make sure that the store achieves its goals. Group maintenance behaviors are activities undertaken by the store managers to make sure that McDonald's employees are satisfied and work well together. Autocratic When the McDonald manager make all decisions on their own and then announce the decision to employees. Democratic When the McDonald manager seeks information and opinions from employees and bases decisions on this information. Effective managers use all styles, selecting the style most appropriate for each situation. For example, the McDonald manager might be more autocratic and relations-oriented with an insecure new trainee and more democratic and task-oriented with an effective, experienced employee. The chapter also discusses another style, transformation leadership, getting people to transcend their personal needs for the sake of the group or organization. This style might be very useful when the store manager is new and trying to turn around a poor-performing restauranttrying to generate excitement and revitalize restaurant's employees.



Job descriptions should be in writing so employees clearly understand what's expected of them. But what are the dangers of relying too heavily on written job descriptions? The job description is a guideline for recruiting, selecting, training, and eventually evaluating employees. The description needs to be in writing so that it can be communicated accurately and consistently to present and prospective employees. Typically, the job description should be thorough enough so that the potential employee knows the nature of the job and the performance expectations. The description needs to contain all of the information needed to develop criteria for hiring people, designing training programs, and developing evaluation criteria. However, if the description is too detailed, it might inhibit the creativity and flexibility of employees to deal with new situations that were anticipated when the description was written. For example, sales associates might not think they should help customers seeking assistance in an adjacent selling area, if the description indicates that they are responsible for selling in one area.


Name some laws and regulations that affect the employee management process. Which do you believe are the easiest for retailers to adhere to? Which are violated the most often? Title VII of the Civil Rights prohibits discrimination on the basis of race, national origin, sex, or religion in company personnel practices. Potential violations are investigated by the Equal Employment Opportunity Commission (EEOC). The Age Discrimination and Employment Act makes it illegal to discriminate in hiring and termination decision concerning people between the ages of 40 and 70. Americans with Disabilities Act (ADA) opens up job opportunities for the disabled by requiring employees to providing accommodating work environments. Sexual harassment includes lewd sexual comments and gestures, sexual joking, showing obscene photographs, staring at a co-worker in a sexual manner, alleging that an employee got rewards by engaging in sexual acts, and commenting on an employee's moral reputation. Managers must avoid such behaviors because they are both unethical and illegal. Equal Pay Act, now enforced by the EEOC, prohibits unequal pay for men and women who perform equal work. Equal work means that the jobs require the same skills, effort, and responsibility and are performed in the same working environment. The Fair Labor Standards Act of 1938 set minimum wages, maximum hours, child labor standards, and overtime pay provisions. Retailers may find that acts are very specific, such as the Age Discrimination and Employment Act and the Equal Pay Act, are more easily adhered to as compared to others that require detailed examination and assessment of each situation. Enforcement of the Fair Labor Standards Act is particularly important to retailers because they hire many low-wage employees and teenagers and have their employees work long hours. Some would argue that this may be violated the most.


What's the difference between extrinsic and intrinsic rewards? What are the effects of these rewards on the behavior of retail employees? Under what conditions, would you recommend that a retailer emphasize intrinsic rewards over extrinsic rewards?


Extrinsic rewards are rewards provided by the retailer. These rewards include financial compensation and recognition. Intrinsic rewards are positive feelings that people get from doing the job well. For instance, retailers can help employees identify the intrinsic rewards of their jobs through contests, which emphasize the "fun" aspects of their jobs and through job enrichment programs. Retail employees feel a sense of fulfillment and motivation by these rewards. The employees in turn will work harder because they feel motivated. However, extrinsic rewards often make employees feel the only purpose of their job is to make money and they lose sight of all intrinsic rewards. Intrinsic rewards should be emphasized over extrinsic rewards in order to avoid making the employees feel they only come to work to get a paycheck. Intrinsic rewards should be used when an employee feels his job is mundane and boring. These rewards can make the jobs feel rewarding and motivate employees to learn how to do their jobs better. For example, experienced employees often lose interest in their jobs. They no longer find them exciting and challenging. Extrinsic rewards, such as pay or promotion might not be so attractive to them. They might be satisfied with their present income and job responsibilities. Intrinsic rewards should be emphasized in this case to motivate and inspire the employees.


Many large department stores such as JC Penney, Sears, and Macy's are changing their salespeople's reward system from a traditional salary to a commission-based system. What problems can incentive compensation systems cause? How can department managers avoid these problems? Accountability will be the watchword of this decade; all will have to know that they are paid based on their production. Since the sales manager is the direct link from the corporate office to the sales people it is up to him/her to convince the sales people to accept the change. To begin with, the department manager is going to have to eliminate the suspicion that the new system is designed to help management get larger profits at the expense of the sales force. The manager should show how employees' earnings should not be negatively affected. In fact, the effective department manager will use this as an opportunity to show how earnings can be increased. The sales manager must be especially careful to explain all facets of the change so that employees' questions and concerns are addressed. The new system should also be periodically examined and discussed with employees to get their feedback.


When evaluating retail employees, some stores use a quantitative approach that relies on checklists and numerical scores similar to the form in Exhibit 17-6. Other stores use a more qualitative approach whereby less time is spent checking and adding and more time is devoted to discussing strengths and weaknesses in written form. Which is the best evaluation approach? Why? Each evaluation approach has its strengths. Quantitative methods are useful in that they provide a scale that can be utilized uniformly across departments and stores. This enables evaluators to get a more balanced appraisal of performance from a broad perspective. In addition, quantitative methods leave little question as to the relevant evaluative criteria, such as, did the salesperson make quota, or what were the total sales for the individual for a specific period? Qualitative methods allow the manager to give individual insight into strengths and weaknesses, and suggestions to correct the weaknesses. They allow the evaluator to focus on the sales person as an individual and therefore allows for specific evaluation pertinent to each person. An effective evaluation system should probably use a combination of both.



What are the different methods for compensating employees? Discuss which methods you think would be best for compensating a sales associate, store manager, and buyer. The compensation methods discussed in the chapter are straight salary, straight commission, salary plus commission, and quota-bonus. Straight salary plan is a plan in which salespeople or managers receive a fixed amount of compensation for each hour or week they work. Straight commission plans are a plan in which employee compensation is based entirely on their productivity. For example, a salesperson might be paid a commission based on a percentage of sales made minus merchandise returned. Salary plus commission plan includes a fixed salary plus a smaller commission on productivity such as a commission on sales. Quota-bonus plan is a plan that includes a fixed salary plus a bonus based on performance relative to a quota. An experienced sales associate should have a compensation plan that includes incentives based on productivity. It is very easy to assess the associates performanceevery time the associate makes a sale it is record with his or her identification number on the point of sale terminal. However, the proportion of total compensation that is based on productivity should be lower when the sales associate is expected to do a lot of non-selling activities such as stocking shelves and if the sales associate is expected to build long-term relationships with customers and provide a lot service. An experienced buyer should also have a compensation plan that includes incentives based on productivity. The performance of a buyer can also be easily assessed by looking at sales, gross margins, inventory turns of the categories for which he or she is responsible. However, there are a lot of factors affecting the buyer's performance beyond the buyer's control, thus the percent of total compensation based on incentive should probably be lower than that of the sales associate. A bonus based on the manager's judgment might be used to determine the incentive compensation rather than fixed formula. An experienced store manager's plan should be about the same as that of an experienced buyer. Note that the above suggestions emphasized that the employees were experienced. For inexperienced employees, fewer incentives should be used because the retailer wants to motivate the employees to develop an intrinsic interest in their job and be motivated to learn how to do their job better.


Is training more important for a small independent retailer or a large national chain? Why? How does training differ between these two types of retailers? Training is equally important for both small and large retailers. However, small retailers have fewer employees and if one employee performs poorly due to a lack of training that poor performance can have a greater effect on the entire company. A large national chain probably has a number of policies and procedures that they want new employees to be aware of. In addition, the large national chain is hiring a lot of people and thus can do some of the training in classes. On the other hand, the small retailer probably does not individualized on-the-job training.


Discuss how retailers can reduce shrinkage from shoplifting and employee theft.


Losses due to shoplifting can be reduced by store design, employee training, and special security measures. To stop employee theft, retailers can screen perspective employees, encourage honesty and integrity, use security personnel, and administer security policies and control systems. 11. Drugstore retailers, such as CVS, place diabetic test strips and perfume behind locked glass cabinets and nearly all over-the-counter medicines behind Plexiglas panels. These efforts are designed to deter theft. How do these security measures impact honest customers. Despite their effectiveness in reducing losses through shoplifting, the security measures described above can unfortunately make the shopping experience less pleasant for honest customers. These customers are inconvenienced by the need to request assistance in getting to the merchandise they wish to buy. Retailers must carefully balance security with convenience. In the situation described above, the retailer should clearly remind customers that its security precautions help to service its loyal customer by keeping losses, and therefore merchandise prices, down for everyone.


See Lecture # 9-1: Legal Issues In Human Resources in Chapter 9. This lecture and the PPT slides can also be used in Chapter 17.