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Transforming the Retail Workforce to Achieve High Performance

by Teri Babcock and David L. Reed

Teri Babcock is a partner in Accentures Retail practice. She has worked with clients in the human performance, talent management and learning space for more than 17 years. Teri can be reached at teresa.j.babcock@accenture.com. David L. Reed is a senior director in Accenture HR Services. He has led Accenture's external and internal recruitment business for 17 years. He posseses extensive experience across all strategic and operational aspects of recruitment across multiple clients, industries and geographies. David can be reached at david.l.reed@accenture.com.

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Hiring the Right People: Human Capital Sourcing and Staffing

Retailing is the preeminent day-to-day business enterprise. The focus on the latest numbers is intense: How many associates are available next shift? What was store traffic last weekend? How will we train associates on the new products that arrive tomorrow? What are our sales this month? Storelevel execution moment-by-moment makes or breaks the enterprise. What, then, should retail executives make of these decidedly long-term data points? The workforce in the United States will expand by only three percent from 2000 through 2020, as compared with a 53 percent increase over the 20 years from 1980 to 2000.

The number of young European workers, those aged 20 to 29, will decrease by 20 percent over the coming two decades, while the number of workers approaching retirement (aged 50 to 64) will grow by more than 25 percent. Japan expects to lose 10 million workers, or 16 percent of its workforce, over the coming quartercentury. One in five Japanese is over the age of 65, the highest ratio of seniors to citizens in the world. These statistics suggest that one of retailings most venerable fixtures, the retail workforcethe people behind the counter, at the checkout station, in the stockroomis already undergoing dramatic change. This change may threaten or undermine many retail enterprises. Accenture believes,

however, that for visionary companies, the unique workforce dynamics at work in the retail marketplace create a significant opportunity to achieve high performance. Accenture High Performance Business research shows that small improvements in key talent management performance indicators such as attrition, speed to competence and associate performance can drive disproportionately large improvements in customer satisfaction and financial performance. This paper explores opportunities for transforming retailing associates into a high-performance retail workforce by focusing on three key talent management levers: recruiting, learning and performance management.

Selection processes of high-performance companies


Successful retailers have human capital strategies designed to ensure that the right people and the right capabilities are in place to execute the business strategy effectively. What all effective enterprises have in common is a mature process for formulating and aligning human capital initiatives with business strategy. These organizations make clear priorities and track their people and workforce programs based on the business value they create. Imagine a manufacturing process where companies had to manufacture 150,000 parts in order to end up with 1,700 parts of acceptable quality. Yet this is exactly the yield from most recruitment processes. Even in the face of this extremely inefficient process, HR departments often feel management pressure to increase the pool of potential workers. We believe that smart hiring is not a recruiting problem; it is a selection problem. Companies do not need to increase the pool; they need a better yield. One of the biggest hiring challenges retailers face today is the disconnect between new job profiles and a recruiting process that too often hires based on old profiles and inconsistent selection techniques. For HR departments in retailing enterprises, new

selection techniques and technologies offer significant opportunities. Instead of relying on the hit-or-miss tactics of traditional recruiting, these new techniques and technologies can be used to match new job profilesand the performance characteristics of the workers who are the highest achieversagainst potential worker pools. Some retailers are creating simple yet ingenious responses to the challenge of smarter selection. Consider the practice of one European retailer that requires that a prospective employee must work in the store he or she will be assigned to for one trial day before being hired. Expectations are explicit, and after the trial is complete, the staff of the store votes on whether the prospect gets the job. The approach has yielded impressive results for a chain that relies on quick, efficient service to a high-end clientele for its success. Basic hiring practices for retailers have not kept pace with the actual performance environments in which workers find themselves. As a consequence, HR departments searching for the best people are getting false positives: workers that appear on paper to have the skills to succeed, except that the paper contains out-of-date performance criteria. Just as worrisome, HR professionals are also getting false negatives: they are failing to hire workers with the right backgrounds and skills to perform optimally, because the HR department is not aware of the change in the definition of optimal work performance.

Accenture takes the view that retailers should: Re-tool their recruitment and selection profiles based on analyses of the performance of the most successful workers in the current work environment. Apply that profile and those performance characteristics across the companys basic core processes. Use next-generation technologies and tools in the selection process to reduce both false positives and false negatives among potential workers. Push the biggest part of the filtering to the front end of the process before more costly human analysis is applied to selectionand let insight-based applications help predict those applicants most likely to respond to and perform well under updated performance conditions.

A simple start toward high performance


Many retailers are challenged to identify the specific problem areas for their key workforces, or to prioritize initiatives to address workforce issues. Based on our extensive experience with companies around the world, Accenture believes that when organizational energy is focused on two to three critical workforces, even slight improvements can make a 10 to 15 percent difference in the companys bottom line. For example, the retail division of a major US bank calculated that every time it cuts a single second from call handling time, it adds up to US$1 million in savings for the bank. A global insurance company with 16,000 life planners in Korea found that a one percent change in a single measure growth in written premium per life plannertranslated into a US$16 million improvement for the company, most of which was pure profit. These incremental improvements are the quick hits that will put the enterprise on a path toward high performance. While each retail organization will have its own challenges and opportunities, consider these six steps for getting started: 1. Identify the two or three most critical workforces for your organization. While retailers have a number of critical workforces, the customer-facing frontline associates may provide the greatest opportunity. In high turnover environments, explore recruitment and learning strategies to improve speed to competence. A floor salesperson who gets up to speed five percent faster yields significantly superior performance in terms of product knowledge and customer satisfaction. Another critical workforce in retailing is buyers. No matter how good a workforce is, if the wrong products are on the floor, the store will fail. 2. Define what optimal performance looks like for those positions. Evaluate your top performers for each key position. What skills and experience do they bring that differentiates them from poor performers? From which recruiting pool did they come? What previous positions did they hold in your company? 3. Assess where capability gaps exist between current and optimal performance. Understand the gap between your top performers and others to (1) identify better candidates and recruiting channels and (2) tailor learning and development programs for entrylevel employees along a more cost-effective path to high performance. 4. Develop a set of integrated talent management solutions to address the workforce gaps. Fundamentally changingand sustaininghigher workforce performance is a complex undertaking. Look first at how selected HR programs can be integrated for a specific workforce, rather than rolling out individual programs across the organization. Results will likely show significantly higher performance for that selected workforce than when programs are implemented independently. 5. Define an overall human capital roadmap that will lead to fundamental, lasting change in your workforce. Include both quick hit initiatives, like targeted learning programs, and long-term investments, like technology or store infrastructure. Evidence suggests that quick-hit savings used to fund long-term investments create sustainable change programs that are more palatable to company executives. 6. Implement and measure return on investment, making calculated adjustments along the way. Implementation raises several practical questions. What is the appropriate frame of referencethe entire enterprise or all retail locations? In Accentures view, retailers should start with the box, the four walls of the retail location. Start building a better workforce inside the box, which is ultimately the profit-and-loss entity that counts. Measuring progress and adjusting along the way is critical. Human metrics are often perceived as soft and in a tight margin business, CEOs do not invest where they cannot prove a return. Each organization will have its own unique journey. Yet leaders in the human capital management arena display certain characteristics in common, as shown by the Accenture High-Performance Workforce Study, a comprehensive research program conducted approximately every 18 months with executives globally. For instance, the leaders that emerged from this research tend to value human resources and training more highly than do other companies. The example of these human performance leaders suggests that the integration of initiatives in recruitment, learning and performance managementwith a particular focus on support provided to critical workforcesis the key to transforming employee performance.

Learning and Knowledge Management: Skills and Behaviors that Drive High Performance

Once the right talent has been identified and recruited, how do you equip them with the critical knowledge needed to be high performers? Consider the second key talent management leverlearning. Learning has moved from the periphery of public and private enterprises to the center over the past decade. Individuals know that their careers depend upon their willingness to engage in lifelong learning that can help them advance to meet new challenges. Retailers realize that unless their people are fully competent to execute strategy today and tomorrow, they cannot achieve high performance and sustain their competitiveness.

The transformation of the learning function from a cost center to a value creator can be seen in recent Accenture Learning research, The Rise of the High-Performance Learning Organization. The study, which sampled opinions from chief learning officers and other learning executives at 285 cross-industry organizations, reveals in vivid detail the new demands being placed on learning functions today. The learning functions at most of the organizations participating in the Accenture Learning survey clearly face heightened expectations to deliver business value and prove the business impact of learning investments. When asked to name their most pressing challenges, learning executives made it clear that business impact was their primary concern:

Aligning learning activities with the most pressing and important business or operational needs. Measuring the effectiveness and impact of learning on the performance of the business or agency as a whole. Proactively communicating the value of learning to all stakeholders. The Accenture Learning study contains provocative evidence about the impact learning can have on the business. About 10 percent of the learning organizations surveyed had levels of performance that earned them the title, High-Performance Learning Organizations. The reason? Every enterprise utilized innovative approaches to learning, approaches that tracked the impact learning has on the business.

Analysis of survey data, coupled with additional financial data from other publicly available sources, has demonstrated that companies with highperformance learning organizations returned better revenue and profit growth compared to their competitors and industry peers: Productivity (as measured by sales per employee) was 27 percent greater. Revenue growth was 40 percent higher. Net income growth was 50 percent greater. These high-performance learning organizations show mastery in a number of important capabilities, including: 1. Investing in learning according to its impact on the business: aligning learning initiatives to business goals, measuring its impact in business terms and running the learning function itself in a rigorous way. 2. A healthy percentage of technologydelivered learning, with an emphasis on blended delivery approaches that include classroom as well as electronic learning, and learning solutions that build upon knowledge management and performance support functionality. 3. Movement of learning outside the four walls of the organization to include other members of the overall value chain such as customers and channel partners. 4. Involvement of learning and performance-enablement efforts during major change programs and in support of business initiatives.

Accenture Talent Interlock: Executive leadership and governance that keep learning on track
Armed with evidence of the link between world-class learning strategies and business results, leading retailers are looking for ways to ensure close collaboration between those responsible for the development and delivery of learning content and the companys senior management responsible for establishing business goals and objectives. This collaboration is too important to be left to chance, or to simply keeping management informed. Retailers need a more formal organizational structure and system of governance to ensure that strategy and workforce enablement are locked in. Accenture has developed this reporting and governance process in Talent Interlock, a proprietary process with services, interactions, metrics and application capabilities that link learning outcomes to business objectives. Accenture Talent Interlock operates on a few critical guiding principles: Ensure the involvement of senior executives in the planning process regarding the specific learning programs that can achieve the best business results. Facilitate an annual planning process and quarterly demand forecasts around learning demand, capability and affordability. Establish a single point of contact for all learning and performance requests from the business. Structure more effective communication channels between the business and the corporate learning organization.

Ensure participation of the learning organization in the overall governance process. Accenture Talent Interlock does not simply add another step in the learning supply chain of content sourcing, cataloging, delivery and administration. It transforms it in the same way that new processes transformed the manufacturing supply chain to enable justin-time (JIT) manufacturing. In fact, that is one of the goals of Talent Interlock: a JIT approach to talent management, where a streamlined learning supply chain delivers support, when and where it is needed, to support real-time performance needs of a companys most critical workforces.

Performance Management: Alignment with Strategy

Behaviors Low High

Thus far we have talked about (1) how to get the right people through the human capital supply chain more rapidly to increase the supply of employees optimally equipped to serve the needs of the business; and (2) providing people with the skills and knowledge needed to perform optimally at all times. Performance management addresses the issue of keeping those people aligned with the needs of the business, and keeping them engaged and interested in their work so the investment in them pays off for the entire organization.

Effective performance management begins with understanding that performance has two dimensions: behaviors and results (see chart). Too often, companies take a view that what really matters is just resultsthe productivity of a worker. In fact, that approach can blind executive decision-makers to the specific behaviors that drive those results.

Consider the four options implied in the accompanying figure, a matrix plotting results vs. behaviors. Workers who fall within the high behaviors/ high results quadrant obviously challenge a company principally from the perspective of retention: these are staff that retailers want to retain for as long as possible. In a different way, low behaviors/low results are also fairly straightforward: these people should be offered remediation but, if performance does not improve, should be moved out of their jobs and/or the company.

Low Results

High

It is those two other quadrants that pose the challenges. One group appears to be doing all the right things but is not being productive. The other group is delivering results month after month, but only through behaviors that one might not want replicated throughout the company. For example, consider the president of one major company who kept hitting his performance targets time after time. Only after close scrutiny did the executive team find that the consistency of this executive was being achieved only at great cost to the rest of the organization: morale was nonexistent and retention was extremely low. By giving attention to which specific (acceptable) behaviors lead to the best results, companies can design roles, find the right individuals to fill those roles, train them to successfully perform in them and manage individual performance against the desired behaviors. If companies do not have the measures in place to assess progress toward the desired behaviors, people probably will not produce those behaviors consistently. Think this is obvious? Not in practice. Companies can often send mixed messages about results vs. behaviors. For example, they tell sales staff to take the time to understand what the customer really needs. But, for the most part, the single-most critical measure of performance for these employees will still be total sales. The solution here is for retailers to be clearerto themselves and to their employeesabout roles and metrics. Set clear performance goals and measure toward them. Do not be afraid to set stretch goals. Retailers that really optimize the performance of individuals have a systematic way of setting expectations that create a challenge. Much of the time these are goals that the individuals themselves do not realize they can meet. Average to lowaverage workers tend to set goals that are either too easy or too

hard, and in either case are misaligned with the goals of the organization. In light of this, they require a different level of management. Given the right set of supportive environments and appropriate mentoring, many of these workers can achieve goals and performance beyond their own expectations. High-performance retailers also know how to handle turnover properly; they know how to address that portion of workers who most often fall into the low behaviors/low results quadrant. Employee turnover can be a good thing, if it is properly planned and managed. Organizations that have consistently high business or financial performance also have some sort of planned or managed turnover program. They have taken conscious steps to routinely upgrade their workforces. There are two parts to this upgrade. One is using turnover as a reason to shuffle people and roles, often to match underperforming employees with roles that might be more appropriate to them. Many managers have had the experience of watching people blossom from average to superior workers simply because they were finally matched to the right jobs or roles. How many times do companies let go of someone with potential, not because of the individuals shortcomings, but from the organizations or leaderships lack of insight about what that person is really good at? The other part of turnover management, though, is systematically planning to move out of the organization the bottom 10 percent or so of its workforce, based on well-defined performance criteria documented in performance reviews. This is not a heartless program. If reasonable efforts have been made to find the right role for a person in the organization, and if performance is still not strong, it is likely that the fit just is not right. Every employee termination comes with emotional pain, but this shortterm pain can be understood as having long-term benefits for all.

Performance management and employee engagement


Effective performance management is a huge contributing factor to increasing the engagement of employees in their work and, therefore, improving retentionespecially of high behaviors/ high results employees. Solving the employee engagement puzzle is partly a matter of putting people into roles for which they are not only competent (or potentially so), but for which they feel some passion. It is possible to overstate the passion point, but more often than not, the problem is ignoring it. An executive at one company said it well: If, in the course of fulfilling an individuals passion, they also fulfill the organizations passion, superior performance overall will result. From one perspective, the employee engagement problem is reaching crisis levels. Another survey by Gallup of more than three million employees found that 71 percent describe themselves as disengaged or actively disengaged from their workthe fourth straight year that workforce engagement has declined. For the retail industry, where customer loyalty and retention is so dependent on effective interaction with competent workers, this is a big danger sign. On the upside, however, a fully engaged workforce can pay big dividends. In fact, research has shown that the more engaged the workforce, the more innovative, productive and profitable the company.

The Accenture Integrated Approach to Managing the Retail Workforce for High Performance
Recruitment Services
Sourcing

Learning Services
Knowledge Management Content Development Content Sourcing

Screening & Selecting

Content Delivery

Learning Administration

Integration & Orientation

Hiring

Talent Interlock
Onboarding Competency Modeling Workforce Analytics

Performance Management Services


Performance Management

Scheduling & Deployment Contractor & Contingency Management

Job Design

Certification/Accreditation

Career Development

Learning & Career Needs Assessment

Resource Demand Management

Succession Planning

Support Services
Program Management Infrastructure Platform Management Service Center

An integrated, technology-enabled solution can deliver breakthrough increases in workforce performance. The Accenture approach wraps recruitment, learning and knowledge management, performance management and support services around a core workforce dynamic called Talent Interlock to achieve high performance.

Recruitment Services Technology-enhanced services to enable more efficient sourcing, screening, selection and onboarding of retail staff. Learning Services Transformed delivery of learning to new and experienced staff through implementation of a learning technology platform, eLearning migration, instructor-led training content enhancement and co-sourced delivery. Talent Interlock Implementation of tools and processes to support and integrate recruitment, learning and performance support services.

Performance Management Services Technology-enabled performance management capabilities that include measurement of individual performance and implementation of the performance management cycle. Support Services Process and technology infrastructure.

Building the High-Performance Retail Workforce

Fundamental forces are driving the restructuring of retailing to a greater or lesser extent in virtually every major market. The dominance of discounting, the rise of online shopping, as well as the demographic trends discussed at the beginning of this paper, guarantee that retailing in the 21st century will scarcely resemble the industry pioneered in the 20th. Amidst all these changes, one thing will inevitably remain constant: the power of a positive interaction between your customer and the person behind the counter. Retailing in the future will be a game of survival of the smartest. The retail enterprises that figure out how to collect the organizations accumulated wisdom on what sells and how to sell, and then transfer that wisdom quickly and efficiently to new generations of workers, are the organizations that will thrive. In the increasingly demanding retail environ-

ment of the future, many may survive, but it is virtually certain that only high-performance companies will succeed. Accentures concept of Talent Interlock is a proven process for identifying, training and managing critical retail workforces so that retailers can consistently deliver on a differentiated value proposition, aggressively expand market footprint into favorable segments, drive organic growth from their existing networks, increase average product sales per person per day and minimize customer churn. Accentures High-Performance Business initiative has shown that high performers are more effective than their competitors at exploiting the collective intelligence and motivation of their workforces. There is a strong correlation between financial performance and the priority organizations place on human capital development. Leading companies are far more likely than others to regularly measure the link

between investments in people and business results. Moreover, their CEOs take a much more visible and direct role in the initiatives to develop their people. In this way, high performers create a talent multiplierbetter results per dollar of investment in their workforces. This multiplier serves as a real and hard-to-imitate competitive advantage. If retailers are to meet their most important competitive challenges todayfight off competition coming from few players and successfully execute a growth strategythey must increase the energy and focus with which they address the workforce capabilities necessary to succeed. Retailing success today requires a highly engaged, skilled and productive workforce: the right people, with the right skills, doing the right things to contribute to the long-term success of the business. 9

About Accenture
Accenture is a global management consulting, technology services and outsourcing company. Committed to delivering innovation, Accenture collaborates with its clients to help them become high-performance businesses and governments. With deep industry and business process expertise, broad global resources and a proven track record, Accenture can mobilize the right people, skills and technologies to help clients improve their performance. With approximately 140,000 people in 48 countries, the company generated net revenues of US$16.65 billion for the fiscal year ended August 31, 2006. Its home page is www.accenture.com. For additional information, please contact: Teri Babcock teresa.j.babcock@accenture.com David L. Reed david.l.reed@accenture.com

Copyright 2006 Accenture All rights reserved. Accenture, its logo, and High Performance Delivered are trademarks of Accenture.