This Retailer Spent $30,000 on Its Employees--and Got $3 Million of Sales in Return
Gap stores conducted research that might turn industry labor practices upside down--while squashing 4 productivity killers along the way.
By Scott Mautz
April 11, 2018
Everyone's looking for the keys to improved productivity and a way to dramatically improve performance. There are few industries more in need of such secrets than retail, which typically operates on razor-thin margins off of an epic struggle to achieve 1 percent annual sales increases.
But an astounding study conducted by researchers working with Gap stores just uncovered a major productivity boon.
The 28-store study pitted "control" stores against stores that intentionally provided employees with consistent work schedules. This included:
- Eliminating store managers' ability to cancel a shift on an employee up to two hours before the shift started
- Requiring employee schedules to be posted two weeks in advance (and keeping consistent schedules in general)
- Guaranteeing a core group of employees 20 hours a week
- Setting consistent start and end times for shifts
- Increasing staffing during surge times
In case you're wondering, all of this isn't standard practice for retail. "The conventional wisdom is that lean, unstable scheduling is inevitable in today's fast-paced, low-profit brick-and-mortar environment," the researchers reported in Harvard Business Review.
Turns out conventional wisdom ain't so wise.
The stores that embraced the concept of consistency saw an astounding 7 percent increase in store revenue. A $30,000 investment in labor hours yielded almost $3 million in incremental sales.
The stores also saw decreases in theft, managers spending much less time on scheduling (in one case reducing the time from three days to four hours), and improved stock organization. Better organization meant fewer "false out-of-stocks" (in which employees mistakenly believe they don't have a requested item in the midst of a disorganized stock room).
Find all these benefits hard to believe? The steady schedule had a huge positive impact merely by enabling employees to more consistently be on time--knowing what bus to catch, for example.
The study highlighted four productivity drains common in many businesses (ones that you can avoid):
1. Lack of consistency
It should raise eyebrows that something as simple as consistency can have such profound effects. But social science isn't surprised.
In fact, research by social psychologist David De Cremer indicates that inconsistency in work patterns (and leaders) confuses people, erodes trust, causes fear, and can lead to "learned inertia," in which employees, paralyzed by uncertainty, disengage from their jobs and avoid interactions with inconsistent managers.
People need patterns. Patterns produce certainty. Certainty allows employees to focus on productivity-boosting behaviors--such as, in this case, providing better service.
So pay attention to not only what you're asking your employees to do but also how you're asking them to do it.
2. A tendency to ignore hidden costs
In retail, it's tempting to focus on the short-term profitability gains of cutting staff--and ignore the long-term costs of decreasing revenue and diminishing customer experience and brand perception. When we don't ask ourselves about the hidden costs of a profit-enhancing dictate, we overlook the true net total impact on productivity and other important metrics.
So, entrepreneurs and other leaders seeking short-term profit, carefully consider any hidden costs of cost-reduction efforts.
3. Misaligned goals
Gap unveiled what many companies struggle with--the boss dictates one thing, but those closest to the business want to do another. In Gap's case, this led to havoc-wreaking incidents. A shipping mistake sent 5,000 units of product to a store versus 2,000, throwing the reduced staff into a frenzy of unexpected, non-customer-facing work.
I often saw initiatives change on a dime in corporate life. Poorly communicated HQ-driven marketing initiatives created major headaches for the sales force, causing them to manage executional details rather than spend time on selling to customers.
So, leaders, ensure the goals of your "HQ" (even if HQ is just you) are closely aligned with those on the frontlines.
4. Lack of autonomy
The study gave store managers discretion to implement the proposed changes as they saw fit. Such discretion led to astonishingly better results. When HQ micromanaged, it caused trouble.
For example, the study cited frequent visits from HQ leadership as disruptive, keeping store employees from doing their core work. I personally experienced this quite often in corporate, where an upcoming leadership visit would throw a team into weeks of over-the-top, unnecessary prep work to ensure a "good meeting."
I came to learn that people fear a bad meeting more than a bad result, and leadership visits feed this unhelpful chain of events. I even heard that one plant manager had his team spray paint the grass outside the plant green to make it look spiffy for an HQ visit.
If you're part of HQ, embrace the power of autonomy. Have awareness of what happens when you don't grant it.
Net, let's revel in what retail has taught us and ring up productivity gains by squashing inconsistency and other productivity killers.