The news is filled almost daily with reports of unhappy workers in the fast food and retail industries. Having been in the retail industry for more than 25 years that is not surprising. For years workers have watched hours be cut, positions be cut and received pay increases at below the rate in cost of living growth. They also read and hear about profits growing in companies at record rates and they wonder about their share. The issue is not really very complex, some would say it is a matter of greed, while others would say poor leadership and many more would say it is simply good business. To some degree these arguments are correct. To me the current model being used by most service companies lacks one important ingredient; common sense.
Every retail manager is taught almost from day one that the number one controllable expense is labor. The expectation is to maximize sales with the least number of dollars spent on payroll. While mathematically this makes sense and has certainly been a factor in the growth of profits and shareholder equity, it is the weak link of the service industry. Why? Because as we see every day customer service is on a down slide, team member engagement is at an all-time low and people are shopping more on their computers, instead of in the stores.
There are two key factors as to why this model doesn’t make sense. The first is customer service. Sam Walton reminded all of us many years ago that customers pay our paycheck. Without customers we have no business. Without having enough people in the stores or behind the counter at a restaurant we cannot take care of those customers. Without the efforts of the day-to-day worker and Manager at the store level there are no profits, no increase in stock prices and no million dollar stock payoffs for high level executives. The fact is that the people most face to face every day with our customers are the lowest paid and least engaged. And they are being asked to do more with less every day. That is not a recipe for customer service or long-term sustainable growth. It may fit the short-term need for those in the stock market, but in the long-term it will fail.
The second is the high cost of turnover. In order to have great customer service there not only have to be enough people, there also need to be qualified people. There are millions of dollars spent every year hiring people. The industry invests time and money to find the right person to fill every position. Human Resources professionals talk about finding the right person, for the right seat on the right bus going in the right direction, when discussing the best fit possible for each opening. They spend many hours not only looking for the right people but also training Managers on how to find and hire the right people. Investing in finding people who are qualified and have the customer service skills to grow the business makes perfect business sense. What doesn’t make sense is that the current business model immediately takes that investment and turns it into an expense or a cost. People are not an expense. They are an investment in the future growth of the company and we need help grow that investment. The service industry needs to realize that people are the key to growth. They need to understand that not only are external customers important in growing sales and profits, but so are those that take care of them. Instead of spending millions to hire, rehire and rehire again because leadership thinks everyone is replaceable and somehow interchangeable, spend money to develop quality people and pay them enough to create long-term engaged teams.
Before I am called a Socialist because I want to give away profits to the “little people”, let me tell you what my experience has shown. Having enough qualified and engaged people in your store or restaurant to give great customer service will grow your sales and your profits not cut them. Customers want to be served. The trend of growing internet sales has many pieces. Convenience, discounting by companies trying to show internet growth and that many people believe they get as much service on the computer as they do in the store. Why would I want to wait in a line at Wal-Mart, while 10 register lanes are not used, when I can order it on-line and pick it up? By not providing enough qualified and engaged store level team members the industry is driving customers to the internet. By not providing sufficient people to handle customers at a fast food restaurant we drive people to another fast food restaurant. The one with the best service keeps the customer.
Let me say this; if your company is not providing a wage that is sufficient for your team members to live on and take care of their family’s shame on you. Not that many years ago these jobs were taken by part-time high school and college students that were making money to help them through school or purchase that one thing they really wanted. Now because of the down turn in our economy and the move of industrial jobs overseas, these jobs are in too many cases the main source of income for a family. Or for a single parent that is trying to make it on their own. This past four months I have been truly humbled by seeing how many hard-working people are struggling daily just to pay the rent. These are not people living on a Government hand out. They are people who go to work every day and try to do the best they can to serve other people while knowing they may not be able to afford the things they need to survive. These are people we need to make an investment in by developing their talents and paying them a good wage. That investment in people will give you all the profits you need.