280 Retailing Management

ypically

QUESTIONS detail
in C
obËectives of hunan resource management?
What are the resource managers?
What major
What issues
activities retailhuman
do face enployees undertake, and how are they typically organized? OBJECT
How does a retailer coordinate cmployees' activities and motivate cmployeestto work tsyw
Aprimary
i theWhat
retailer's
humangoals?
resourcee management programs are used for building acommitted workfg cOmpetiti
managers concerned? percentage
With what legal issues are human resource can produ
determmine
etailers achieve their financial objectives by effectively managing their five critical a SÉStance,a
locations, merchandise inventory, stores, employees, and customers. This chapter foc a retarler
on theorganization and management of employees-the retailer's human resources competitor
HowardSchultz, chairman and chief global strategist of Starbucks, emphasizes, The relations CUstomer
that we have with our people and the culture of our company is our mostsustainable competit culturein
advantage."! advantage
Sherry Hollock, vice president of talent and organization development at Macy's, emphasza
the importance of human resources in retailing:
9.1 R
One of the biggest challenges facing Macy's, and most other retail chains, is hiring and
retaining managers to lead our company in the coming years. The changing demographics
are working against our hiring and retention objectives. Over the next ten years, a lot of While the sa
our senior managers, members of the Baby Boomergeneration, will be retiring. So W* George Zimre
are going to be competing with other retailers and firms in other industries for a Smalkt largest speci
pool of available managers in the generations behind the Boomers, In
addition, retailing
aillion throug
becoming a much more sophisticated business. Our managers need to be comfortabie wi
The core
new technologies, information and supply chain
business as well as managing a diverse workforce management svstems, and2 internau
and buying merchandise."
salespeaple,
that sales as:
George Z
thei tscompary
Hunan resource management is particularly empio
important
major roie in performing its critical business functions. In in firms,employes
retailing because
manufacturing capital equip
(rmachinery,
Bt retailing computer
and other systems,
nchade the fo
roboties) often
servVice businesses is labor-intensive.
remain used to performRetailers
the jobs still rely on popk
employees
perfornthe basic retailing activities, such as buying, displaying merchandise, and providingsena
FuRment a
ngioyeesbe afrfir
to customers, Dont
MMen's Nearhe
Two chapters in this text are devoted to human resource management because it issh
important issue for the
perfomance
Íssues involving organizatton structure: oftheretail firms,
general This chapter
approaches used for motivating8 broad sti
On theandcoordinatlt
focuses Committed workt
Suaatclsaidneescinegs theanwwoc
employee activities; and the management practices for building an effective,
and reducing turnover. Having tun at
The activities undertakeI1 to mplement the retailer's human resource strategy, incude
recruiting, selecting,
training, supervising,
evaluating, and compensating Sales
associates. Chieeylrnebsrate
Tam excelen
 sgpicallyundertaken by store
Human Resource Management 281
i nCChapter 16, in the Store management. Such operational issues will be
derail
Management section of this textbook. discussed in more
OBJECTIVES OF
HUMAN RESOURCE
A
prinary objective
competitive advantage.
of human resource (HR)
This advantage is is to
MANAGEMENT
management
a build basis for
a sustainable
përentage of a attainable since
retailer's total expenses. Therefore, the labor costs account for a significant
produce a cost advantage. Also, the effective management of employees
experience
determinedIby the activities of employees who
that most customers have with a retailer is
0stance,and stock displays and shelves.
select merchandise, provide information and as-
Thus, employees can play a major role in differentiating
artailer's offering from its competitor's. Finally, these potential
aompetitorsto duplicate. For example, Nordstrom employees are advantages are difficult for
known to
mstomer service. However, most retailers are not able to develop the sameprovide outstanding
ailbure in their firms. Retailing View 9.l describes how Men's Wearhouse built customer-oriented
a competitive
styantage through effective human resource management.

9.1 RETAILING VIEW Men's Wearhouse: Using Human Resources

to Builda CompetitiveAdvantage
Hhie the sale of men's tailored clothing has declined during the past 30 years, Men's Wearhouse, founded by
of the
SOge Zimmer when he was only 24 years of age, has continued to gain market share, becoming one
Wearhouse sales have grown to over $1.9
5 specialty retailers of men's apparel in North America. Men's
the United States and Canada.
blioThen thcoremore than 805 retail store locations in
roughof the company's strategy is to offer superior customer service delivered by knowledgeable, caring
wardrobe consultant was chosen intentionally to emphasize
salespeople, wardrobe consultants. The term
called are professionals, like physicians or attorneys.
1 tnat sales associates
philosophy, in which the customer, the wardrobe consultant, and
the
George Zimmerbelieves in a win-win-win potential
believes that its job is to develop the untapped human
mits company all do well. Because the company
considerable attention to training. Some of Men's
Wearhouse's core philosophies

nlvdeerthenplofollowing:
yees,
nent it devotes
Men's Wearhouse help its
did wants to have it. So how does
Job satisfaction-everyone
Work.
l eto
Vice

engloye s afrald of mistakes.

sfind it? it all starts with trust and respect.
You can tell alot about a
opportunities
company
that
by observing the way it handies
mistakes provide. It likes to say
mistakes.
that it celebrates its
h a1
ategic
natig
SWearhworkouse and family life.
focuses on the learning
and its failures.
Men's Wearhouse
encourages employees to balance the wortds
inside and

forne
Workplace. with fun among friends is good tor business.
Work with friends. AWorkplace filled individual excelience and
Wearhouse recognizes that
uding

CelEKeehratel ence
individual and team success.
are interrelated--they
Men's
support each other. That's why it celebrates both
individua! and team

iseyenents:
 FrOmote from within. skills and experience at a job are oniy part oT the picture When picking its
about others, take the time to listen and
Men's Wearhouse people who care show
Working toward team andforindividual
looks goals. That's why it promotes people it already knows.

Times"
enthusiasm
y

Offers Advice for Good and Bad Economic

(accessed wNovember
ABCn e spapersChance"
.com,
sOurce: Eric Hagen, "Men's Warehouse CEO
Advantage," wwD, April 2, 2007, p. 14; "Give People a
Iz, 2009,; Sharon Edelson, "The Training
2.0, May 2007, p. 67; Men's Wearhouse 2008 Annual Report,
wwW.menswearhouse.com (a Second
16, 208

Another strategic objective of human resource management is to align the

behaviors of employees with the short- and long-term goals of
the retail firm. Retailers use several standard metrics to measure
capabi
REFACT lities
how they are doing. One human resource metric is employee Retail employee turnover iy
productivity--the retailer's sales or profit divided by the number almost 60 percent for full.
time associates and almost
of employees. Employee productivity can be improved by 115 percent for part-time
increasing the sales generated by employees, reducing the number employees.3
of employees,or both.
Whereas employee productivity is directly related to the retailer's short-term profits, ot
measures of employee attitudes, such as job satisfaction and commitment, have
on the long-term performance of the retailer. important ees
Committed
the retailer in achieving its goals, such as improving the employees are more motivated to ass
customer loyalty. They also are less likely to leave the satisfactionIn of customers and builin
to measure these employee attitudes, company. addition to using surves
retailers also
measure of employee commitment. Employee consider employee turnover as a behaviOr
turnover equals
Number of employees leaving their job during the
year 1SS
Number of positions
If a store owner had five sales
ass0ciate positions but three emnlovees left and
Hun
during the year, the turnover would be 3+5= 60 were re great dithe
than 100 percent if a substantial number percent. Note that turnove can be the
In our example, if the
replacements
of people are replaced more than Once duringthe ye
for the three
store
the turnover would be 6+5 = 120 employees that left also left during
theveat part
Afailure to consider both
percent.
human resources and a
long- and
short-term objectives mismanagement HR
downward performance
retailers sales and profits
decline due to
can result inthe
spiral, as shown in Exhibit 9--1. Sometimes, wh borde
labor costs. They reduce the
number sales
of increased competition, retailers respond bydecreasiand
part-timers,
BalReta
spend less on training, Although
they have an adverse effect on these actions may
associates in stores, hireproductivity
more and prot
increase
short-term
long-term performance because
service decline.4
employee
custotk
Morale and tphotatent
ogeth
 rce Management
283
Exhibit 9-1
DownwardPerformance Spiral
FINANCIAL PERFORMANCE PROBLEMS
Low profits
High costs

EMPLOYEE RESPONSE RETAILERS RESPONSE

"Decreased motivation and effort "Layoffs
Poor customer service Freeze on hiring and promotion
Lower job satisfaction Reduced training
"Greater turnover Salary freeze
Greater use of part-time employees
andmore autsourcing

SSUESIN RETAIL HUMAN RESOURCE MANAGEMENT

Tesource management in retaling is very challenging for several reasons. First, it is
ifhicult to achieve a delicate balance between the ability to satisfy the needs of employees,
the ability of HR professionals at the corporate offices to set policies, and the capabilities of
Siore managers toimplement those policies. Second, retailers have increased their proportion of
become
parMOrt-etimdiverse,
e employees in an effort to reduce expenses. Third, as the U.S. population has
so has retailers labor pool, making managing diversity an important objective for
HR beyondtheir home country's
in retailing. Finally, retailers that have expanded
bordeprrs ofemodify
ssionals and adjust their HR perspectives, policies,
and procedures.

Balancing the Human Resource Triad Wearhouse, and The Container Store believe
Retailers such
hat hunean resources Depot, Wegmans, Men's
as Homeare too important to b¢ left to the hum¡n resourçe department. The tul1
HR triad work
potenial of professionals, is realized when three elements of the
a retailer's human resources

\ogether- HR store managers, and employees

(see Exhibit 9-2).
 Store Mangers
Chapter 16
HP
R rofess

Cha

Store Employees

professionals, who typically work out of the corporate office, have sneist
Human resource are responsible for establishing HR
knowledge of HR practices and labor laws. They
training used by store manse
that enforce the retailer's strategy and provide the tools and
responsible for bringings
and employees to implement those policies. Store managers arewho work for them. The ig
policies to life through their daily management of the employees
confronting HR professionals are discussed in this chapter. Chapter 16, in the Store Manageed
section of this book, reviews the responsibilities of store managers. Finally, the employees
share in the management of human resources. They can play an active role by providing feit
on the policies, managing their own carcers, defining their job functions, and evaluating
performance of their managers and coworkers.

Expense Control
Retailers must control their expenses if they are to be profitable. Thus, they are cauL
about paying high wages to hourly employees who perform low-skill jobs. To controlcs
retailers often hire people with little Or no exXperience to work as sales associates, bankteila
and waiters. High turnoveI, absenteeism, and poor
inexperienced, low-wage employees. performance often result from t
The lack of experience and motivation among many retail employees 1S particusa
troublesome because these
employees are negative
appearance, manners, and attitudes can have aoften in direct
effect on saBes with
customers.
contact
and CUStomnerloi
Research has shown that in some
types ofinretail in hiring"
staff will result in a signihcant increase
on their own, or if they can't get an
operations,
sales. If customers can'tlnvestment
a modest hnd d particularp
explanation of how it works or how 1|is used,the pr
probably won't sell. One method of
issue discussed in the next section, controlling expenses is to part-time employe
utilize
Part-Time Employees
Retailers' needs for store employees vary depending on the time of day. day ofweek,tit
year, and promotion schedule. Retailers use computerized scheduling systes thataredes
 and
trim Human Resource Management
n
factor costs by 285
the
ruations, and effects matching
of store staft size to customer trafic, hour by
even the weather promotions,
itferent hours and days. To detemine the right
to sporting REFACT
hour. These
Suggest that
minimize
retailers complement their costs, the The average supermarket
er-week) store
Pat-tme employyees are less employees with part-time full-time of emplovment
worker has lost three hours
eoyees. expensive than
Further, they are usually offered workers. 2003,
comparable full- in 2007, from 32.3
aweek since
hours to 29.5
benefits and little no health or upward reversing a previous
job security. The trend. Retail workers
retailing has been slightly growth of part- overall have lost 0.7 hour a
ie sett SDce 2000 6 outpacing that of full- week over the same period

UHilizing Diverse Employee Groups

The changing demographucpatten will result inachronic shortage of qualified sales
e bestdesS uulizing less expensive part-time labor,
manage, and retain mature, minority, retailers are increasing their eftortsassociates.
to recruit,
and
Alibough young employees have traditionallyhandicapped
made up
workers
the majority of the retail labor force.
les have realized that hat these
employees
zn Urk environments isquite different from want out of their jobs REFACT
tani therefore, that different what their older supervisors
approaches need to be used to manage ApproximateBy
he They want more ffexibility, meaningful jobs, professional freedom, one-third of retail
d a better employees are
work-life balance than older employees do. Younger 24 years old or
plasees readily switch jobs if their expectations aren't met, making younger.
ioyee tunover high.
Ís beip ease the overal! labor shortage and the perceived deficiencies of younger workers.
les are increasingly turning to older employees because they are more reliable, have lower
T rates, and often have better work performance." Training
SS e also lower for older people since they generally have had REFACT
UR WOrk experience. These advantages of hiring older employees Women account for
nearly two-thirds of
SOut erbalance any increased costs in missed days for medical
robiems. Home Depot even offers winter work in Florida and summer the retail industry's
part-time workforce. 20
By building relationships with groups such as the
Association of Retired Persons (AARP), Home Depot helps
Eple like military retirees find jobs.

InteSraiagement
rnational Human Resource lssues
of employees working for international retailers is especially
work values, economic systems, and labor laws mean th¡t HR
challenging.
practices that are
another. For example, U.S. retailers rely heavily on
country might not be effective in
apractice consistent
erformance appraisals and rewards tied to individual performance culture, such as China
US. culture. However, in countries with a collectivist
dividualistic
enployces downplay individual desires and focus on the needs of the group. Thus, group-
countries.
and incentives are more effective in those
vahsations
286 Retailing Management
The legal/political system in countries often dictates the human resource
practices that retailers can use. For example, in Spain, acompany must pay 45 days
every year worked if it fires someone, 1 In the Netherlands, employers must get approval far
mansalageamryem task

the government to lay off employees, Governments in

14
Japan, Korea,iroandm
Colombia, Venezuela,
China can also block layoffs.
The Stathng of management positionsin foreign countries raises a wide set of:fissues. Shoula
management be local, or should expatriates be used? Howshouldthe local managers or
be selected, trained, and compensated? For example, at the France-based hypermarket expatrialey
Carrefour, it is likely for a Brazilian to be managing astore in China. In fact, Carrefour prides
itself on grooming managers for global experiences.
The following sections of this chapter examine three important strategic issues facing rel
HR professionals:
1. The design of the organization structure for assigning responsibility and authority for ajs
to people and business units.
2. The approaches used to coordinate the activities of the firm's departments and emploves
and motivate employees to work toward achieving company goals.
3. The programs used to build employee commitment and retain valuable human
resources.

DESIGNING THE ORGANIZATION STRUCTURE FOR A RETAIL FIRM

The organization structure identifies the
activities to be performed by specific employees and
determines the lines of authority and responsibility in the firm. The first step in
organization structure is to determine the tasks that must be developing t
that are typically performed in a retail fim. performed. Exhibit 9-3 shows tasks
These tasks are divided into four major
administrative management (operations), merchandise categories in retail firms: strategic manageme
organization of this textbook is based on these tasks andmanagement, and store management
the managers who
Section II of this text focuses on
and finance decisions strategic and administrative tasks. perform thenl.
(discussed in Chapters 5 and 6) are Strategic marke
management: the CEO, chief
represents shareholders in operating officer, vice presidents, and the board
undertaken primarily by S
of directors
7-11) are performed by publicly held firms. Administrative tasks in Chapter
corporate employees who have
management, finance, accounting, real estate, (discussed
specialized skills in human Systems resour

marketing, operations, visual distribution, management information

In retail firms, category merchandising,
managers,
and general counsel (legal).
management (Section I), and store buyers,
managersand tnerchandise
and the regional managers
planners are above them merchandist
are involved
in the management of the stores (Section IV). These managers are responsible involved in
for implementingtthe
strategic plans and making the day-to-day decisions that directly affect the retailer's performanct
To illustrate the connection
between the tasks performed in Exhibit 9-3 and Organization
structure presented in the following sections, the tasks are color-coded. Pattern theC is usedf
 Organization of a Single-Store Retailer
Initially, the owner-manager of asingle store may be the entire organization. When he
goes to lunch or heads home, the store closcs, As sales grow, the
owner-manager hires employees, Coordinating and controlling REFACT
employec activities is casier in asmall store than in a large chain More than 95 percent of
all U.S. retailers
of stores; the owner-manager simply assigns tasks to each operate a single store,
employee and watches to sec that these tasks are performed but single-store retailers
propertly. Because the nunmber of employees is limited, single-store account for less than Sn
percent of all retail
retailers have little specialization. Each employee must perform a sales
wide range of activities, and the owner-manager is responsible tor 15 store
all management tasks.
Às sales continue to increase, specialization in management may occur when the We
manager hires additional management employees. Exhibit 9-4 illustrates the common divisie
of management responsibilities into merchandise and store
management. The owner-manager continues to perform strategic
REFACT
management tasks. The store manager may be responsible for Mellerio dits Meler,
administrative tasks associated with receiving and shipping the French jeweler
merchandise and managing the employees. The merchandise founded in 1613, is one
manager or buyer may handle the advertising and promotion tasks, of the oldest family
as well as merchandise selection and inventory owned retail chains stil
management tasks.
Often the owner-manager contracts with an accounting firm to operating.6
perform financial control tasks for a fee.

Exhibit 9-4
Organization Structure for a Small Retailer
Owner-manager
Strategic management

Accountaat
Werchandise management
Merchanei se manager Store manager
Financiat control
Advertising and prarnotios Store management
Human resource management
Distrlbution
Salespeopie
Stratagic management
Merchandise management Store management
Administrative management
 Organization of a Human Resource Management 289
contrastto the
National Retail Chain
In
ust
ManagerS must supervise units
management of a
single store, the
sections, We discuss the
that are
are
geographically management
distant from
of a retail chain is
one complex.
Exhibit 9-5 shows the organization structure of a typical retail chain. another. In the following
responsiblefor the entire organization chart of a typical department store.
the CEO is the organization
president of
is the chief Overseeing and
executive officer (CEO). Reporting
to
private-label operations. Also global operations, president directlyof
of direct channels, and president
reporting to the CEO is the senior vice president of
senior vice president of stores, and senior vice
and financial officers. president of operations, plus the chiefmerchandising,
marketing

Exhibit 9-5
Organization of a Typical Department Store
CEO

Private-Label President President Direct Channels Global Operations President

SVP of SVPof CMO

Stores Operations
Merchandising

Direstor o
Geaera VP of
Managenment Special
Information
Wanagetchandi(GMM)
Mer se Merçhandise Systems (MIS) Events
Planning

VP of eneral Cuse
$ Regional agal
Managers `upplyChala
Divisional
Planning
Manayer
VP af Huna
ResourceS
District
Regional Managers
Planner
Planners Qrector at Vsua!
Merchandtsing
Store
Managers

Strategic managenent Store management

Herchandise management Administratlve management

 the senior vice president
Merchandising Looking at the merchandising division,
to develop and coordinate the (SV
merchandising works with buyers and
and
planners
ensure manageme
that it is consistent with the firm':
Chaptersstrate120
gy.
the retailer's merchandise offering
responsibilities of the merchandising division are detailedin 12 t
organization and responsible for determining the
The buyers in the merchandise division are negotiating with vendors. Most the merchan
ret
assortment, pricing, and managing relationships and retail
ofplanning positions parallelto the buying positions supervised by a senior vice presida
have aset merchandise managers in the buying organization,
of planning who is at the sanme level as the
merchandising planners are responsible for allocating merchandise and tailoring the
of several categories for specific stores in a geographic area. as ortina
As shoWn in Exhibit 9-5, there are several levels of management in the merchandu
division--general merchandise managers (GMMs), divisional merchandise managers (DN
and buyers. Most large retailers have several GMMswho are responsible for several mercha
classifications. Similarly, several DMMs report to each GMM and a number of buvers ren
each DMM.

Stores The senior vice president (SVP) of stores supervises all activities related to stors
including working with the regional managers, who supervise district managers, who superi
the individual store managers. Store managers in large stores have several assistant son
managers who report tothem (not depicted in Exhibit 9-5). One assistant manager is responsit'e
for administration and manages the receiving, restocking, and presentation of the merchandis
in the store. Another is responsible for human
resources, including
evaluatingempioyees. A third is responsible for operations such as storeselecting, training,
security. maintenance and stus
Each region has regional planners who work as
the corporate planners to ensure that the liaisons between stores in their regton
stores have the right merchandise, at the right timt
the right quantities. The stores division also
the chief financial officer) to plan new works closely with the real estate division (e
layout, and store design. stores and with those in charge of visual
merchanar
Operations The chief operations officer (CO0)
information systems (MISs),supply chain, human oversees managers in charge of manageme
is also in charge of shrinkage and resources, and visual TheC00
physical assets of the firm, such as loss prevention and the operationmerchandis1ng.
and maintenance
(these functions are not reflected in stores, offices, distribution and centers, and
trucks
Exhibit 9-5), fulfillment
Marketing T
The chief
marketing officer (CMO) works with staff to
programs. Managers in Promori a

related marketing initiativescharge of public relations, annual develop advertising andandcaus

also report to the CMO. events, credit marketng
Finance The chief financial officer (CFO) works with the CEO on fnancial issuesSuchs*
equity-debt structure and credit card operations. In addition, the real estate division andgenel hea
counsel (legal) divisions, headed by vice
presidents, report to the CFO.
ers.
sagement such
tnaking
management.
storeand Two vicehavealso served
performedby OUHtry.
and size Tetailers,
TheGlobal Vaegory maintenance
integratingcenters Channels
pricingDirectmerchandise
each decisions
by are often cpntrol, The
by organization .usrmational
RETAIL a the
therefore
Private
Label
reporting
asm
gobal category VP evaluate private-label being Retailers
approaches portant
issues
the is in
that of merchandising
erchandise
of on and performed to
ot centralized organization within
the The made isthe the
fill the private-label
ORGANIZATION home-country he selection and work what free marketing is operations,
the vary
The are tnumber global operation merchandise
orders is the
presidents a CEO.
cond made complexityand by design coherent. private-label
closely private-label separate
to president considerably
the for The by
anagement, by or operations and divisions accept
The designthe of
typically of same individual of
issue decentralized
segional, or stores of president of development. wholly and
management theassortment the with division,
private-label
t first directors or catalog
arises buyers, is
has
operation Internetretailer's buyers
merchandise merchandise
and reject responsible owned on
information issue operation this
president of
tailers
cause district, DESIGN customers. and/or how
ISSUESmerchandising, in rather of its as
m,tinhe translates andretail a each In the they
charge ofand offereddirect and buyers, in subsidiaries
(2) are Web either and
or the
catalog planners
merchandise Exhibit
for clectronic
country. oversees than offering
is organize
store organization duplicated merchandise Hdowever, site, exclusive
distributionand of channels
through and
case,included the
into separate
managers
divide
marketingand determined is
stores, channelscustomer tothe the
conceptualization, 9-5, Resource
Human
Regardlessretailing as channel.
with Management
their
us, whether the.in ensuresourcing offered. they
buyers
are buyers number
a the is managers merchandise.
in
ndise and offered catalog
responsible private-label
the
eedey or used (1) -global into call the would
Exhíbít
systems,
by the operations
finance. of
operations
that retailer's
in presidents
the numbertheby for theircenters, of and In
to size, in and th
involvede some any the
managersdecisions degree
operations. multichannel
each
and coordinate allstore merchandise qualitymerchandising design,
When 9-5
opto and many Internet f or other development
store divisions. channel.three and
assortmentretail shows
of
in to outside channel. th e with
human about theof control vendor, sourcing, the three
the which th e organizations, these
ement merchandise Forcountriesof channelsretailers channels,selection and private-label private-label
wayscorporate activities
resource functions
instance, the fulfillment offered subsidiaries
decision It At are are activities,
actívities
would division
and quality
home for these made
to are the done they 291
a in
 TheStores
Smooth
"Given
November (accessed
December Sources:
expenses.its Macy's 292
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ts Decentralization
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of versus
remendous adequately
knewserve the
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at 9.2 centralized managerS
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Chief; Fewer Macy's Although Formerly,acquisition, geogaphically
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corporation
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overnight. decision retail
centralization significant with is including
Tim T 7, now customers' My responsible Management
Retailing
HoldShoppers
s 2009); its
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e consolidate The than to
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York
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