How HR can revive the high-street’s fortunes

The past year has produced a slew of headlines about retail chains going into administration, with many high-street brands such as La Senza, Blacks Leisure and Peacocks falling victim to the contracting economy. Data recently released by insolvency firm FRP Advisory estimates that retail companies going into administration have cost almost 20,000 employees their jobs over the past 12 months.

It is not all bad news, however. FRP Advisory found that of the 39,000 staff who were put at risk by retailers going into administration, 27,200 had managed to keep their jobs once the companies had gone through the administration process.

Even so, it has been an uncomfortable ride for HR professionals and managers in the retail sector since the downturn hit. Many retailers have been forced to close down or cut staffing levels, while consumer spending has slowed down. Even shoplifting has increased.

Low employee engagement

It may not come as a surprise then, that the latest Work Trends survey by the Kenexa High Performance Institute (KHPI) has revealed that employees in the retail industry demonstrate the lowest employee engagement index scores of all sectors. Engagement is particularly low for staff in customer-facing positions, says the survey, which tracks engagement levels of workers across the globe. Employees with below-average engagement scores are more likely to have plans to leave their employer, leaving them with recruitment costs to cover, and an increased workload for existing staff.

The KHPI argues that addressing employee engagement in the industry could have positive implications in terms of improving performance, enhancing customer satisfaction and retaining staff. The report points to a relationship between higher employee engagement scores and higher customer satisfaction, which could ultimately lead to an improvement in sales; this is something in which HR can play a crucial role.

Challenging climate

Jeff Jolton, director of consulting at Kenexa, believes that retail HR professionals – particularly in this challenging climate – need to make staff feel that they are part of the recovery and that they play an important role in turning their employer’s fortunes around. “Retailers should be looking to make their enrichment or development opportunities more visible and demonstrate to staff that they are not just a cog in the machine,” he says. “Give them a vision or strategy that they can relate to.”

At the frozen-food retailer Iceland, addressing staff engagement levels helped it to boost its profits by almost 15% in the financial year to June 2011. Ensuring that staff know they will be rewarded financially for their effort has been crucial to this approach. Recently, the company announced it would reward staff with pay rises of between 6.3% and 45.5%. Chief executive Malcolm Walker, who founded the company in 1970, makes a clear link between staff engagement and performance. “We have made great strides in improving staff morale and working conditions, and significantly increasing pay rates,” he says. In the past six years, the company has raised the hourly pay rate for store staff by 33.7% and for home-delivery drivers by 49.8%.

Addressing leadership

Financial compensation alone, however, will not raise engagement levels. Addressing leadership can have a significant impact on improving both engagement and, therefore, customer service. Kieran Colville, head of leadership for Europe, the Middle East and Africa at Kenexa, suggests that organisations work to a simple leadership model that is consistent across the business, outlining the expected levels of behaviour and targets. “It doesn’t need to be complicated,” he says. “Sometimes, you can have a company that runs a number of brands, across a huge number of stores, and their performance won’t be consistent. They need to isolate what works and replicate it across all of their stores.” A potentially effective strategy is to target your top 10% of best performing leaders or stores, and observe why they achieve results, he adds.

Laura Whyte, personnel director at department store chain John Lewis, agrees that great leadership can make all the difference. “A great leader will understand the power of motivating partners and engaging them in the success of the business,” she says. The company will be recruiting more than 600 staff this year when it opens three new stores. The key to finding staff who will be engaged, she says, is to recruit on attitude rather than skill, which can be taught later: “We look for someone who is curious about people and who is prepared to engage with them to find the right solution.”

Changing shopping habits

Employers in the retail sector are also faced with the wider issues of changing shopping habits, with a move towards online and out-of-town shopping. The recent government-commissioned review by retail consultant Mary Portas predicts that by 2014, out-of-town sales will account for 33% of our total spend. And, while she acknowledges that an increasing proportion of consumer spend will be online, she believes that bricks and mortar high-street stores will have a role to play, for example in collecting deliveries for those who cannot be at home.

Whyte says that the best way to manage these trends is not to isolate “bricks or clicks” and instead to look for staff who can offer a consistent experience however her customers choose to access John Lewis products or services.

Multi-channel approach

That said, moving towards a more multi-channel approach means that retailers also face a greater challenge in terms of managing performance, says Colville. “You have a technical person, someone in a call centre, a delivery driver who turns up at the customer’s front door – it’s much more remote and virtual. It’s more difficult to maintain consistency,” he says.

Another recommendation of the Portas report is that larger retailers should support and mentor local businesses and have greater ties with the communities in which they operate. John Lewis does this by working with Jobcentre Plus to ensure that local people are the first port of call when recruiting partners for its new stores. When it opened its new department store in Stratford, east London, last year, it secured roles for 200 staff who had come to John Lewis through a joint work scheme that it runs with Jobcentre Plus.

Thankfully, the outlook is also looking more positive for retail companies. According to Steven Kirkpatrick, managing director of recruitment company Adecco, UK retail businesses performed better than expected in January and there has been an increase in the number of permanent job vacancies advertised. Further, recent data from the Office for National Statistics shows that UK retail sales grew by 2% in volume last month compared with the same time last year, and by 4.4% in value. “This is a positive step, although only time will tell whether it represents a genuine rise in confidence for 2012 or whether companies are simply testing the water to see what talent is out there as they enter a new year,” says Kirkpatrick.