Proof that you earn more by spending more ... on staff

A recently published book "The Good Jobs Strategy" by MIT Sloan professor Zeynep Ton explains how "the smartest companies invest in employees to lower costs and boost profits". The four that are held up as models - Costco, Trader Joe's and QuikTrip in the US and Mercadona in Spain - are part of a very small group of retailers (we would also include Wegmans) that treat staff as assets to be nurtured rather than costs to be cut. By paying their staff more, ensuring there are more than enough on hand to do the job properly, and investing more in training, they end up delivering consistently superior customer satisfaction and value, which translates into consistently superior financial results. 

Despite such a clearly positive correlation between greater investment in labour and productivity, the majority of food retailers remain stuck in the "staff as a cost" mindset. The author interviewed many store managers at various retailers who said that the pressure to meet short-term performance targets led them to reduce employees even though they knew that the workers who remained would cut corners and make mistakes, and they suspected that this could hurt sales and profits. This is exactly what led to Tesco's decline in the UK in the latter years of Terry Leahy's reign as CEO, which is proving so difficult to reverse today. 

As a (presumably little-read, long forgotten, or just plain ignored) study by the Coca Cola Retailing Research Council has pointed out, cost reduction is so ingrained in supermarket management’s thinking that it seems not so much a strategy for productivity improvement as the only strategy.

However, it is worth remembering that instead of decreasing the amount of input relative to output, it is also possible to raise productivity by increasing input in such a way as to increase output proportionally more. Humans - assets Jeff Bezos has reportedly described as "annoyingly variable" - respond particularly well to this approach, especially in a low-paid industry such as food retail. This is the basis of our unique "SEE" method of taking in-store service to a new level while reducing staff cost ratios. 

The ideal solution would be to combine both methods of raising productivity, using robots to do boring, repetitive tasks (such as re-stocking and checking out) more cost-effectively, and investing more in training staff so they are able and willing to offer informed advice on food preparation, storage, and nutrition.  This is the basis of Novastore, a semi-automated store concept combining the best of the online and in-store experience. 

Enter your email address:

Delivered by FeedBurner