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Good in retail a toolkit

How to move to a Living and maximise the benefits Acknowledgments Introduction

his toolkit was written and The Foundation t is often assumed that higher In an era where customer Tdeveloped by Tess Lanning would like to thank Emma Iwages in labour-intensive service service is increasingly important, and Luke Murphy for the Living Morton, David Shears, Robin sectors are ‘bad for business’. many retailers are looking at Wage Foundation, with support Winstanley, Rose Stott, Rona But the decision by leading retail how to best invest in and engage from EE, IKEA, BrewDog, Cook, Anna Parfitt, Jacqueline and hospitality employers to go their employees. Hobbs, Paperchase and KPMG. Rouse, Rachel Bowman, Simon beyond statutory requirements to Luscombe, Paul Jamieson, Peter pay their staff the Living Wage has This Good Jobs Toolkit provides a It is kindly supported by Scraton and Sam Dodds for their confounded the traditional view of practical ‘how-to’ guide, drawing the Department for Work advice and input. We would also how to succeed in these sectors. out lessons from leading Living and and the UK like to thank Zeynep Wage employers and other global Commission for Ton for enabling us to draw on From fast-growing UK-born retailers about how to provide and Skills as part of the UK her ground-breaking research on companies such as the brewery value for customers and investors, Futures Programme – a series of the operational strategies that and bar chain BrewDog, to the while also creating jobs that are productivity challenges testing underpin a ‘Good Jobs Strategy’ global low-cost furniture giant better paid, more stable and more innovative solutions with in retail and for her invaluable IKEA, accredited Living Wage meaningful for employees. businesses to identify ‘what support during the project. employers are demonstrating that works’ in addressing workforce the companies best placed to development problems. succeed in the 21st century will be those that put the customer-staff relationship at the heart of their business model.

2 livingwage.org.uk livingwage.org.uk The Living Wage Structure Campaign of the he campaign for a Living Wage This is lower than the voluntary Tbegan in 2001. Communities Living Wage rates, which are in East London came together independently-calculated based on report to discuss what changes would what people need to meet the basic improve their lives. Parents spoke cost of living, cover all workers over of the hardship they faced living 18, and include a separate rate to The first half of the report examines on poverty . At the time the reflect the higher living costs in the the hidden costs of low skill, low National was just capital. In 2016 these were set at pay business models in retail, and £3.70 an hour, and many of them were £8.25 and £9.40 in London. how Living Wage employers and working two jobs and still struggling to make ends meet. By mid-2016, there were over 2,500 other leading global companies The second half provides a practical accredited Living Wage employers, are challenging this approach by guide for employers that want to The Government’s new minimum including nearly a third of the FTSE- combining great customer service move to a Living Wage and maximise wage rate for over 25 year olds – 100. More than 100,000 employees with decent jobs for their staff. the benefits. We offer advice on how badged a ‘’ – was have seen their wages increase to make the case for a Living Wage, 2 a huge win for the 15-year campaign as a direct result of the campaign ensure it helps you to achieve your to tackle in-work poverty. However, and well over a million employees long term business objectives, and the new wage floor came in at £7.20 are covered by Living Wage manage change effectively. If you in 2016 and is due to rise to over £9 accreditation agreements. want to go straight to the practical by 2020, based on a target to reach 1 guide, turn to page 21. 60 per cent of median earnings. The Living Wage rates are uprated in November each year based on The Toolkit is the product of a year- the best available evidence about long project testing the operational the trends affecting people’s living strategies that support higher paid, standards. The methodology is higher skilled jobs in retail through a overseen by the Living Wage series of innovative workplace pilots Commission – an independent body with major retailers, with advice and drawn from leading Living Wage input from KPMG and Living Wage accredited employers, trade unions, employers across different sectors. civil society and experts.

4 livingwage.org.uk livingwage.org.uk 5 he retail and wholesale sector The use of short-hours contracts is Tcontributes £180 billion to the commoniv, and research estimates UK’s economic outputi and employs that 40 per cent of wholesale and nearly five million people, making retail employers provide no it the country’s biggest employer.ii for their staff.v Yet the sector is facing a challenging business environment. Established players are feeling the pressure IN A SECTOR THAT from lower-cost entrants. The rise OPERATES WITH TIGHT of online shopping has also driven PROFIT MARGINS, up operational costs and led to a fall EFFORTS TO IMPROVE in the number of people entering COMPETITIVENESS OFTEN 1 physical stores. FOCUS ON REDUCING STAFF COSTS In a sector that operates with tight profit margins, this highly A case competitive context has led to an These problems have got worse ongoing drive to control costs. in recent years, as many retailers Labour is the biggest and most responded to the downturn with cuts for change: tangible cost to retailers. Efforts to to staff training budgets, real terms improve competitiveness therefore reductions in pay, and a move to often focus on reducing staff more part time and agency staff. spotlight on retail costs – with measures to limit the cost of employee pay and benefits, A report in 2015 commissioned by minimise investment in training and the Joseph Rowntree Foundation match staffing levels and contracts found that low paid workers in to patterns of customer traffic as the service sectors described closely as possible. their jobs as stressful, unfulfilling and precarious. Most of the retail As a result, low wages, chaotic workers interviewed for the research schedules and a lack of training and had experienced cutbacks in hours progression opportunities are often and many were not paid for breaks seen as an inevitable feature of jobs or .vi in the sector. 1.5 million people in wholesale and retail are low paid – making up nearly a third of all low paid people in the UK.iii

livingwage.org.uk 7 The hidden costs of bad jobs

his is not just bad for Operational complexity has grown at A vicious cycle? employees. Many employers the same time as many retailers have T hen sales and profits are The study estimated that profits are also concerned about the reduced investment in staff, driven falling, managers often would have been 25 per cent higher sustainability of this strategy, which by bigger product ranges, more W reduce labour costs, with staff hours at Borders had there been none of is associated with high levels of staff complex service offers and frequent and training budgets the first to these so-called “phantom stock- , absenteeism and loss of promotions. There is increasing see cuts. This delivers short term outs”. Over time this problem stock to theft and error (‘shrinkage’). recognition that this complexity has savings. But in the longer term seriously undermined the company’s increased costs and can exacerbate understaffed stores with poorly ability to respond to changing The negative image of the sector and stock problems and trained, demotivated staff are customer tastes by integrating its lack of progression opportunities poor customer service. viii often associated with operational store and online operations through mean that retailers often struggle problems that undermine store a click-and-collect service.ix Borders to attract or retain recruits with the sales and profits. was one of the first casualties of right skills and attitude. Low levels MANY EMPLOYERS ARE the rise of online retailing, and of training exacerbate problems CONCERNED ABOUT A study conducted by the leading eventually filed for bankruptcy such as poor customer service, a THE SUSTAINABILITY OF MIT operations expert Professor in 2011. lack of product knowledge, and weak LOW WAGE STRATEGIES, Zeynep Ton at global bookstore problem-solving, organisational WHICH DRIVE HIGH STAFF Borders at the peak of its success These operational problems are live planning, leadership and strategic TURNOVER, ABSENTEEISM found that high employee turnover issues in the UK. Loss of stock due to management skills.vii AND SHRINKAGE and understaffed stores were crime, waste and error costs British systematically hitting business retailers more than 1.3 per cent of These problems have indirect and performance. A combination of sales.x One survey found that over direct costs to employers. Low price retailers in particular high workload and complex, badly- a third of customers had left a shop are often seen as synonymous designed operating processes empty handed in the previous month with demotivated, overworked resulted in misplaced products and due to poor stock management, and undertrained employees, long a failure to replenish stock. One in costing retailers £1bn a month in check-out queues and disorganised six customers who approached a lost sales. The study found that stock management. In extreme salesperson for help could not find some customers, particularly cases these problems can seriously what they were looking for, despite it young people, would stop shopping undermine business performance, being in stock, because it was in the with retailers permanently if they particularly for those that get into a wrong place. repeatedly fail to provide what they vicious downward cycle. are looking for.xi

8 livingwage.org.uk livingwage.org.uk 9 This situation is frustrating for studies suggest customers and can lead them to shop that there is huge elsewhere. Customer satisfaction unfulfilled potential with the UK retail industry declined The CBI has highlighted that within the UK retail sharply between 2010 and 2015, wholesale and retail and other workforce, and that and the Institute of Customer low paying sectors such as the country is not Service raised concerns that some transport, administration and reaping the economic organisations were focusing on leisure account for almost a third benefits that should short term improvements in market of the UK’s productivity gap with follow from a higher share at the expense of the longer the US.xiv Research by the British skilled population term investments in workforce Retail Consortium found that more skills, engagement and technology than half of retail employees feel required to drive customer overqualified for the work that they The introduction of the new higher loyalty and sales in a highly do, and nearly a fifth do not feel minimum wage for over 25 year olds, competitive environment.xii motivated to give their best at labelled a ‘national living wage’, Despite a small improvement in work.xv This finding is echoed by has brought these issues to a head, 2015, customer satisfaction remains surveys of wholesale and retail with the Government arguing that The prospect of sharp increases in below 2010 levels. The biggest employers in the UK, a third of which employers must pay more to offset the minimum wage over the next five areas of complaint are speed report that they have staff with skills planned reductions in state spending years is forcing all retailers to look and responsiveness, complaints and qualifications that are not being on working tax credits. While some even more closely at how to increase handling, and staff behaviour used in their roles.xvi retailers have warned that higher productivity and reduce costs. and attitude.xiii wages will lead to reduced dividends, These studies suggest that there is downward pressure on job quality The key question is how they will The prevalence of low skill, low huge unfulfilled potential within and widespread job losses, others choose to respond. wage business models across the the UK retail workforce, and that the hope that it could help to slow the labour-intensive service sectors country is not reaping the economic race to the bottom and tackle long- also has negative implications for benefits that should follow from a standing problems of high turnover, the economy and the country, and is higher skilled population. low skills and weak productivity. attracting increasing concern from business leaders and policymakers.

10 livingwage.org.uk livingwage.org.uk 11 The alternative: taking the ‘high-road’ The business case for a Living Wage to business success everal studies have looked at and better relationships between in- Sthe impact of the Living Wage in house and sub-contracted staff, while London, where the campaign began. Living Wage accreditation was seen he decision by leading retail Living Wage employers see the wage A study by London Economics found as having reinforced their reputation and hospitality employers to increase as an investment, not a T that more than 80 per cent of London as good employers.xix go beyond basic legal compliance cost. For these companies, a modern Living Wage employers reported and pay their staff the higher, workforce – well-paid and motivated enhanced staff performance. The Studies in other regionsxx and independently-calculated Living to perform to the best of its ability majority said it had improved staff countriesxxi have found similar Wage rates demonstrates that low – is the key to good service. This and retention, and 70 per improvements in recruitment, staff pay is not an inevitable feature of drives customer loyalty, which, in cent reported improved consumer retention and firm reputation as a these sectors. Set at £8.25 and £9.40 turn, drives sales and profits. awareness of their commitment to result of successful campaigns for in London, full time workers paid the being an ethical employer.xviii a living wage. These studies are Living Wage earn £2,000 a year more The relationship between higher supported by a wide body of evidence than those on the minimum wage, wages and lower staff turnover showing that engaged employees and £4,000 in the capital. is long-establishedxvii, and MORE THAN 80 PER CENT that feel valued and have time and organisations that pay the Living OF LONDON LIVING resources to perform their jobs to Wage across different sectors have WAGE EMPLOYERS the best of their ability are more Living Wage employers reported improvements in staff REPORT ENHANCED STAFF productive, more loyal, more resilient see the wage increase loyalty, engagement and quality of PERFORMANCE under pressure, and less likely to take as an investment, work, reductions in staff turnover or other absences.xxii not a cost and absenteeism, and a stronger corporate reputation. Similarly, researchers at Queen Mary University found that London Living Wage employers experienced a 25 per cent reduction in labour turnover on average. Greater staff stability had also led to higher productivity

12 livingwage.org.uk livingwage.org.uk 13 rganisations that maximise In this way, the Living Wage can act “All of our managers have been astounded with the impact on their teams… Othe benefits of paying a Living as a catalyst for meaningful changes [The staff] feel that they’re part of something bigger and they can more easily Wage take a holistic approach, across the business. see how they’re impacting on the business. They build better relationships with combining the investment in staff our customers. We get better customer feedback. The returns that you get on it pay with wider changes that result When the brewery and bar operator are just phenomenal.” in permanent improvements in BrewDog became a Living Wage staff performance, productivity and employer in October 2014, they also Rona Cook, People Business Partner, BrewDog customer service. This is sometimes abolished zero-hours contracts and underpinned by a move over time introduced more stable hours, with to flatter, more collaborative team the most common new contract set structures that support both a higher at 32 hours a week. The company “[We] definitely take more pride in our work. To rent in Aberdeen I might have entry rate of pay and longer and simplified its pay structures, to have another job or work an enormous amount of hours so it lets me focus more stable contracts. Investments introduced greater pay transparency on working here and being really passionate about craft beer in my job and in training enable them to build a and increased managerial pay, so not worrying about just working for money.” more skilled workforce that requires that more than 180 staff got a pay less supervision and can be deployed rise overall. BrewDog also improved Robyn, Former bar staff and now Duty Manager, BrewDog more flexibly across different job roles. its training and development programme, capitalising on the expectation that its staff would want INVESTMENTS IN TRAINING to stay longer with the business. ENABLE LIVING WAGE EMPLOYERS TO BUILD A In just a year these interventions MORE SKILLED WORKFORCE had led to a 50 per cent increase in THAT REQUIRES LESS staff satisfaction with their pay, a 40 SUPERVISION AND CAN BE per cent reduction in staff turnover DEPLOYED MORE FLEXIBLY on the company’s retail sites and an increase in the proportion of management roles filled by internal promotions from less than 50 per cent to 80 per cent.

14 livingwage.org.uk livingwage.org.uk 15 Case study: how to go Living Wage “Introducing the living wage is not only the right thing to do for our co-workers; it also makes good business sense. This is a long-term investment in our people based on our values and our belief that a team –IKEA with good compensation and working conditions is in a position to IKEA became an accredited Living provide a great experience to our customers.” Wage employer in April 2016. As well as increasing their entry-level This includes plans to: Gillian Drakeford, Country Manager, IKEA pay rate to the Living Wage, IKEA increased pay for all employees up to Improve job security: the first tier of management. Overall IKEA is introducing new rights to anaging these changes is no The company is clear that the more than 6,700 people got a pay ensure their employees have the hours Msmall task. IKEA has a turnover investment will make them money rise. The low-price furniture retailer and flexibility they need for a healthy of more than £1.5bn and employs overall. Together the changes aim also put in place a plan to move all work-life balance. This includes the 9,000 people across 18 large stores, to improve employee satisfaction sub-contracted staff working on rights to a weekend off a month and a which operate on a decentralized – including a target to save up their premises onto a Living Wage contract that reflects the hours they model. A team was set up to oversee to £10million by reducing staff within two years. work on a regular basis. In the longer the process of change, enabling them turnover to less than 10 per term they plan to reduce the reliance to take a joined-up approach and cent – and lead to more helpful, on temporary staff and offer more t IKEA, the Living Wage is one adapt goals and strategy as necessary. knowledgeable staff. This in turn hours to those that want them. A part of a long-term business The team engaged with all parts of the is expected to improve customer strategy to improve customer organization to develop and test the satisfaction and business turnover. service and sales, including a plan to Improve operational proposals. This involved presenting They reflect IKEA’s culture and tackle and make the rationale for change and business values, which see good leadership at better use of staff skills and abilities. flexibility: objectives to all stores across the all levels of the organization as being IKEA is improving operational country, creating active spaces for the key to success, underpinned by efficiency and customer service staff to talk about their concerns fair standards of employment. through changes to scheduling, and ideas, as well as consulting with enabling them to better manage their elected employee forum, the fluctuations in demand over the National Co-worker Committee, and year, and multi-skilling to support recognised trade union, USDAW. more collaborative team structures where jobs are more varied and staff are trained to carry out a range of activities according to store needs.

16 livingwage.org.uk livingwage.org.uk 17 The ingredients that underpin a Cross-train: Offer less: ‘Good Jobs Strategy’ in retail: Second, they cross-train their Finally, these companies offer less wider evidence staff to enable them to be deployed than their competitors. They focus flexibly. This ensures they are their offer on the priorities of their productive over a shift and customers, reducing operational supports longer and more stable costs in their stores, distribution he approaches taken by Living Her findings suggest that schedules, rather than flex staff centres and supply chains by TWage employers are echoed in four operational choices up and down to ‘chase’ patterns of offering fewer promotions, reduced the wider evidence about how leading underpin their ability to follow consumer traffic. In busy periods, packaging, smaller product ranges service sector companies succeed by a ‘Good Jobs Strategy’: their roles are customer-facing, or shorter opening hours than their combining great customer service but in quieter periods, they might competitors. It is often assumed with good jobs. MIT management arrange products, restock, conduct that ‘more is less’ in retail, but professor Zeynep Ton has examined Standardise and inventory checks and stock orders, offering less can increase customer the choices that enable some of the empower: and take part in continuous satisfaction – as long as the products world’s most successful retailers to improvement processes. and services are good quality, fairly deliver low prices and offer decent First, these companies standardise priced, and staff have the skills, pay and benefits, stable, predictable all routine tasks to ensure efficiency, Operate with slack:, knowledge and time to be able to schedules, and opportunities to train safety and consistency between help customers find the best product and progress.xxiii stores, but also empower their Third, they operate with slack – for their needs. employees to use discretion when deliberately operating with slightly Ton looks at companies operating it comes to decisions that will affect more staff than required – to enable in comparable labour markets to the customer satisfaction, and draw them to improve customer service, UK, including the highly successful on their insights to continuously reduce operational errors, and US retailers QuikTrip, Trader Joe’s improve operational processes and engage staff in efforts to improve and Costco. product range and quality over time. products and services over time.

invest in people

standardise operate with cross- train offer less & empower SLACK

Source: Ton 2014 18 livingwage.org.uk livingwage.org.uk 19 he lesson from these retailers The companies Ton examines are Tis the importance of combining characterised by their ability to strong investment in the workforce deliver value to their customers, with operational excellence. They employees and investors at the are extremely efficient, cutting costs same time. They outperform their everywhere except when it comes to competitors on key metrics including their employees. Decent wages and sales per square foot, labour benefits enable them to attract staff productivity, inventory turns and with the values and judgement to shrinkage. They are also better able use discretion effectively. Training to respond to changes in customer ensures employees understand tastes, new regulations and new 2 company priorities, know their technology. Ton concludes that: products, and have the skills to deliver high standards of customer “Model retailers… design and Moving to a service. Managers are expected manage their operations in a way to motivate and treat staff fairly in that makes their employees more order to get the best results. productive, reduces the costs of doing Living Wage: business, and puts employees at the Ton cites the fast-food chain In- centre of the company’s success.” N-Out Burger in the American a guide for employers southwest, which sells high quality These companies, like Living Wage burgers at lower prices than employers, know that this success is McDonalds, and pays their staff not possible on a minimum more. They do this by offering a far wage model. more limited menu. This makes sales more predictable, and reduces waste. The savings are used to invest more in employees, which in turn underpins high quality and consistent customer service.

20 livingwage.org.uk How to pay the living wage and his report has set out the case maximise the benefits: Tfor change in retail and explored P aYING the Living how employers can and do offer Wage can lead to An overview better paid, better skilled jobs in transformational this and other low paid sectors. For change if it is employers interested in putting this implemented as part Why should I pay the into practice, the rest of the report of a wider plan to Living Wage? provides a practical guide for how meet organisational 1 Understanding the case for change in you might do this. objectives your business

Paying the Living Wage can lead How can the Living Wage help me achieve to transformational change if it is We have broken this down into a my long term business objectives? implemented as part of a wider plan to series of steps to help you understand 2 Identifying a vision for change that meets meet organisational objectives. While where you are today, where you want the challenges you face pay is the primary consideration, to be, and how to get there. This each organisation will have a different includes advice on how to make How can I maximise the benefits set of operational challenges and the case for change, maximise the of paying the Living Wage? opportunities that this investment benefits of a better paid workforce, Building a strategy to improve job quality can support to progress. and manage and monitor change 3 and business performance effectively, supported by evidence It is worth investing time upfront from leading global retailers and How do I get from where I am now to build an effective vision and Living Wage employers to stimulate to where I want to be? strategy for change. The plan should your thinking. We suggest you Managing change effectively be holistic and collaborative, made work out a timetable for each of the 4 together with all key stakeholders phases and get ‘buy-in’ from senior in the organisation, starting with stakeholders at the outset. frontline employees. This will How do I know it’s working? help them to understand their role Monitoring and in achieving your objectives and 5 ensure the solutions are grounded in the reality of the business.

22 livingwage.org.uk livingwage.org.uk 23 Phase 1: Tips and people to convince the waverers, and do not waste energy trying to Why should I pay the recommendations convince adversaries.

Living Wage? Analyse the problem Set-up a dedicated team to How good your data is at the moment oversee change will affect the time you need for A dedicated team is essential to Understanding the case for Phase 1. If you do not currently successful change management. change in your business gather the relevant data, spend up The team should be set up after the to 12 weeks monitoring it across the case for change is established, perational inefficiency, poor Key questions: business or, for larger organisations, but before the vision and strategy Ocustomer service and low over 10 per cent of your sites. for change have been productivity are common problems • What are the main challenges For example, you might examine developed.xxiv You should draw in the service sector. We know facing your business at the how rates of staff turnover and on a range of expertise, including that high levels of staff turnover moment? absence are correlated with store the human resources, finance and and absenteeism contribute to performance. Talk to staff across the operations teams. Sustainable • What is the cost of absence and these problems, and that higher business to understand the issues change relies on building champions staff turnover to the business? wages, more regular contracts and that affect your performance, and across the business, so consider how opportunities to train and progress • What other ‘bad’ costs do you analyse exit interviews to get a to involve junior and frontline staff at work can make a difference. This have – such as high customer clear sense of why people leave. An with useful insights and an ability to is often a factor in an employer’s returns or inventory shrink – independent assessment can also influence other employees, as well as decision to pay the Living Wage. that are important to you today? be useful and enable staff to be open top and middle managers. about the challenges they face. How do they affect the customer Understanding the case for change • “Allow yourself plenty of time. experience and productivity in your business requires a clear Map your stakeholders Don’t just look at how [the Living across the business? analysis of where you are today, Map the internal and external Wage is] going to affect you for the first year. Look five years into the including what your employees and • What are the main drivers of stakeholders you need to influence, future. Combine it with an overall customers think of you, the costs and these problems? using named individuals rather than drivers of any problems you face, general groups. Identify which of look at how you’re treating your staff… If you’ve got deeper staff engagement and how these are affecting your these are likely to be allies, which problems, it’s highly likely that you’ve ability to succeed. This information are neutral onlookers, and those got other things going on as well. will help you to create a burning most likely to block change, and the The impact of [paying the Living relative influence of each of these platform for change to convince key Wage] will be lessened if you don’t fix on your goals. Focus your efforts stakeholders of the need to those at the same time.” take action. on those who will help you to make the case for change – for example Rona Cook, People Business Partner by identifying allies within key at BrewDog UK teams such as finance. Rely on these

livingwage.org.uk livingwage.org.uk 25 Phase 2: Start by looking at what your How can the organisational values mean for Living Wage help me how you want people, including achieve my long term your customers, employees and Analysing the case subcontracted staff, to be treated. business objectives? These questions are important to determine before deciding the for change specific operational changes you want to make. Identifying a vision for change that meets the Key questions: challenges you face useful data • What are your main business he move to a Living Wage goals and objectives at the • Key Performance Indicators including Tshould be delivered as one part moment? productivity measures of a plan to achieve your long term • Where do you want the business organisational goals. Identify the to be in five years’ time? • Rates of attrition and absenteeism for staff on different broad outcomes and measurable contracts and pay rates outputs – such as higher customer • What is the cost of getting from satisfaction, reduced staff turnover where you are now to where you • Staff surveys and exit interviews or an improved cost to sales ratio want to be? – that are important to business • Customer feedback and satisfaction scores success, including any costs that • How do you want your need to be met. customers, employees and sub- • Customer returns contracted staff to be treated, The key question is how you choose and how do you want them to • Ratio of staff costs to sales to achieve these goals. Living perceive you? Wage employers choose to put an • Which values and behaviours • Sales and profit margin engaged, well-paid workforce at the does this require across the heart of their competitive model, business? • Inventory shrinkage based on their values as ethical and responsible businesses. Success is driven by a clear vision of how to satisfy customers, employees and investors at the same time.

26 livingwage.org.uk livingwage.org.uk aliGninG your vision and Phase 3: values with operational tarGets: How can I maximise How people are measured has Tips and a significant impact on their the benefits of paying recommendations behaviour, especially at a Living Wage? level, so make sure that staff Setting the goals targets reflect how you want things for success: to be done (the behaviours) as well Organise a group discussion with the as what you want to achieve (the Building a strategy to executive team and owners/investors KPIs). This will ensure that staff improve job quality and to discuss your organisational values behaviour and decisions at all business performance and what the way you treat people levels reflect your values and says about you as a business. It can brand as ethical employers, from nce you have a clear idea of This section sets out four questions be useful to engage an external how strategic decisions are made Owhere you are now, where you that it might be useful to consider, organisation to facilitate this and at the top to how people operate on want to be, and the cost of moving based on lessons from Living Wage help you to build consensus for how the shop floor. A holistic set to a Living Wage and any other employers and Zeynep Ton’s work you would like to operate in terms of of targets can also help to drive changes you are making, you are on the operational and people employee conditions, how this could innovation, for example by asking ready to build a strategy for change. choices that support a ‘Good Jobs support you commercially over the managers to improve performance Strategy’ in retail (see page 18). It long term, and the goals for success. on key metrics such as your cost to To absorb the costs and maximise focuses on how to manage, train and We suggest that aiming to improve sales ratio, conversion rate and the benefits, many Living Wage engage staff in ways that support customer satisfaction, employee customer service scores, while also employers make wider changes to operational excellence and high satisfaction and productivity – in increasing staff satisfaction and ensure the investment translates standards of customer service. that order – will help to ensure that loyalty. into sustainable improvements decisions are taken in a way that in customer service, operational Whatever changes you make, they supports improvements in job quality efficiency and productivity. There should meet and be aligned to the and business performance at the same is no one-size-fits-all blueprint for business objectives you identified time, not one at the expense of the other. this. It will require you to identify in Phase 2. The proposals should the specific activities that affect the be developed and tested through a outputs and broader outcomes collaborative process that connects you desire. with all parts of the organisation, including your employees, customers and other stakeholders.

28 livingwage.org.uk livingwage.org.uk Step 3.1 Key questions: would like to see change, and work with employees to define standards • How often do you review and that meet these. update operational processes to Are you as ensure they are efficient? Capture and incorporate staff insights • How do you consult your Create a formal process for efficient and workforce to come up with employees to propose improvements solutions together? to standards, products and services over time. Encourage problem- responsive • Are there areas where allowing solving approaches, and consider employees to use more setting up dedicated central or as you could be? discretion could improve regional teams to capture staff customer satisfaction or enable ideas, test them, and roll out those you to better respond to local that are shown to improve store conditions? performance, customer satisfaction or sales. Tips and Empower staff to use their recommendations: discretion for tasks that igh workload and poorly The most resilient and agile could affect customer Increase efficiency designed operating businesses also engage satisfaction H through greater procedures are common in the their employees in efforts Customer satisfaction often standardisation service sector. Standardised to continuously improve depends on how employees deal Identify the time your staff spend tasks and processes can products, services and with their problems or complaints. on back-office tasks such as maximise efficiency and processes and empower them Evaluate your recruitment, training stock management, cleaning or consistency across stores, to use discretion when it and performance management administration, and the workload enabling you to reduce costs comes to decisions that affect systems to ensure staff decisions generated by non-essential tasks and improve customer service. customer satisfaction. reflect your values and priorities. such as a high frequency of display For example, you could profile changes or excessive packaging. your top 10 performing managers Ask your employees to make – including the way they motivate recommendations that improve and manage staff – and use this to efficiency and meet customer inform recruitment and performance priorities. For example, you could management criteria for all ask a group of your best site managers and . managers to interview customers standardise in stores about what they value and & empower livingwage.org.uk 31 Step 3.2 Key questions:

• How do you currently you to offer more flexible senior deal with fluctuations in roles. Ask store managers to identify Are you getting consumer demand? at least one way in which their team structure could be improved to Could you change how you the • better share workload and enable organise work across the team best flexible deployment of staff. to support more hours for out of your employees? Make better use of • Could you give more staff skills workforce? responsibility to your team In many cases your staff may already to rely less on managers and have skills that you are not making the create a more collaborative most of. Conduct an audit to establish team structure? the existing skills and qualifications in your workforce, how these could be better utilised to improve Tips and performance, the effectiveness of recommendations: your current training programme, and any gaps. Encourage innovation any retailers feel that However, some retailers Build flexible teams, not and learning among your staff by there is a trade off choose to offer more full time M flexible contracts involving them in efforts to solve between the need to meet and stable shift patterns by Help stores to build a team that problems and improve efficiency, fluctuations in customer cross-training their staff. they can deploy productively service and productivity. demand through high use of This enables sales staff to take across a shift. Small amounts of part time and flexible contracts, on more responsibility and cross-training – such as cashing up, and high staff turnover – with to vary their role according carrying out administrative tasks or YOUR STAFF MAY ALREADY many employees leaving to to store needs. It supports managing stock – can enable flatter HAVE SKILLS THAT YOU ARE find work that offers longer and broader, more interesting jobs team structures and more stable NOT MAKING THE MOST OF more stable contracts. and improvements in staff scheduling patterns. This can reduce loyalty, operational efficiency the amount of supervision the team and productivity. requires, potentially supporting higher levels of pay, freeing managers to spend more time with customers and staff, and enabling

cross-train

livingwage.org.uk 33 Step 3.3 Key questions:

• Are your stores frequently either Ensure flexibility works over- or understaffed? for employees as well as Do your staffhave the business • What impact does this have on Encourage responsible staff time to perform staff loyalty, consumer service planning across your business and operational efficiency? by introducing fair standards of • How much time would staff employment – such as a weekend to the best off a month; a requirement for shifts need to perform all tasks to the of their best of their ability, engage with to be given well in advance; and ability? customers, and identify scope stable contracts that reflect for operational improvements? the hours employees work on a regular basis. Tips and recommendations: Aim to reduce the number of casual Give staff time to succeed staff you rely on, perational excellence Research shows that erring Rather than the standard approach and avoid short- and Oand high standards on the side of over- rather of using sales data to drive staffing zero-hours contracts of customer service depend than understaffing can reduce allocation, calculate store workload unless employees on staff having enough time operational errors such as based on estimates of how long it request them to carry out the necessary misplaced products, which are should take staff to complete their back-office tasks and engage harder to measure than staff operational tasks such as cleaning, effectively with customers. costs but can be damaging in restocking and ordering; engage Aim to reduce the number of casual the long term, and enable staff with customers; and take part in staff you rely on, and avoid short- to gather useful information to continuous improvement processes. and zero-hours contracts unless inform company decisions about Sales data are also not always an employees request them. Examine stock, display and packaging. accurate predictor of consumer whether head office decisions, traffic, so make sure you understand such as frequent stock or display the times people are coming into the changes at short notice, exacerbate store to browse, as well as when insecurity at store level. they buy.

operate with SLACK livingwage.org.uk 35 Step 3.4 Key questions:

• How complex is your supply chain, and what are the cost Are you implications of this? • How do you know that your current offer reflects the Tips and offering priorities of your target market? recommendations • Could you make customer Understand and review too much? choice more predictable and what your customers want save money by simplifying your Engage with your customers or offer – for example by reducing clients to identify their priorities the number of products, and the extent to which this reflects promotions or packaging – your current product and service without compromising your offer. Analyse customer satisfaction core offer? data and ask frontline staff to gather feedback in stores. If you decide to simplify your current offer, ensure any retailers have A simplified product or that staff have the knowledge increased operational service offer that is focused M and skills to explain the rationale complexity at the same time on the priorities of the target and advise customers on the best as investment in staff has market can reduce supply alternatives for their needs. declined, leading to high chain and warehousing operational costs and errors. costs, wastage and workload – enabling you to absorb the cost of paying a Living Wage and make additional productive investments in your business.

offer less

livingwage.org.uk 37 Case study: tackling underemployment at he mobile phone operator EE The has TEE operates within a highly been working with EE to monitor the competitive industry, which is impact of these changes. In total, 650 undergoing rapid change and facing employees from 330 stores chose increasing customer expectations. to increase their working week by To differentiate themselves, EE have an average of 9.2 hours. In earnings “The main benefit is that if we uplift sought to improve customer service To tackle this problem, in December terms this is about £4,500 extra a people’s hours – we’ve done a lot up by investing in staff skills 2015 EE offered all retail staff who year. After six months, the rate of staff to 35 hours rather than the 25 [we and engagement. wanted it an uplift in their basic turnover among this group was 25 per offered before] – it gives the people working hours. This was supported cent lower than the rest of the retail that stability. EE wants to look after One of the barriers to achieving by earlier changes to standardise population. EE also expects to see them. They’ll stay, get the stability, these goals is the high staff turnover the company’s recruitment process improvements in customer service they can have a . They can get rates among EE’s core retail staff. for stores across all regions; reform and sales as their workforce becomes a mortgage and they’re happier. A In mid-2015, over 60 per cent of KPIs to incentivise greater focus more stable and experienced. happier workforce delivers more.” employees working less than 25 on customer service; and introduce hours a week were leaving within a new three-week induction and David Botfield, Resource & Capacity the first 12 months of joining. The buddy process for all new starters, Planning Manager, EE negative impacts of high attrition scrapping the probationary rate of include the cost of changing staff; pay and introducing a softer lower productivity; understaffing; launch into targets. recruitment costs; and the loss of knowledge and skills. The extensive use of short hour contracts was regarded to be the main driver of high staff turnover.

38 livingwage.org.uk livingwage.org.uk 39 Phase 4: How do I get from where I am the

now to where I want to be? morale Change Curve

Managing change Once the changes are in place, effectively you can sustain enthusiasm by recognising achievements New hange that is imposed, even and maintaining effective Beginning Cpositive change, can result communication. Signs of in grievances if the process is not unmanaged change include well-managed. Many people may prolonged evidence of stress, fear Ending find the changes you make difficult and anxiety.xxv – from the managers that have to implement them to employees or Denial Enthusiasm contractors that are used to doing Key Questions things in a certain way. While your practical plan can be imposed very • How will you communicate Shock Hope quickly, getting people to do things your goals to staff, including the differently takes much longer. benefits for them?

How will you involve staff in Importance People need help to accept the loss • Anger identifying the solutions? of their old role and the move to a Acceptance new beginning. At the start, it is • At what stages will they be Frustration / Stress important to acknowledge their consulted? Skepticism concerns and be clear about their Ambivalence role in achieving your objectives. • Who is most likely to resist the As the changes start to take effect, changes you are making? feedback and ‘quick wins’ can help • How will you help them to do people to stay motivated. things differently? Neutral Zone • How will you ensure your managers are able to engage staff and maintain momentum?

livingwage.org.uk Source: Bridges 1991 time41 Tips and recommendations: Phase 5:

Analyse the context How do I know it’s for change working? Understanding the specific context for change in your business is Do not just communicate the crucial for success. Doing too much plan once or rely on information too soon could risk your chance of to trickle down through Monitoring and success. Your strategy should take management channels. Aim to evaluation into account the extent to which your sustain communication in all team organisation and employees have meetings and through all channels ou are now ready to implement Single data measures are of little use the capability, power and capacity of communication throughout the Yyour changes. Build in time as you will not be able to explain the to deliver the changes you want to process. Use consistent branding for reflection and learning, and be source of problems or understand see, and make a judgement about the and wording to avoid confusion. prepared for some of your objectives how to unlock the value employees appropriate time, scope and depth or strategies to change as you can create for your business.xxvii Involve staff in of change to reflect this situation. incorporate feedback. Logging the Retailers seeking to follow a good the solutions You should also identify the aspects changes you make and monitoring jobs strategy should reflect a broad A common pitfall is for changes of your current culture and working how effective they are against your focus on employee satisfaction, to stay in head office, and not be practices that you do not overall business objectives will customer satisfaction and xxvi embedded or understood across the want to lose. enable you to evaluate what works. productivity.xxviii The measurable organisation. Employees should be Many employers find it useful to trial outputs reflecting these goals can be Communicate, communicate, seen as part of the solution, not the new approaches before rolling them used in performance management communicate problem. They should be involved out across the organisation. procedures to align staff targets The implementation of your early and at all stages. Invite them with your objectives. strategy must be underpinned by to engage with proposals and a strong strategic narrative and scenarios, rather than concrete visible leadership. Consider how plans, and acknowledge any to articulate the desired outcomes concerns they have. Make use of staff of paying the Living Wage and any unions and employee forums. If you other changes for both staff and do not have these already, consider the business. setting one or both up to help you communicate to staff and formally consult on your plans.

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Outcomes Measurable outputs Possible Interventions

Improved customer • Net Promoter Scores • Operational design satisfaction • Mystery shopping results • Staff communication and consultation • Customer returns • Recruitment • Conversion rate • Performance management • Training • Work organisation Improved employee • Staff engagement survey score • Job design

livingwage.org.uk satisfaction • Staff turnover rates • Workforce planning • Absenteeism • Pay and benefits • Average length of employment • Employment standards • Glassdoor reviews

Improved business • Sales (per day / per head / per store) performance • Total revenue per worked hour • Average transaction value • Gross Profit • Cost to sales ratio Conclusion benefit the most from the increase. in the sectors where workers should potentially making jobquality worse to jobs, hours and staffbenefits – the country willrespond withcuts shops, bars and restaurants across has centred onthe extent to which in April 2016, the national debate minimum wage for over 25 year olds Since the introduction ofthe higher pay and insecurity are most acute. and hospitality where problems oflow particularly insectors such as retail pay their staffthe Living Wage– than ever for more employers to In this context itis more important grow by 2020. growth, withchildpoverty set to minimum wage and employment otherwise have seen from the higher income growth working families may reforms are likely to wipe out any warned that benefit and tax credit the Institute for Fiscal Studieshas paid lessthan the Living Wage, and Almost sixmillion peopleare still xxx livingwage.org.uk xxix http://www.livingwage.org.uk/contact Contact the Living Wage Foundation: Good luck! good jobsstrategy. experiences as you implement the We are also keen to hear your your staff to benefit your business. about how we can help you engage or would like more information becoming aLiving Wage employer Get intouch ifyou are interested in accreditation process. you through the Living Wage strategy for change, and guide business, support you to build a the scope for improvement inyour can help you assess and evaluate the Living Wage Foundation. We Wider support is available from succeed inthese sectors. is possible to offer goodjobsand engaging staff more effectively, it developing, investing inand This Toolkit shows how by 45 Council (2013) Scrutiny review into the xxiv Kotter (2012) Leading change, Boston, Notes and references implications for the District of Bradford Massachusetts: Harvard Business Review Council adopting a Living Wage policy, Press. Report of the Corporate Overview and Scrutiny Committee, September; Holden xxv Bridges (2001) The Way of Transition: i Rhodes (2015) The retail industry: Statistics xi Venda (2013) The missing £billion basket and Raikes (2012) Pay up? Living costs and Embracing Life’s Most Difficult Moments, and policy, London: House of Commons report 2013, London. the Living Wage in Manchester, Manchester: Boston, Massachusetts: Da Capo Press Inc. Library. New Economy Working Papers; and Marsh, xii Institute of Customer Service (2015) Murphy, Blackaby, O’Leary and Jones (2010) xxvi Balogun and Hope-Hailey (1999) ii Vivian, Winterbotham, Shury, Skone UKCSI Customer Service Index: The state of Living Wage in Wales: Exploratory study, Exploring strategic change, New Jersey: Jones, Huntley Hewitt, Tweddle, Downing, customer satisfaction in the UK, London. : Welsh Assembly Government. Prentice Hall. Thornton, Sutton, Stanfield and Leach (2016) Employer Skills Survey 2015: UK results, xiii Institute of Customer Service (2016) xxi See, for example: Thompson and xxvii For more on how to measure talent Evidence report 97, Wath-upon-Dearne: UKCSI Customer Service Index: The state of Chapman (2006) The economic impact of within your organisation, see the Chartered UKCES. customer satisfaction in the UK, London. local living wages, Washington: Economic Institute for Personnel and Development’s Policy Institute; Fairris, Runstein, Briones, Valuing your Talent Framework. Available iii Corlett and Gardiner (2015) Low pay Britain xiv CBI (2015) A better off Britain: Improving and (2005) The Los Angeles living wage at: http://www.cipd.co.uk/research/valuing- 2015, London: Resolution Foundation. lives by making growth work for everyone, ordinance: Effects on workers and employers, your-talent/framework.aspx London. Los Angeles, California: Los Angeles iv Chartered Institute of Personnel and Alliance for a New Economy; and Reich, xxviii See Zeynep Ton, The Good Jobs Score: Development (2015) Zero-hours and short- xv British Retail Consortium (2016) Retail Hall and Jacobs (2003) Living wages and A measure of people-centred operations hours contracts in the UK: Employer and 2020: What our people think, London. economic performance: The San Francisco strategy. Available at: http://www. employee perspectives, London. Airport Model, Berkeley, California: Institute goodjobsscore.com/ xvi Vivian et al (2016). of Industrial Relations. v Vivian et al (2016). xxix A survey of employers prior to the xvii See for example Greenwald and Stiglitz xxii See, for example, Wood et al (2013) High introduction of the Government’s ‘national vi Hay (2015) What do low-paid workers think (1988) “Pareto inefficiency of market performance working in the Employer Skills living wage’ found that more than a fifth of would improve their working lives? York: economies: search and efficiency models”, Surveys, Wath-upon-Dearne: UKCES; service sector employers were planning to Joseph Rowntree Foundation. American Economic Review, Vol. 78(2), MacLeod and Clarke (2009) Engaging cut staff bonuses and overtime in response, pp. 351-355 and Akerlof and Yellen (1990) for success: Enhancing performance and more than a quarter will squeeze pay vii Vokes and Limmer (2015) Sector insights: “The fair wage-effort hypothesis and through employee engagement, London: differentials between staff. See D’Arcy and Skills and performance challenges in the ”, The Quarterly Journal of Department for Business Innovation and Davies (2016) Weighing up the wage floor: retail sector, Evidence report 95, Wath-upon- Economics, Vol. 105(2), pp. 255-283. Skills; and Purcell (2010) Building employee employer responses to the National Living Dearne: UKCES. engagement, London: Acas; Bevan (2010) Wage, London: Resolution Foundation. xviii London Economics (2009) An The business case for employee health and viii See, for example, Ernst and Young (2013) independent study of the business benefits wellbeing, London: The Work Foundation; xxx Browne and Hood (2016) Living standards, Retail operations: Six success factors for a of implementing a Living Wage policy in Rucci, Kim, and Quinn (1998) “The poverty and inequality in the UK: 2015-16 to tough market, London; and Wood and Butler London, London: . employee-customer-profit chain at Sears”, 2020-21, London: Institute for Fiscal Studies. (2015) ‘Tesco cuts range by 30% to simplify Harvard Business Review, Jan-Feb, pp.83- shopping’, , 30 January 2015. xix Wills and Linneker (2012). The costs and 97; Barber, Hayday, and Bevan (1999) From benefits of the London Living Wage, London: people to profits, IES Report 375, Brighton: ix Ton (2014) The Good Jobs Strategy: How Queen Mary University. Institute of Employment Studies; Bates, the smartest companies invest in employees Bates, and Johnson (2003) “Linking service to lower costs and boost profits, New York: xx See, for example: Dutton, Raeside, to profit: the business case for service Amazon Publishing. Mazza and Chen (2014) Evaluating the excellence”, International Journal of Service economic impact of the Glasgow living Industry Management, Vol. 14(2), pp 173-183. x Centre for Retail Research, no date, Retail wage, Edinburgh: Employment Research crime in the UK. Available at: http://www. Institute, Edinburgh Napier University; xxiii Ton (2014). retailresearch.org/ukretailcrime.php City of Bradford Metropolitan District

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