It all adds up to bad business, according to the report, commissioned by Coca-Cola Retailing Research Group Europe (CCRRGE). "To remain successful in an increasingly competitive and fast-paced market, food retailers need a dedicated and skilled workforce, especially in their stores," it states.
Consumer relationship strategies will demarcate the competitive battleground of the 21st century, it continues, and customer-facing employees, especially store managers, will be fundamental to the delivery of superior customer satisfaction and the successful implementation of business strategies.
It has long been known that food retailers have difficulty attracting and retaining suitable staff. Sir Terry Leahy, chief executive of Tesco and co-chair of ECR Europe, says people are at the top of Tesco's agenda, but he concedes: "It is still difficult. At store level it is very hard work physically and relatively low paid. We have to recruit people who like people. All they want is an interesting role, to be treated with respect and a chance to get on. It is obvious, but in the food industry we so seldom see it."
The situation is so serious that store managers are often forced to keep on frequently absent or unreliable workers average absenteeism rates across the industry are 5% of all working hours but in urban areas they reach as high as 10%.
It all hits the bottom line. Take, for example, a UK retailer with 100,000 store employees, 400 store managers and 3,200 department managers. Turnover rates at store manager and department manager level are at 20% and non-managerial staff at 30%. The retailer would face a deteriorating situation as its workforce continued to shrink, the population aged and employee expectations changed.
If, however, turnover rates could be halved, annual cost savings of about E90m would be generated and a reduction in personnel costs of between 4%-6% per store achieved. According to the report, this could equate to an improvement in operating margin of up to 0.5%.
But, despite being one of the largest private sector employers in Europe, the industry is not seen as a first career choice. It fails to meet the expectations of existing and potential employees in terms of work content, learning opportunities, and work/life balance.
School leavers, one of the major target groups, show very little interest in retailing, with over half saying they cannot imagine working in retail. Tim Mason, marketing director of Tesco and a member of CCRRGE, adds that food retailers are not helping themselves by failing to adopt best practice HR processes.
Historically, he says, there has been a generic and reactive approach to recruitment, with store managers placing local ads or companies waiting for candidates to approach them. Unstructured interviews and lengthy recruiting processes have contributed to a poor image. And while the industry places such great importance on market research, it rarely conducts proper personnel research or analyses employees using quantitative or qualitative measures.
Mason says: "The recruitment process needs to be improved while on-the-job training is largely unsupervised. At worst, food retailing has a people problem. At best, there is plenty of scope for improvement."
CCRRGE's key recommendation is that assessing attitude is more important than skill when hiring customer-facing people (see table).
And there is a need to concentrate on retaining high achievers.
Through interviewing 660 high achievers, report author Roland Berger Strategy Consultants found the competitive success of the employer and the work challenges of the job had a major influence on the employee's commitment. Low organisational commitment could lead to a doubling of employee turnover rates and a 50% increase in absenteeism.
Leadership was highly important for department managers and non-managerial staff, with leadership components making up more than half of the top 10 factors influencing commitment. Here store managers play the crucial role. They represent the company, embodying its culture and values, lead staff on a daily basis and satisfy customers. Store managers should be made responsible for retention and motivation, with variable pay depending on performance and leadership indicators such as rate of absenteeism and commitment, the report recommends. "Store performance is directly linked to the performance of the store manager," says Knut Faremo, executive vice-president of NorgesGruppen.
An employee relationship management programme could apply the same thinking to employees as is applied to customers. Focus on high achievers first, the report urges. By clarifying their expectations, you can build an incentive system that is the basis for increased employee retention. "Once food retailers make themselves attractive on the inside, they become more attractive on the outside."
The nub of the matter, says Faremo, is that strategies for human resources must be elevated to an appropriate level and should be "on the radar at board level," he says. Those who fail to see the importance of them will lose out. Aligning retail and people strategies will be one of the key success factors for food retailers in the future.