When I teach my service operations elective, I inevitably spend time talking about managing front line service workers and the potential payoff from having a longer tenured workforce. Thus, I am always interested when Fortune puts out its list of the best companies to work for. The 2012 list was just published. There are some unsurprising names here such as Google and BCG. At a high level, these firms promise good pay, interesting work, and a dynamic environment. One of the striking features is how few conventional (as opposed to Internet-based) retailers end up the list. In the top 25, there are only three Wegmans (#4), REI (#8), and The Container Store (#22).
On the one hand, it may not be surprising that there are few retailers on the list. My first job was in the camera department of a Caldor store. It was boring and tedious with pretty minimal compensation. On the other, front-line employees are the face of a retailer and are what separate bricks-and-mortar stores from the on-line competition. Supposedly, “superior” customer service is a reason to go into Best Buy as opposed to just ordering on line. Indeed, there has been much in the press recently about how retailers are aiming for better service as a way to compete.
So why then does it seem like retailers are going out of their way to make life hard for employees?
A recent study called “Discounted Jobs: How Retailers Sell Workers Short” has gotten a lot of press. (See here for the New York Times report and here for a PDF of the actual report.) The study interviewed nonunion retail workers around New York City about their pay and working conditions. As the word “nonunion” might suggest, the group behind this study — Retail Action Project — has an agenda. But even with that caveat, the studies findings are rather grim.
For example, the report emphasizes how many retailers have come to rely on a “core-periphery” labor strategy with a small core of full-time workers and “a constantly churning periphery of part-timers and temporary employees.” The latter qualify for few if any benefits. Worse, part-time work has changed. My Caldor job was part-time but I had a consistent 20 hours a week and minimal variation in schedule from week to week. (For what it is worth, Caldor was a union shop.) Part-time retail work now means being on call and having little predictability in the volume or schedule of hours. Here is how one interviewed worker describes his experience.
Irregular schedules are a big issue for me. I’m given my schedule just a day or two ahead of time. Since I am in college, it’s really important that I’m not scheduled during class.
There’s so much turnover, I don’t know my coworkers’ phone numbers in case I need to switch shifts. To make matters worse, my schedule is posted in the store, but not e-mailed to me. If the schedule is posted when I’m not working, I have to call in – sometimes I’m on hold for half an hour.
Additionally, there is only one manager at my store who can change employee’s schedules. If I’m not working when he’s working, I have to track him down on my day off. Everyone’s hours fluctuate. I have been scheduled for as few as six hours in a week, and as many as 40, so my paycheck is always different.
There are a couple of points to be made here. First, one has to acknowledge that retailing is a very tough business. For example, no one has my old Caldor job since the chain went bankrupt years ago. Margins are slim and labor is one of the biggest expenses. Hence, aggressively managing staffing is a necessity. However, it is not clear to me that that necessarily translates into highly unpredictable schedules. Yes, demand varies over the week but Saturday is always busier than Tuesday afternoon.
One could also argue that a core-periphery strategy makes sense in an industry with high turnover. That is, one needs a deep bench of employees when everyone’s a free agent and could be gone next week. Fair enough, but that raises the question of what is the cart and what is the horse. Are these systems set up to tolerate high turnover or do they engender high turnover? If retail jobs are structured to require minimal training and little firm specific knowledge, then employees can switch firms, essentially be equally as productive, and take no real hit in their wages. Of course, if jobs are set up to require little specific knowledge, it is not clear that workers are providing much in the way of service to customers. That is, if your workers can’t do much for customers, how elastic are sales to staffing levels? If sales don’t respond to staffing, then why do you need an army of part-timers?
Finally, there has to be a tradeoff in compensation and schedule uncertainty. Significant swings in weekly hours mean that employees face risk and that risk needs to be compensated for. Thus firms should be able to trade some consistency in hours for lower wages.