$15 minimum wage challenges retailers

Pay hikes in Alberta, B.C. and Ontario lead to renewed focus on technology, performance management, training and efficiencies
By Marcel Vander Wier
|Canadian HR Reporter|Last Updated: 04/06/2018
Panel
From left, panellists Michelle Lettner, Sherri Amos, Eric Matusiak and Kevin Graff discuss the implications of minimum wage hikes. Credit: Marcel Vander Wier

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With legislators continuing to push provincial minimum wage rates up across the country, retailers are facing a new workplace reality.

Alberta, British Columbia and Ontario are hiking the rate to $15 per hour by 2021 at the latest, and advocates continue to promote the cause in other jurisdictions.

The higher-than-inflation increases to base pay have provided challenges for many organizations, though an upside does exist, according to Kevin Graff, president of Oakville, Ont., consultancy company Graff Retail.

“This will be the one thing that finally forces us as retailers — no matter how big or small we are — to run store operations with as much efficiency and professionalism as we do every other part of our business,” he said, speaking as part of a panel at a Retail Council of Canada event in Toronto on March 28.

“With the minimum wage going up, we’re infinitely more competitive now with attracting employees that we used to lose to other industries, so we get a better talent selection pool as a possibility, better possibilities for retaining employees, which allows you to be able to build a brand.”

The panel offered five strategies for retailers to consider as solutions when faced with wage increases.

Cuts, cuts, cuts

The first inclination for organizations is to slash staff, store hours, benefit offerings or training and incentive programs, said Graff.

“There’s some logic to all of that, but part of the trap is avoiding what I always call ‘the race to the bottom.’”

While it may be the simplest solution, the risk for retailers is in harming the in-store experience for customers, said Eric Matusiak, national retail industry leader at accounting and advisory firm BDO.

“It’s easy to cut — it’s the blunt instrument,” he said. “It’s one that we see many of our retail clients employing. (But) there’s a long-term potential risk here with doing this.”

Reallocating staff to more optimal positions such as click-and-collect offerings is more realistic, as is shifting scheduling towards top traffic hours, said Matusiak.

Home Hardware is doing its best to avoid cuts, according to Sherri Amos, director of dealer support.

With many stores located in rural communities, slashing hours or benefits could put the company at risk of losing staff, she said.

Meanwhile, Roots Canada is taking advantage of its position as a global business, according to Michelle Lettner, vice-president of HR.

“We have the ability to spread our efficiencies across a number of provinces,” she said. “It was really important that when we started our analysis, we wanted to make sure we weren’t negatively impacting our employees.”

Embracing technology

For many organizations, minimum wage increases have kick-started technology projects previously slated to start later, said Graff.

“As labour gets more expensive, technology starts to look like it’s a little bit more viable.”

And it’s not all about self-checkout, said Matusiak. For many brands, the shopping experience now begins on a mobile device.

Retailers are also choosing to empower staff with tools such as mobile technology that can search inventory or reveal customer history, he said.

“There’s a lot of other technology and some of it is behind the scenes,” said Matusiak. “It’s not all about cost. You also get a data stream from some of these new technologies.”

Roots has turned to a new HR system that has improved the company’s learning management system, quickened the onboarding process, and trained employees more consistently across all retail outlets, said Lettner. “It has allowed us to leverage technology in a totally different way.”

Perfecting performance

One of the underlying concerns for retailers is lower performers now make too much money, said Graff.

The poor performance could stem from missed sales opportunities, gaps in the customer experience or lack of employee urgency, he said.

Because of this, many retailers are now saying: “If I’m going to pay more, everybody’s going to have to pick up their game,” said Graff. “The issue of performance management becomes really important.”

Roots’ newly implemented HR system is expected to drive a renewed focus towards a performance culture. The program tracks team sales, provides analytics, and suggests appropriate scheduling in terms of goal-setting and coaching, said Lettner.

“That sounds very rudimentary but it wasn’t something that we were doing consistently across skills,” she said. “It’s really easy for us to now get data on all of our employees on performance scores and where they’re sitting so we can make really thoughtful decisions about planning succession.”

The minimum wage adds more incentive for store managers to really take a look at their labour budget, said Lettner.

“With the increased cost, you want to make sure that you’ve got the best employees on the floor if you’re going to be spending those additional dollars.”

Retailers can no longer afford to employ performance management merely as an annual exercise, said Matusiak.

“There’s a renewed focus on this because, historically, the walk hasn’t always matched the talk,” he said. “Employees were always an important part of any business or retailer. It’s just become a more expensive asset and something you have to pay more attention to.”

Focus on training

With employees earning greater compensation, their brand value increases accordingly.

“We are training our employees constantly to become brand ambassadors,” said Lettner. “How do we create engaging and meaningful experiences for our customers in the stores and how do we get our employees really excited about being able to be a part of creating those experiences? How do we start to train our teams to just be really customer-obsessed?”

In its effort to create a seamless experience between technological shopping solutions and brick-and-mortar stores, Roots needs employees to be part of the solution, she said. Consistent training and a career framework model are two ways the retailer attempts to keep staff loyal to its brand.

At Home Hardware, wage hikes have prompted the company to take another look at its development system for star performers. And recent traffic to the hardware chain’s internal learning management system reveals a renewed focus on soft skills and product knowledge training, said Amos.

“It’s our dealers identifying with the fact that our team is now costing us more,” she said. “How do we invest in them and make sure we that we get the most out of them?”

Finding efficiencies

With the hikes in minimum wage, areas such as product management, supply chains and price increases — or fewer blowout sales and markdowns — all deserve new consideration, according to Matusiak.

“When you’re faced with a dramatic increase in one part of your cost structure, you’re selling yourself short if you’re trying to absorb that cost increase just in that one area,” he said. “There are ways of getting it back just on the top line as well.”

“You don’t necessarily have to suck this up. You can pass it along in terms of increased prices.”

It means taking a fresh look at everything from hydro efficiency opportunities — such as low-energy light bulbs — to snow removal contracts to possible solutions from staff, said Amos: “A full health check of the business.”

“It really forced us to take a look at our businesses and our operations and put a strategy in place,” she said. “If we play the strategy right, as we see the equilibrium happen, we should come out to the good. We’ve decreased our operational costs… We should see ourselves positioned quite well at the end of this if we play that cost strategy properly.”

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