HR’s Impact on the Bottom Line

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Posted in: HR, Restaurant, Retail

HR is responsible for one of the most important assets and one of the largest costs of a retail company – people. A good workforce builds customer loyalty, drives more sales through upselling and is instrumental in company’s a brand. At the same time payroll is one of the largest, if not the largest, costs of running a retail business.

Being responsible for this asset, HR sees the retail business through a different lens than most other functions within the retail organization – through the people on the front lines, the store associate. As retailers looks to distinguish themselves in an hyper-competitive market, the store associates have the potential to be a major competitive advantage. Leading retailers recognize this and use their unique culture and workforce to grow revenue, lower costs and improve the bottom line.

Take Burberry, who was recently honored as the International Retailer of the Year.  What’s the secret behind the 4th fastest growing brand globally, and a luxury brand in a depressed economy at that? CEO Angela Ahrendts explains that Burberry is an “omni-channel retailer [and their objective is] that anytime the consumer sees, feels, hears the brand regardless of where it is, it has to be a pure brand expression … and when they walk into our stores we have to exceed their expectations … that’s where the human connection comes in.” Essentially, Burberry wants the consumer to have the same experience shopping with Burberry whether it’s online, on a mobile device or in person, and Ahrendts recognizes that the physical channel is Burberry’s opportunity to go the extra mile to delight the customer. This strategy is centered around the store workforce and would not be successful without a great set of people.

Another example where people are fundamental to the company’s overall success is the Container Store, whose 1 equals 3 philosophy – that one great employee equals three good employees – has contributed to a compound annual growth rate of 26% and a turnover rate between 10 and 20 percent. In an industry where turnover rate averages upward of 100 percent, the Container Store has a significant financial advantage. Let’s assume a 5,000 employee retailer has a new hire cost of $1,000. This means that every year this retailer spends $5 million dollars on recruiting, training and other expenses associated with new hires. The Container Store only spends $500,000 to $1 million. Over time this financial gap only increases as Container Store employees continue to work for the company, while the competition replaces 100% of their workforce every year. Recruiting and retaining great employees is not just a soft goal for the Container Store. It’s a key strategic initiative that sets them up for long term success and strong financial performance.

So how does an HR department turn their asset, people, into a competitive advantage? Start with figuring out the metrics that are important to measuring your company’s performance (hint they are all related to the bottom line) and how HR’s responsibilities intersect with those metrics. From this starting point HR can build initiatives to add value to the company and help improve these metrics.