The Parker Avery Group is closing in on the final days of our Channel Integration in the Store study (it closes next week, so you still have the opportunity to participate: http://parkeravery.com/survey.html). As we hear from retailers about the many changes they are making to integrate their channels and use their strategic advantages at the store level to really deliver on their omnichannel customer experience promises, I am constantly curious to know how these major changes – and others – are being handled. Parker Avery does a lot of work helping retailers with organizational transformation, business process redesign, training strategy and development, communications, and other Change Management elements, and while there are basic principles that should be followed, there are many variances in exactly how these tasks are done to accommodate different corporate cultures, as well as the magnitude of the change at hand. Big Change Management projects are usually tied to a major corporate strategy shift, a large system implementation or the realization that the company’s current way of doing things simply does not work well anymore.
It’s also interesting to witness how changes that are driven by external factors, such as competitive forces, environmental factors or government legislation are handled. A good example is the recent healthcare legislation, called the Affordable Healthcare Act (ACA). Retailers are already asking their stores to do more to handle omnichannel processes (usually with the same or tightened labor budgets), and the new healthcare law represents another radical change in how companies must manage their operational and labor costs. It also requires changes in how they schedule their labor at the store level. On the employee side, staff that were once comfortable with working 30 hours a week and considered part-time, now must rely on fewer hours and smaller paychecks. This is because at 30 hours, they are no longer considered part time, since under the ACA a full-time employee is defined as an employee who works 30 hours per week, per month, on average.
It’s a common fact that employee turnover costs the retail industry millions each year (anywhere from $5,500 to $25,000 per employee<.--[if .supportFootnotes]--><.--[endif]-->),and that it is a constant struggle to find and retain “good” staff – i.e., those who will show up on time (or even just show up); come to work in proper attire, appearance and state of mind; and perform as expected. So the balance of retaining the “good” staff and asking them to work fewer hours – while still performing the same amount of work – all while trying to manage scarce labor dollars is an enormous challenge. And with turnover in retail on the rise (67% for hourly workers in 2012), more spending is necessary for recruiting, hiring and training.
From a Change Management point of view, how do you tell your valued part-time employees that they’re critical part of your company, yet you now have to cut their paycheck? Because keeping them at the same level of hours (this times several thousand part time employees), would cost the company millions in health care costs? This is not just because of the ACA mandates, but also from the extra administrative costs the company will now need to incur to manage the changes and avoid penalties. How does that conversation go? “We value you, you’re an integral part of the team, we want you to stay with us, but we have to cut your hours because it will cost us too much?”
Perhaps the one saving grace is that all retailers are facing this same daunting challenge: staff who work 30 or more hours are now considered full time employees, and according to the new law, these employees must now be offered health care, which comes at a cost to the company. To retain these employees’ part-time status, their hours must be less than 30 per week. The employee is now faced with a choice – stay with fewer hours or look elsewhere for work. If an employee decides to seek work at another retailer, they will very likely be faced with the same dilemma – fewer hours than they were once accustomed.
Retailers (and other businesses) must also make changes in their benefits programs to ensure they reduce or eliminate any possible penalties that go along with the ACA, such as penalties associated with “affordability” and “minimum value”. With the wide fluctuation in labor hours that is inevitable in retail – even with full time sales associates – managing this becomes quite tricky. This equates to the need for new responsibilities at the corporate level, and possibly additional roles.
The Parker Avery Group is not saying that changes to healthcare are not necessary. We are not speculating on whether the latest legislation will ultimately be good or bad for the country. But we are saying that this major change is something that all retailers are struggling with – in the face of an already dramatically changed retail world. We are also saying that Change Management – effective communications, organizationaland process redesign, and comprehensive training– will be critical during these highly transitional times. Retailers must figure out the best equation to incorporate the new healthcare law into their business models – one that both maintains their ability to attract, hire and retain good employees, while at the same time successfully integrating their channels and minimizing negative impacts to their bottom lines.