September 17, 2008
GHQ: Raising the Bar
By William Epmeier
Through a special arrangement, what follows is an excerpt of a current article from Grocery Headquarters magazine, presented here for discussion.
John Wilkerson, who is now a management consultant, learned a valuable lesson about hiring strategies when he worked for a St. Louis company back in the 1990s. Management would only hire college grads for warehouse jobs.
“We decided to shoot for a higher standard,” Mr. Wilkerson said, and the bet paid off: most of the hires turned out to be high-quality workers and many stayed with the company and moved into management. Mr. Wilkerson has since moved on and is now vice president of Bellwether Services, a supply chain consulting firm based in Stockbridge, Ga., but that lesson sticks with him today.
This is not an approach that comes naturally to most warehouse managers. Warehousing is an industry that has been built on hiring warm bodies for as little money as possible. High turnover has long been accepted as normal. For some owners, this approach is even encouraged as a means of keeping labor costs down.
Hiring for the long-term may make sense for full-time warehouse staff, but warehouses also need a large part-time contingent of workers to handle seasonal fluctuations. The average tenure for the majority of hourly warehouse workers is only about 90 days, according to statistics provided by Kronos, a Chelmsford, Mass.-based software firm that helps many supermarkets and other retailers test, hire and manage their workforces.
“The yearly turnover rate among hourly workers in warehouses averages about 85 percent,” explained Steve Earl, director of marketing for Kronos’ talent management division.
As a business strategy, high turnover is no longer viable in the warehouse industry, said Bruce Bolger, managing director of the Incentive Performance Center, a research and corporate outreach group based in Tarrytown, N.Y. “Warehousing is a critical junction point between manufacturing, just-in-time inventory management and technology,” Mr. Bolger said.
The growing importance of logistics to most retail companies as a competitive advantage is putting pressure on employee performance. Companies simply cannot afford mistakes such as late or incorrect shipments. Also, the skill level to operate more technologically sophisticated equipment in warehouses has increased, all of which puts a premium on hiring and retaining more productive people than in the past.
“Managers need to start thinking about the lifetime value of employees in the same way they think about the lifetime value of customers,” Mr. Bolger said.
Discussion Questions: Does the retail warehouse demand a higher quality worker than in the past? Are retention efforts around warehouse workers even more important than those around store employees? What’s the difference in retaining warehouse workers versus store associates?
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With the transition of retail to highly sophisticated systems for demand management, pricing optimization, logistics and the rest of the supply chain, this sounds like a good approach for an employee development pool. Workers could become far more valuable with hands on operating experience in this area. As new systems were implemented, this perspective on operations would be very useful. As others have discussed, providing an incentive to participate and grow would be an important key to retention.
An all or nothing strategy is rarely the answer. For many DCs, college students have been a good source of labor. Not everyone hired can become the Senior Vice President of Supply Chain, so why hire for it? Just like in the store, not all new hires should be on a store manager track.
A practical approach is to hire two or three times as many college graduates that you project to need for management. Let the cream rise to the top.
One mistake the food industry makes is assuming someone hired as a bagger will progress to Category Manger when an MBA graduate is needed for the position. The industry overall needs more college graduates to stay competitive. These should include a mix of both Bachelor and Master degrees. Jewel and Safeway were two chains that hired a greater percentage of college graduates than other chains. This clearly helped them stay ahead of the curve.
I just don’t see how you can get past the seasonal requirements that can often create huge fluctuations in demand for labor (or at a minimum, in demand of labor hours). That said, it’s much easier to ramp those people up to capacity quickly when you have some senior, experienced people around to help make sure the new people do things properly. But those seasonal workers–they’re willing to work short term because they are in very specific work circumstances. That’s just not a labor pool that will come back to do a job for 3 months and then leave year after year.
So sure, it would be great to shoot higher for quality labor in the warehouse. But as a universal goal, I just don’t think it’s achievable.
Anyone walking through a warehouse today will find that labor is already down and technology is way up versus years ago. It is not hard to find warehouses that are almost completely automated, down to and including the picking of units off the racks.
On a very basic level, as pickers (and other workers) are eliminated due to technology, the warehouse must upgrade its labor force to deal with that technology. I have seen a demonstration of what goes into a computer to automatically pick an order and it seemed to be several levels above my skill level.
I am actually surprised that this is news. From what I have seen over the last several years in the logistics business, the labor force has already moved from brawn to brains.
The warehouse is the most critical link in the chain for retail operations. How many retailers are suffering because of weak logistics? I can name at least 5 off the top of my head.
While working in the warehouse or distribution center is laborious, there is a certain amount of organizational skill that is required. Is a college degree needed? Probably not, but hiring managers need to scrutinize candidates more carefully. More often than not, we are filling spots with warm bodies to keep the lines running. This attitude does extend from distribution all the way to the sales floor.
When hiring, the process starts as soon as the candidate drops off his/her resume. Looking at initial body language and communication skills can uncover potential problems down the road. Ultimately we want people that will work well by themselves and will take initiative on their own. Those that display a certain enthusiasm from the start will most likely be successful at whatever they do.
Hiring in retail is always a challenge but structuring the job so that the individual can take ownership in the company is how they will succeed and contribute positively to the organization.
Retention of employees at any level of business should be a management priority. Significant cost savings can be realized by not having to train 85% of a workforce each year. Institutional knowledge can be shared. Informed/trained workers can often come up with new ideas to more efficiently operate areas of a business.
And loyalty to a company by its employees will lead to better internal and external relations with vendors and consumers. It’s too bad that many management teams don’t get this and plan for high turnover, rather than worker retention.
A couple of points come to mind quickly as I read the article and read the comments.
1. It is not how much you pay. It is what you get for what you pay.
2. For years, The grocery industry used to see the best and the brightest coming to work for them while they were in high school and most of them were never sold on the idea that this was a possible career opportunity. Then they get a little older and go into the restaurant industry and they do the same thing.
3. You have to give people a reason to stay with you. The employee who will find it easiest to leave you and get a job someplace else is your best employee.
4. Remember, employees do things for their reasons, not your reasons. So find out why they came to work for you and help them achieve their goals.
5. Turnover in seasonal employees will, by nature, always be high but it will also give you a chance to look at other potential great long term employees.
6. You may want to look at some of the things that UPS does to attract and keep great full time and part time distribution workers.
At least part of this phenomenon is the process of natural selection. Or as Grandpa Flynn would have put it–“Boy, there’s them that do and them that don’t….”
People who tend to be more diligent about things like higher education also tend to be more dependable employees. Especially the ones who are dedicated to work part-time jobs in warehouses to pay their way through. The critical issue for the employer, be it a warehouse, a store or a used car lot, is “where do they go and how do I keep them motivated until they get there?”
Workers should have college degrees for all positions. This establishes a higher profile human resource and sets the organizational standard to a level that allows for a tremendous resource of internal talent and experience that cannot be duplicated anywhere else.
What better way to reward workers than promoting them internally, defining their career path within an organization, and planning all of this around employees who have demonstrated a proven responsibility through their dedication to the organization throughout their careers in different positions?
I’m sorry but I missed the hourly wage these college graduates were offered? Are we to believe that college graduates were hired in at minimum wage, or as close to it as the local economy would allow? Don’t get me wrong, a motivated work force is certainly desirable and the fact that someone has gone through 4 years of college indicates some motivation. If in fact, these graduates were offered an entirely different pay scale, then we aren’t comparing apples to apples. With regard to logistics, I do think that it is more important now to provide excellent service to your customers. With the expansion of services via the internet any customer has several supplier options available at any point in time. Missed sales and profits due to logistics problems won’t fly in our connected age.
Most retailing firms look for the lowest-priced labor they can find. For the warehouse. For the stores. For the office. They’re consistent. Often work quality and productivity isn’t measured so how can they pay for it? And promotion is often by seniority, since work quality and productivity aren’t measured. So the better performers don’t rise to the top. They go where they’re appreciated.
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With the transition of retail to highly sophisticated systems for demand management, pricing optimization, logistics and the rest of the supply chain, this sounds like a good approach for an employee development pool. Workers could become far more valuable with hands on operating experience in this area. As new systems were implemented, this perspective on operations would be very useful. As others have discussed, providing an incentive to participate and grow would be an important key to retention.
An all or nothing strategy is rarely the answer. For many DCs, college students have been a good source of labor. Not everyone hired can become the Senior Vice President of Supply Chain, so why hire for it? Just like in the store, not all new hires should be on a store manager track.
A practical approach is to hire two or three times as many college graduates that you project to need for management. Let the cream rise to the top.
One mistake the food industry makes is assuming someone hired as a bagger will progress to Category Manger when an MBA graduate is needed for the position. The industry overall needs more college graduates to stay competitive. These should include a mix of both Bachelor and Master degrees. Jewel and Safeway were two chains that hired a greater percentage of college graduates than other chains. This clearly helped them stay ahead of the curve.
I just don’t see how you can get past the seasonal requirements that can often create huge fluctuations in demand for labor (or at a minimum, in demand of labor hours). That said, it’s much easier to ramp those people up to capacity quickly when you have some senior, experienced people around to help make sure the new people do things properly. But those seasonal workers–they’re willing to work short term because they are in very specific work circumstances. That’s just not a labor pool that will come back to do a job for 3 months and then leave year after year.
So sure, it would be great to shoot higher for quality labor in the warehouse. But as a universal goal, I just don’t think it’s achievable.
Anyone walking through a warehouse today will find that labor is already down and technology is way up versus years ago. It is not hard to find warehouses that are almost completely automated, down to and including the picking of units off the racks.
On a very basic level, as pickers (and other workers) are eliminated due to technology, the warehouse must upgrade its labor force to deal with that technology. I have seen a demonstration of what goes into a computer to automatically pick an order and it seemed to be several levels above my skill level.
I am actually surprised that this is news. From what I have seen over the last several years in the logistics business, the labor force has already moved from brawn to brains.
The warehouse is the most critical link in the chain for retail operations. How many retailers are suffering because of weak logistics? I can name at least 5 off the top of my head.
While working in the warehouse or distribution center is laborious, there is a certain amount of organizational skill that is required. Is a college degree needed? Probably not, but hiring managers need to scrutinize candidates more carefully. More often than not, we are filling spots with warm bodies to keep the lines running. This attitude does extend from distribution all the way to the sales floor.
When hiring, the process starts as soon as the candidate drops off his/her resume. Looking at initial body language and communication skills can uncover potential problems down the road. Ultimately we want people that will work well by themselves and will take initiative on their own. Those that display a certain enthusiasm from the start will most likely be successful at whatever they do.
Hiring in retail is always a challenge but structuring the job so that the individual can take ownership in the company is how they will succeed and contribute positively to the organization.
Retention of employees at any level of business should be a management priority. Significant cost savings can be realized by not having to train 85% of a workforce each year. Institutional knowledge can be shared. Informed/trained workers can often come up with new ideas to more efficiently operate areas of a business.
And loyalty to a company by its employees will lead to better internal and external relations with vendors and consumers. It’s too bad that many management teams don’t get this and plan for high turnover, rather than worker retention.
A couple of points come to mind quickly as I read the article and read the comments.
1. It is not how much you pay. It is what you get for what you pay.
2. For years, The grocery industry used to see the best and the brightest coming to work for them while they were in high school and most of them were never sold on the idea that this was a possible career opportunity. Then they get a little older and go into the restaurant industry and they do the same thing.
3. You have to give people a reason to stay with you. The employee who will find it easiest to leave you and get a job someplace else is your best employee.
4. Remember, employees do things for their reasons, not your reasons. So find out why they came to work for you and help them achieve their goals.
5. Turnover in seasonal employees will, by nature, always be high but it will also give you a chance to look at other potential great long term employees.
6. You may want to look at some of the things that UPS does to attract and keep great full time and part time distribution workers.
At least part of this phenomenon is the process of natural selection. Or as Grandpa Flynn would have put it–“Boy, there’s them that do and them that don’t….”
People who tend to be more diligent about things like higher education also tend to be more dependable employees. Especially the ones who are dedicated to work part-time jobs in warehouses to pay their way through. The critical issue for the employer, be it a warehouse, a store or a used car lot, is “where do they go and how do I keep them motivated until they get there?”
Workers should have college degrees for all positions. This establishes a higher profile human resource and sets the organizational standard to a level that allows for a tremendous resource of internal talent and experience that cannot be duplicated anywhere else.
What better way to reward workers than promoting them internally, defining their career path within an organization, and planning all of this around employees who have demonstrated a proven responsibility through their dedication to the organization throughout their careers in different positions?
I’m sorry but I missed the hourly wage these college graduates were offered? Are we to believe that college graduates were hired in at minimum wage, or as close to it as the local economy would allow? Don’t get me wrong, a motivated work force is certainly desirable and the fact that someone has gone through 4 years of college indicates some motivation. If in fact, these graduates were offered an entirely different pay scale, then we aren’t comparing apples to apples. With regard to logistics, I do think that it is more important now to provide excellent service to your customers. With the expansion of services via the internet any customer has several supplier options available at any point in time. Missed sales and profits due to logistics problems won’t fly in our connected age.
Most retailing firms look for the lowest-priced labor they can find. For the warehouse. For the stores. For the office. They’re consistent. Often work quality and productivity isn’t measured so how can they pay for it? And promotion is often by seniority, since work quality and productivity aren’t measured. So the better performers don’t rise to the top. They go where they’re appreciated.