There is a rule in business that if you are not growing, you may be dying. But grow too rapidly and you may still find yourself on the fast track to the business graveyard. That will happen if you are not alert or constantly looking out for the speed bumps that will come your way when you are riding on a highway at top speed. Typically, the growth challenges relate to outgrowing the infrastructure, losing talented people, stretching the human capital resources too thin, attracting new competitors and flagging customer service.
These are also the challenges that face the retail industry in India today as it whizzes along on the fast lane. Being a labour intensive industry sector, workforce management has emerged as the single biggest task for human resources managers. Companies are being challenged to reorganise and adapt their employees to become more efficient. The Deloitte Changing Times, Changing Roles report 2013 sums up the key concerns for HR as hiring skilled talent, retaining critical talent and engaging and motivating employees.
Before we get into the specifics, here is a glimpse of how the industry has grown so far. At $450 billion (or Rs 20.85 lakh crore, according to an April 2013 Deloitte Touche Tohmatsu study), it contributes 14 per cent to the national GDP. The sector employs 7 per cent of the total workforce and is the second largest employer after agriculture. Organised retail, which is about 17 per cent of the total, is expanding rapidly at 20 per cent per year, compared with traditional retail where growth is pegged at 7 per cent. This growth is driven by the emergence of large-format retail outlets and shopping malls.
Such scorching growth has meant there is a huge shortage in skilled manpower. It doesn't help that employee churn is quite high in the sector. Company heads and experts that
The Strategist spoke to reckon that the attrition level in the retail sector would be around 70-80 per cent, and even higher in some cases. Globally, the attrition rate is 30-40 per cent.
Potential to generate employment:
|Source: Deloitte secondary research|
The situation gets complicated when you consider how the workforce is deployed. In most companies, 80-90 per cent of the staff is employed at the front end. A majority of the staff that represents this front end - where the consumer actually interacts with the brand - is from economically weaker sections and needs thorough product knowledge and training to be able to understand the consumer needs and address them effectively. A senior executive at a popular apparel retail brand explains it well: "That branded dress you purchase from the store at a glitzy mall would cost the same as the monthly grocery bill that the sales person's family would run up. Imagine the disconnect!"
Also, retail is a thin margin business compared with other service industries where the rewards and dividends are far higher. So, the task of retaining key people becomes all the more difficult. Experts say most of the attrition happens in the first year when bulk of the training is imparted. Which means a lot of training money simply goes up in smoke.
The task of attracting the best people and keeping them happy is big enough to keep every HR head awake at night. Of course, players are learning the ropes and reacting fast. Here are some lessons from the recent experiences of the big boys in Indian retail.
Planning is key
Spencer's Retail, the Rs 1,400-crore food and grocery chain from the RPG Group, faced two sets of issues when it decided to shift tracks some eight years ago. The first related to downsizing, which required retooling the workforce and the second concerned expansion of its repertoire, which needed a different kind of training altogether.
Around 2004-05, just when the sector was beginning to take off, the company embarked on an expansion spree opening new and bigger stores in newer and bigger markets. In five years, as the market turned competitive and growth slowed down, it had to take the harsh decision to cut the flab. As it began closing down outlets in markets where business was indifferent, the company realised that it had more people on its rolls than it actually needed.
By 2010, the company had calculated that roughly 250 stores had to be shut down in a span of nine months. Which meant 4,000 employees had to make an exit from the company. Spencer's decided it would go the extra mile to ensure employees did not feel deserted.
"We realised that though we hired hastily, we could not fire hastily. It had to be done with a lot of care," says Nihar Ranjan Ghosh, executive director, Spencer's Retail. So a damage control exercise was devised. First, the company created cross functional teams to identify and retain the top performing employees at the front end. Second, it had "frank, transparent" one-on-one discussions with the staff that was being laid off explaining why it had to take such a step. Third, the employees, depending on the grade, were given anywhere between 30 and 90 days to look for a new job.
During this time, Spencer's arranged for specialists to come to the stores, train this laid-off workforce and help them update their resumes. The company made a special request to its recruitment agency to ensure all its employees get placed elsewhere. Many of the internal managerial staff were asked to refer these employees. By the end of the first month of this exercise, roughly 1,000 laid off staff had secured jobs in other companies. Spencer's also decided that when it would go into the hiring mode later, the first right of refusal would be given to employees who were asked to leave the company.
A big task, according to Ghosh, is to understand how a lay-off can affect a person psychologically. "These were people who came from an economically challenged strata of the society. Merely asking them to go with a severance package would have been unfair and we didn't want them to feel they had some shortcomings," Ghosh explains. The exercise of hiring specialists, training the laid off staff and connecting them with recruitment agencies cost the company an additional Rs 60-70 lakh (over and above the severance packages that were given), but the company says it was a worthy cause.
But its problems were far from over. While Spencer's was getting out of unviable markets it also realised the time was ripe to look beyond the food and grocery format. It got into apparel but found it was a completely different ball game.
The people attending to the food and grocery section (who only needed to ensure stock supply, address grievances, keep the store spic and span) now had to interact more intimately with the consumer who would ask questions about design, cut and fit of garments etc, all of which required a different kind of expertise. As its complaint boxes began to fill up, the company roped in Pearl Academy of Fashion to devise a training programme specifically for the Group, which made all the difference.
Training has been a big area of focus for the Future Group as well.
With 90 per cent of its staff comprising the frontend workforce who face consumers as part of their daily routine, training has become the key tool to build employee confidence and improve sales. "Given the high attrition rate in this sector, our endeavour is to nurture employees for the long term and ensure their commitment leads to outstanding professional growth," says G R Venkatesh, head, People Office, retail businesses, Future Group.
Sometimes, however, the best intentions can backfire. The Future Group realised a standalone training programme doesn't help - in fact, it increases churn as the trained people quickly begin to look out for 'better opportunities' outside. What is required, says the company, is marketing the company to its people and making them aware about their growth path there. So now, with author Devdutt Pattnaik as its chief belief officer, the Group has embarked on a plan to demonstrate to its employees where they fit in in the overall scheme so they feel part of a bigger mission. It hosts off-site programmes and team building exercises more often and in most of its training modules uses examples from Indian mythology to drive a sort of emotional connect between the corporate entity and its people.
Building emotional connect is imperative, agrees Venkatramana B, president, group HR, Landmark Group, because employee disengagement is a direct result of the kind of job retail entails. The front end staff stands for eight to 10 hours at a stretch attending to the customer; those in senior positions feel there is not much scope to grow as the market itself is at a nascent stage. To make things better for the people, Landmark has devised as many as 10 training modules aimed at reducing what Ventakramana calls "infant mortality" or exits within in the first three months. It also continuously looks out for signs of disengagement among workers. When Landmark figured that despite all its efforts attrition was touching 80 per cent some years back, it introduced internal job postings (something that didn't exist before) to identify existing talent and fill up posts with candidates from within the organisation instead of looking out. "This allowed us to look at the career graphs of our employees more closely and give them a fillip," he adds.
Sometimes a well-planned move can fall flat on its face. At one point, when the company was looking at ways to cut costs, Landmark decided to hire people on a part-time basis during lean seasons, idle weekday hours and so on. Soon, the management realised that people under this arrangement had zero accountability and were hardly involved in the work assigned to them. "The aim was to ease matters for our full-time employees but it didn't work," says Venkataramana.
For electronics retail chain Croma, training is top on the check list if only to serve customers better. Ajit Joshi, MD and CEO, Infiniti Retail, says in his category the staff needs to be absolutely thorough in their knowledge of the products and their understanding of customer needs. So, besides offering a training programme that is a mix of on-the-job and classroom sessions, Croma has started sending daily SMS snippets to its employees with updated information about the products, brands, categories that are stocked by the company. One small move that has gone a long way in boosting the sales person's confidence; it has also ensured the employee feels looked after, says the company.
Evidently, the challenges are many and there is no one-size-fits all formula for success. A lot depends on how proactively firms pick up the warning signals, says Devangshu Dutta, chief executive of Third Eyesight, a retail consulting firm, rather than "plug the holes after things begin to fall apart".
- Hire from tier 2/ tier 3 cities
- Hire permanent staff rather than temporary staff
- Higher level of gender diversity in retail sector
- Introduce flexible working arrangements to manage peak season requirements
- Develop alternative channels (etailing, direct selling) as feasible
- Design competitive compensation structures to incentivise employees
- Identify high potential performers and investing in their development
- Develop training initiatives and platforms that cater to specific requirements
- Focus on internal upward movement and cross functional moves to ensure retention
- Design career plans for key performers