Balancing Act

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Balancing Act

By Donna Hood Crecca - 10/12/2003
Many operators and observers believe that the competition for hourly employees has subsided with the weakened economy and rising unemployment.

Indeed, the economy appears to have forced a cease fire on the wage war. Workers now prefer security and are not so quick to jump from one job to another in these uncertain times, even for a few cents or even a dollar more an hour. Many employees today value benefits, work environment and opportunities for advancement over wages. A competitive wage rate, while still important, is no longer the deciding factor for candidate evaluating multiple job offers.

That's not to say wages are any less of a burden for convenience operators. Hourly wages, in fact, comprise a major portion of any retailer's total labor costs, and with the wage creep of the past few years, convenience operators are now shouldering quite a burden. Faced with a weak economy and an average hourly rate of $9.66 — up from $9.28 in 2001 — balancing a competitive wage rate with fiscal responsibility has never been more important.

Spend Wisely

"The hourly wage rate has definitely increased in recent years due to the increases in cost of living and the competition for employees," said Rachel Andreasson, director of human resources and training for Cuba, Mo.-based Wallis Cos.. The company operates 45 locations employing 373 hourly workers throughout the state. "It's not as competitive out there now for employees, but we still have to deal with increasing wage rates and the need to be profitable."

Each year, Wallis conducts a competitive wage survey and sets its hourly rate based on an examination of the results and a review of its overall operating budget. Wallis competes with other convenience operators, grocery and apparel retailers for hourly workers.

At its metropolitan St. Louis locations, Wallis Cos. will offer $7.70 per hour to new hourly employees coming on board after Jan. 1, 2004, up from this year's starting wage of $7.38. The rural locations throughout Missouri operated by Wallis will see starting wages go from $6.73 to $6.98.

To accommodate for that increase, the company examined how to use its labor most productively, according to Andreasson. "Benchmarking against NACS numbers, we're focusing on the number of hours utilized per store, making sure we have the right balance of hours scheduled for productivity and customer service," she explained. "In light of this analysis, we're paring down labor hours. What's more, we're focusing on personnel development so we can reach our goals of reducing turnover and increasing profitability at each store."

Wallis is not alone in seeking out innovative ways of making the most of the dollars spent on hourly labor. "Retailers are absolutely looking for new strategies to deal with the increasing costs of labor, and the hourly wage is a big part of those costs," says Adam Mertz, senior manager for grocery workforce solutions at Unicru. The Beaverton, Ore.-based firm uses technology to assist retail and foodservice companies in employee selection and retention measurement.

Paying for the Best

"Retailers in all segments of the industry are working to improve productivity, reduce shrink and provide quality customer service. What most are finding is that the first step in addressing those issues is hiring the right people," he said. "It used to be that business was so brisk with the booming economy that the battle for hourly employees was fierce. The thinking was 'Just get me some warm bodies!' Now it's changed to 'Get me the best people.'"

Which brings it full circle: A competitive wage rate is the first criteria for attracting quality employees. "Wages are important for getting the best people," said Mertz. "Today, however, we're seeing 17 applicants for every job opening in the grocery industry, and convenience retailing is experiencing an equal flood of available workers. So, employers are in the driver seat and are now able to be more selective, which is a great opportunity to improve the quality of the hire."

Being more selective can mean more time spent by the person doing the hiring on evaluating candidates, however. In the case of convenience stores, that's usually the store manager. "We're seeing an increased emphasis on streamlining the screening process so the manager spends less time plowing through applications and interviews and more time on the floor working with customers and running the store," said Kevin Tate, senior manager of retail workforce solutions at Unicru.

Two types of employers have emerged in the retail arena in recent years, according to Mertz. "There's a split between companies who treat their employees as commodities and pay them the lowest possible rate and companies who treat them as assets and pay them the highest rate they possibly can," he said. "Companies like Costco make it a point to pay their people well, and look at that company's performance in the past few years. We've seen a relationship between the overall performance of a company and its approach to its labor force."

Andreasson said she's been hearing more talk in the industry about continuing to pay hourly employees more. "But nowadays there's the follow up comment that the person has to be worth it," she adds. "I've heard operators say recently that rather than have two mediocre employees each making $7 an hour, they'd prefer to have one quality employee making $11 and develop them, give them more responsibility and get more out of them.

"I'd say that's a good philosophy: pay for good people and train them, develop them and get them to help you meet your business goals," she said. "Maybe you won't need as many!"