When I worked with factory leaders in the US in the 1980s, I provided them research showing that factory worker productivity declined heavily after 11 hours and after sustained days of constant overtime. They used the research to schedule more sane and stable manufacturing hours and to maximize productivity and worker health.
Now, new research published in the Harvard Business Review illustrates the serious downside of understaffing retail stores and using on-call scheduling to cut costs.[i] The practice of understaffing retail stores has continued despite repeated studies over the past decade showing that increasing staffing would increase sales and profits.[ii] Yet, this research has been largely unheeded.
The HBR authors conducted a randomized and controlled study at Gap retail stores in San Francisco and Chicago begun in November 2015. In the study, 28 stores were randomly assigned into control and intervention groups. In the intervention groups, store managers eliminated “on-calls”. ( An “on-call” is when an employee is scheduled to work a shift that can be canceled anytime up until two hours before the shift is scheduled to begin.) Intervention group employees also had their schedules posted two weeks in advance.
The Gap intervention stores then also implemented five additional changes for each core team associate:
- A “soft guarantee” of 20 or more hours a week.
- Standard start and end times for shifts.
- A stable core schedule (meaning that associates had a consistent schedule from week-to-week).
- The ability to swap shifts on their own without getting their manager’s approval by using the mobile app Shift Messenger.
- The addition of more staff during understaffed hours which were identified based on an analysis of store traffic and conversion rate date which predicted which stores were likely to increase their sales with more staff.
According to the HBR article authors, the results were striking. Sales in stores with core stable scheduling increased by 7%, an impressive number in an industry in which companies work hard to achieve increases of 1-2%. Labor productivity increased by 5%, in an industry where productivity grew by only 2.5% between 1987 and 2014. The authors estimate that Gap earned $2.9 million as a result of more-stable scheduling during the 35 weeks the experiment was in the field, with a very high return on investment.
The authors went on to point out that lean staffing with short-hours part-time staff who have unstable schedules can jeopardize customer service in many ways, most obviously by leading to long check-out lines or situations where customers can’t find someone to help them get a size or style they need. In addition, employees found it easier to show up on time because they were able to more accurately predict their commute times.
Previous research, cited by the authors, shows that stable schedules also have a link to decreases in thefts and an increase in the orderliness of stock. This phenomenon decreases “phantom stock outs,” (when an item appears out of stock but is simply just out of place) and reduces the managers’ time scheduling shifts.
The authors hope their research will counteract the unconscious bias that many retail executives have with understaffing and call-out shifts. They see the benefits of reduced costs but don’t see the hidden costs of the impact on poor customers service.
Here’s the author’s bottom line:
A shift to more stable schedules is a win-win for retailers and their employees. During a challenging time in the retail industry, Gap made a commitment to its values and it paid off. Retailers would be well-advised to take the initiative to implement more stable scheduling for their associates and improve customer service to effectively combat the threat from online retailers.
To learn more about comprehensive talent strategies that work in retail, I recommend The Good Jobs Strategy, by MIT researcher Zeynep Ton. Her research illustrates how companies in service industries with low margins can excel at critical business measures, such as operating margins, customer satisfaction, profitability, and shareholder equity by implementing “the good jobs strategy.” Here is a summary of her insightful book.
Victor Assad is the CEO of Victor Assad Strategic Human Resources Consulting and is a Managing Partner of InnovationOne. He consults and provides “hands-on” support for innovation, global talent strategies, developing agile leaders and teams, and other strategic initiatives. Visit https://victorhrconsultant.com/ to learn more.
[i] Joan C. Williams, Saravansan Kesavan and Lisa McCorkell (March 29, 2018), “Research: When Retail Workers Have Stable Schedules, Sales and Productivity Go Up,” Harvard Business Review. Found at: https://hbr.org/2018/03/research-when-retail-workers-have-stable-schedules-sales-and-productivity-go-up.
[ii] Vidya Mani, Saravanan Kesavan, and Jayashankar M. Swaninathan, “Estimating the impact of understaffing on sales and profitability in retail stores”. Found at http://public.kenan-flagler.unc.edu/faculty/kesavans/understaffing.pdf.