Tanda Blog: Industry Insights

Industry Insights

Closing Time for 2018: Penalty rates, employee turnovers, and other Australian labour trends

Another year of business has come and gone. The ever-changing landscape is continuously breeding innovations. FW penalty rates are rolling out and turnovers are still unstable. Need help gauging your business plan for the coming year? Here’s a quick look at the major factors in the Australian economy: Awards, Penalty Rates, and Wages • Changes […]

Onboarding: The Employer’s Checklist

Employee onboarding is widely acknowledged by human resource experts to be an important part of building a great team. Hiring right is only the beginning, as integrating a new employee into the company is going to determine how successful they will be in their role, and how much they will be able to contribute to […]

Why employees love Tanda’s Workforce Success software

Workplace automation, including the use of artificial intelligence and robotics, is expected to surge in the next three years, according to multinational insurance broker Willis Towers Watson. This development is unsurprising, as automating HR can lead to significant cost savings for your organisation, especially when implemented in managing attendance, eradicating benefit errors, and automating compliance. […]

Psychological “B.S.”​ Pricing Explained with a Blender

You have a choice: you’re looking at a high-end blender putting out 900 Watts of power for $119 or and identical blender putting out slightly more power (1000W) for $179. Would you be willing to pay an additional 50% for a minimal 11% gain in power? Probably not – this doesn’t sound like it stacks […]

Australian Penalty Rates: Retail Industry Update (Nov. 2018)

The Fair Work Ombudsman recently updated penalty rates for staff under the Retail Award, namely: Saturday rate for casuals: Casuals are now entitled to an additional 15% for all work performed on a Saturday or a 5% increase from previous rates. Weekday evening penalty rates for casuals: Casual workers are now entitled to the evening […]

Creating Customer Programs with Customology’s Michael Barnard

How do you make sure customers keep coming back for more? This is what Michael Barnard, General Manager of consultancy firm Customology, specializes in. A speaker at the Beyond Workforce Success Conference 2018, he focuses on creating customers for life. Existing customers and their interactions shape the future of your business, so it’s important to […]

Keeping up with the Customers: Why feedback matters for every business

Customer service is a constant element in all business transactions. Before, during, and after a sale, your interaction with clients shapes their overall experience. It determines whether they will stay with you, or jump ship to your closest competitor. Customers demand smooth and stress-free support and are willing to pay for it. And the impact […]

Tapping Into what Customers Value with Customology’s Michael Barnard

What does it take to make a genuine connection with your customers? Michael Barnard, General Manager of consultancy firm Customology, says finding out what customers really value is a key to success. During his talk at the Beyond Workforce Success Conference 2018, he showcased the elements of value, and how you can use them to […]

Below average staff performance? Time to look at your onboarding process

Do you remember your first day at work? Did your manager show you the ropes, or did you have to figure things out by yourself? Was your desk already set up, or did you wait a couple of days? All these questions are important in onboarding, or the process of orienting new employees for their […]

Wage theft is on a roll: Sushi as a symbol of unpaid wages

When we hear the word ‘sushi’, what normally comes to mind is a dish of specially prepared vinegared rice, usually with some sugar and salt, combined with a variety of ingredients, such as seafood, vegetables, and occasionally tropical fruits. Recently, however, the delectable Japanese cuisine has become the poster boy for unpaid wages thanks to […]

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How this retailer increased profit by $8.9m from rostering more hours

There has been a lot of speculation on why we are losing retailers so fast. An interesting research piece from the US presented an alternative hypothesis that generalises the issue down to rostering for profit rather than rostering to control costs. For context – If you were given the choice of increasing revenue by 5% or reducing costs by 5% in order to create the most profitable outcome, what would choose? A “back of the hand” calculation would show that reducing costs increases profit more than the equivalent uptick in revenue. Accordingly, most retailers choose option two. This makes sense if you assume the two scenarios are independent of each other, but what if the cost was your employees? This is where the problems arise. For industries like retail, where staff have a direct impact on sales, it’s not as simple of a question as cutting costs to increase profit. In a study led by Professor Marshall Fisher from Wharton, he and his research team constructed a conceptual model from historical data to identify stores within a US-based retail chain that had the highest potential to benefit from increased labour spend. Importantly, the strategy was actually implemented at 168 retail sites over a 26-week period to validate the model, with the retailer electing to implement the strategy further. The result: A near $8.9 million increase in profit of the stores included. The labour cost challenge The challenge in allocating labour budgets lies in the tradeoff between the known immediate payroll cost and the less certain increase in sales that could be achieved with more staff on hand. The researchers point out that retail managers have a tendency to overweigh the decision to reduce the known payroll cost than the less certain increase in sales which could be achieved by allocating additional labour spend. The labour budget death spiral The study highlights the limitation of the most common retail strategy — setting labour budgets as a portion of sales. Fisher points out that this approach creates a circular problem by failing to take into account how store labour spend can positively impact sales, with the worst case leading to a spiraling effect of reduced sales forecasts reducing labour spend which reduces sales further and so on. Quantifying the impact of labour spend on revenue Creating labour budgets that are designed to maximise profit requires retailers to know on a store-by-store basis the correlation between labour-spend and sales. One way to do this is by looking at times when staffing levels deviate from the original schedule. If ten staff were scheduled on a particular day, but on that day only eight turned up, did sales also decrease by the same portion? If not, by how much? If the answer to the above is that sales didn’t decrease at all, the store is likely overstaffed. If there is a measurable impact, the inverse scenario is likely true and the store may be losing sales by being understaffed. This is the same approach used in the study, which found the relationship between random staffing deviations and impacts on sales was statistically significant. Results showed an increase in labour spend pointed to increased sales at varying degrees, depending on known store attributes. Implementing the strategy for profit The study identified stores in a US retail chain which had the highest market potential, making them good candidates for an increased labour spend. The market potential factored in attributes like average basket value and proximity to competitors, which would create scenarios that allow workers to have the highest impact on converting sales. In the study, 168 stores were selected this way, then allocated a 10% increased labour budget over a 26-week period, of which 75% of the increase was actually consumed in practice by the stores. The outcome was a 4.5% increase in revenue at the impacted stores and resulting in a near $8.9 million profit increase. Learning from the strategy The study shows empirically why the common practice of setting labour budgets as a fixed proportion of forecasted revenue is often self-defeating when applied in a retail setting. An opportunity exists to all retailers to leverage this same profit-centric model for defining labour budgets. The data required is available to all retailers however, it may just be a matter of leveraging that information with the right systems. An integrated forecasting strategy that integrates foot traffic, sales, and employee scheduling data is a practical opportunity afforded to retailers of any size to optimise their labour resource allocations. The interesting part is, Fisher’s research is readily available to all retailers who are looking to drift away from the traditional method of fixing labour budget rosters. The next step is to get this method of labour resource allocation battle-tested in the Australian markets. Stay tuned. Up next: What is the Contingent Workforce and how can you leverage it in your business?

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