Study: Stable Employee Schedules Boost Retail Sales, Productivity

Study: Stable Employee Schedules Boost Retail Sales, Productivity

In a randomized, controlled experiment at Gap, researchers Joan C. Williams, Saravanan Kesavan, and Lisa McCorkell sought out the effects of more versus less predictable schedules on the productivity of retail employees and the profitability of stores. “The results,” they write at the Harvard Business Review, “were striking”:

Sales in stores with more 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% per year between 1987 and 2014. Our estimate is that Gap earned $2.9 million as a result of more-stable scheduling during the 35 weeks the experiment was in the field. Given that out-of-pocket expenses were small ($31,200), our data suggest that return on investment was very high. (If stable scheduling were adopted enterprise-wide, transition costs might well entail the costs of upgrading or replacing existing software systems.)

Unlike the typical way of driving sales through increase in traffic, the sales increase from our intervention occurred due to higher conversion rates and basket values made possible through better service from associates.

These findings, the authors underscore, contribute to a growing body of empirical evidence that lean staffing practices, with most employees on part-time, unstable, and on-call schedules, are not the money-savers they are often believed to be. It is indeed feasible for retailers to offer their employees more stable and predictable schedules, they add, but employers often overstate the benefits of an on-call system (reduced labor costs) while ignoring its drawbacks (such as poorer customer service and more management time devoted to scheduling).

This research comes at a time when schedule predictability has emerged as a focal point of labor activism and attracted the attention of regulators. San Francisco became the first major city to mandate predictable scheduling with its “retail workers’ bill of rights” in 2014, while Seattle passed a mandate in 2016 and New York City introduced a fair scheduling law for retail and fast food employees last year. Oregon became the first state to enact such a regulation statewide last summer and other states are mulling laws of their own.

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Private Equity, an Employer of Millions, Turns Its Attention to Talent

Private Equity, an Employer of Millions, Turns Its Attention to Talent

As investors become more aware of how talent drives value at a company, they are looking for ways to measure that impact and demanding more information about talent issues from the companies in which they invest. But investors won’t always wait for companies to crack the code connecting talent to performance; some are going ahead with this themselves.

Take private equity firms for example.

If asked who the biggest private sector employers are in America today, many would think of companies such as Walmart, Amazon, or General Electric. Not according to Michael Milken, chairman of the Milken Institute. In a speech he delivered recently at the annual conference that bears his name, the Financial Times’ Gillian Tett reported, Milken produced a list of America’s top 10 private sector employers, as calculated by the institute. Walmart indeed tops this list, but the next eight largest employers, according to Milken’s data, are private equity (PE) firms. And while Milken refrained from identifying these entities, it is not hard to guess who they might be, as Tett explains:

Carlyle and KKR, for example, are each estimated to employ about 700,000 people through their portfolio companies, which probably ranks them just below Walmart. Blackstone has “around 600,000” employees, as Steve Schwarzman, its founder, told the Milken event. Apollo, another private equity group, has 300,000 workers in its portfolio companies, while Warburg Pincus, General Atlantic, and TPG are only slightly smaller. Lobbying groups estimate that private equity firms now employ 11 million people throughout the US (the data are not very transparent).

Over the past decade or so, PE firms have become more like conglomerates. In the traditional model, private equity makes money by boosting the value of portfolio companies, then selling them at a much higher price, but according to research by the RBL Group, many PE firms are increasingly pursuing a “buy and transform” model. In this model, RBL’s Dave Ulrich and Justin Allen explain at the Harvard Business Review, PE funds must behave more like employers and pay more attention to talent and leadership. This has led to the emergence of leadership capital partners (LCPs), who are responsible for ensuring that both the firm itself and its myriad of portfolio companies have the right talent, culture, and leadership. According to RBL, over half of PE firms now have an executive with the responsibilities of an LCP:

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CEOs Want HR to Communicate the Value of Talent

CEOs Want HR to Communicate the Value of Talent

When it comes to what CEOs want from HR to help drive business value, one of their main demands is that HR help communicate the value of talent to investors, whether that means Wall Street or a lone philanthropist. At a breakout session at last week’s ReimagineHR event in London, Brian Kropp, HR Practice Leader at CEB, now Gartner, explained that the reason CEOs want this help is not because investors believe in making employees happy for its own sake, but because they are increasingly acknowledging that talent is a leading indicator of business performance and growth. Below is an overview of some ideas HR leaders should think about when approaching this opportunity:

The Growing Value of Talent

According to PwC’s annual CEO survey, the percentage of CEOs concerned about the availability of key skills as a business threat to organizational growth has risen from 46 percent in 2009 to 77 percent in 2017. This year, CEOs identified “human capital” as the second most important investment to make to capitalize on new business opportunities, ahead of “digital and technology capabilities.” Various trends, from new technologies to demographic shifts, are uprooting the core assumptions of how companies and industries operate. In our analysis of earnings calls from 1,600 of the world’s largest publicly traded companies, we found that words like “change,” “transformation,” and “disruption” have become commonplace. (CEB Corporate Leadership Council members can see the full range of insights from our Investor Talent Monitor here.)

In a recent earnings call with Volkswagen, Chairman and CEO Matthias Mueller said that “Volkswagen needs to transform. Not because everything in the past was bad, but because our industry will see more fundamental changes in the coming 10 years than we have experienced over the past 100 years.” Highlighting the value of talent is becoming one way in which organizations can gain the trust of their investors that their business still has what it takes to outperform a rapidly changing, volatile market. Jean-Paul Agon, CEO of L’Oreal, mentioned in their earnings call that they were going through a “digital transformation” whose success “stems from our very decentralized agile approach in execution with a significant investment in talent.” Conversations like these are only growing, and investors are pushing for more. Private equity firms are even taking matters into their own hands, appointing executives to oversee the talent strategies of their portfolio companies.

As we’ve observed in our Investor Talent Monitor, 46 percent of the largest public companies talked about issues related to talent during their earnings calls in 2010, but by 2016, this number had topped 60 percent. This should not be surprising: Investment firms and activists have been making the news recently for taking an active interest in companies’ talent strategies, pushing firms for greater gender diversity on boards of directors as well as for firms to publish employee compensation and pay gaps.

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Investors Urge SEC to Mandate Human Capital Disclosures

Investors Urge SEC to Mandate Human Capital Disclosures

The Human Capital Management Coalition (HCMC), a group of 25 institutional investors with more than $2.8 trillion in assets under management, has petitioned the US Securities and Exchange Commission to enact a rule that would require companies to disclose details about their human capital management in their reports to shareholders, David McCann reports at CFO:

The group did not define any specific metrics that it wants to be reported, instead offering nine broad categories of information deemed fundamental to human capital analysis as a starting point for dialogue:

  • Workforce demographics
  • Workforce stability
  • Workforce composition
  • Workforce skills and capabilities
  • Workforce culture and empowerment
  • Workforce health and safety
  • Workforce productivity
  • Human rights
  • Workforce compensation and incentives

At present, public companies are not required to disclose anything about their human capital other than their number of employees, unless you count the requirement to reveal the compensation paid to top executives. Investors don’t even know how much money a company spends on its workforce each year.

The HCMC’s proposal is in keeping with a trend we’ve observed in our recent research at CEB (now Gartner) of investors taking an increasing interest in talent issues: Earlier this year, we released our Investor Talent Monitor (which CEB Corporate Leadership Council members can read in full here), showing that among the 900 largest companies in US equity markets, the percentage of organizations talking about talent on investor calls increased from 55 percent to 70 percent from 2010 to 2016. Culture and recruiting were the most common talent topics brought up on these calls, but other issues, like diversity and inclusion, are also subject to growing attention from investors.

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State Street’s Gender Equality Push Reflects Investors’ Growing Focus on Talent

In today’s business environment, we are seeing more and more the main differentiator of company performance is no longer access to technology, capital, or supply chains, but rather the quality of the people at the organization. Not only are CFOs paying more attention to human capital metrics and looking for new and better ways to measure the impact of talent on the bottom line, institutional investors are also taking a stronger interest in talent issues, and CEOs are proactively bringing up this information in earnings calls.

In CEB’s new Investor Talent Monitor (which CEB Corporate Leadership Council members can read in full here), we found that among the 900 largest companies in US equity markets, the percentage of organizations talking about talent on these calls increased from 55 percent to 70 percent from 2010 to 2016: Out of the 14 talent topics we examined, we found that culture and recruiting were the two most commonly discussed on earnings calls; diversity and inclusion was the ninth. And when CEOs are not proactive, investment analysts are bringing it up. A full 85 percent of the investors we surveyed indicated that talent information was critical when deciding when to buy and sell stocks.

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