The Cost of Disengagement to the Retail Industry

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In today’s competitive retail environment, engaged employees are a company’s greatest differentiating factor. But if you’re like most companies, inspiring employees to create amazing customer experiences may require you to reconsider the way you think about employee engagement. Frankly, it’s the only way to overcome the status quo and spark results that bypass competitors.

Disengagement costs the US economy almost $550 billion per year in lost productivity.1 In the retail environment, half of disengaged employees plan to quit their jobs.2 Of course, this doesn’t present a problem for the employee, since the number of available jobs has increased by 73 percent, from 2.2 milion to 3.8 million, since July 2009.3

Inside The Cost of Disengagement to the Retail Industry:

• Learn why competing in today’s retail environment is more difficult than ever and what you can do about it.

• Understand the true cost of employee disengagement in retail and how it impacts business productivity, retention, absenteeism, customer satisfaction, and ultimately, profitability.

• Discover actionable best practices, learn to abandon old-school engagement strategies, and triumph over their costs.

Growth is back. Don’t let employee disengagement limit yours.

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The retail landscape has changed. Today, retail organizations are at the whim of customer opinions, guided more by social reviews and changing buyer demographics (think online, mobile) than by industry best practices or trends. By the time consumers come to your business to buy, they already know everything about your business, your products, even your corporate culture. If these consumers buy from you, they were probably spurred more by referrals from family, friends, or their expansive networks than anything else.

When it comes to retaining customers, customer service is just as important as price, if not more. Recent research tells us 89 percent of consumers will do business with a competitor following a poor customer service experience, and 86 percent are willing to pay for a better experience.4 Whether it’s before, during, or post-purchase, customers need to know that customer representatives are empowered to help with any problems that arise throughout the buying process.

Customer switching is quickly becoming a more common phenomenon worldwide, and nowhere more than in the retail industry, which saw 28 percent of global consumers switch due to poor customer service in 2013, compared to 22 percent in 2012. That’s higher than retail banks (20 percent), internet service providers (18 percent), and even wireless phone companies (17 percent).5 What’s more, 81 percent of consumers who did switch said the company they left could have done something other than drop prices to keep their business. By providing inadequate service, global organizations are leaving millions (or more) on the table—or worse, in their competitors’ pockets.6

It is your employees who ultimately create the delightful—or not so delightful—experience for your customer, influencing their emotional connection with your company. And great service pays – in one study from Northwestern University, researchers found that when employees do satisfy customers, they are likely to spend 22 percent more during their hotel visit.7 Having engaged employees who own the customer problem creates happier customers who are more likely to spend more, come again, and refer their friends to your business.

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DISENGAGED EMPLOYEES FIRE CUSTOMERS.

Five Ways Disengagement Threatens Retail Businesses And What You Can Do About It.

In today’s consumer- controlled retail market-place, it’s no surprise that striving for Net Promoter Scores (NPS: a key indicator of excellent customer service) translates into serious wins for retail brands. When brands achieve exceptional NPS scores, they tend to have 20% - 60% higher growth than their competitors. That’s customer service magic at work.

- Bain

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So what’s next? Empower your employees to create more incredible customer interactions.

• Define your customers’ needs and align your employees’ daily habits to be in sync with their demands. Help your employees understand how customer interactions impact your bottom line.

• Recognize your employees for achievements in the moment. Did someone provide excellent service to create a happy customer? Recognize them immediately to reinforce the behavior(s) that made the difference.

• Provide the opportunity for customers to recognize your employees too and make sure that employees receive that feedback immediately.

Disengaged employees make 100 times more errors than their engaged colleagues.8 That’s 100 times more energy, time, and money wasted because of errors tied to disengagement. Avoid these errors by reinforcing exceptional work efforts with in-the-moment recognition. Recognizing positive behavior ensures that such behavior is consistently repeated.

Only 37 percent of employees have a clear understanding of what their organization is trying to achieve and why —a critical piece of the employee engagement puzzle.9 Help employees understand their contributions to your organization by setting clear goals, communicating expectations, and aligning them to core values and business objectives. Employees inherently want to be successful. If you help them see an entire picture of success, you’ll see a direct impact on improved engagement.

When employees are disengaged, they look for an escape route from the place they hate the most—their workplace. Even worse, your engaged employees (the ones showing up to work and putting in extra effort) have to pick up the slack, negatively impacting their own performance and engagement levels. When employees call in sick, the organization suffers from a loss of productivity.

Total costs related to absenteeism amount to $84 billion annually.10 A decrease of only 10 percent in employee absence could produce a one to two percent savings in payroll costs.11

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Two-thirds of global consumers switched providers in 2013, a rate that’s been steady or rising for the past 10 years, and is attributed specifically to poor customer service.

On a global basis, retailers were hit the hardest by consumer switch last year.

Percentage of Consumers Who Switched Due to Poor Customer Service Globally in 2013:

THE COST OF DISENGAGEMENT TO THE RETAIL INDUSTRY

DISENGAGED EMPLOYEES CALL IN “SICK.”

DISENGAGED EMPLOYEES ARE NOT PRODUCTIVE.

Retail

Wireless Phone Companies

Internet Service Providers

Retail Banks

Cable & Satellite Providers

Hotels

- Accenture

28%

20%

18%

17%

14%

10%

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It’s not easy to tackle the absenteeism problem, but you can create a culture where employees want to come to work because they are highly engaged and aligned with the organization. Empower your employees to be successful by creating a work environment that makes them smile. Include your workforce in the front end of planning and align them with your organization’s objectives. This will give your employees a greater perspective of corporate goals and inspire a purpose-driven workplace.

The number one reason employees quit is lack of recognition: 64 percent of employees leave because they don’t feel appreciated.12 When employees leave, they take with them the knowledge, skills, and, most importantly, experience that contribute to your business success.

As the economy continues to bounce back and employee options increase, employees are more and more likely to seek opportunities that make them feel valued. Across the retail industry, turnover seems to be at an all-time high, representing high replacement costs and lost productivity. In 2012, the Hay Group reported a median turnover rate in retail of 67 percent for part-time store workers. For full-time employees, the median turnover rate is 24 percent, spelling expensive implications for employers. 13

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Here’s the cost breakdown: let’s say your organization has 1,500 full-time employees and you experience an industry average ~ 25% turnover. If your average full-time employee salary is $30,000, you can expect to lose at least $2.25 million per year in turnover costs. That’s not including the thousands of other part-time employees you can expect to lose if your workforce is not engaged.

1,500 employeesloss per year in turnover costs

$2.25 million25% turnover $30,000 average

base salary

THE COST OF DISENGAGEMENT TO THE RETAIL INDUSTRY

When employees leave they take knowledge, skills, and experience with them.

DISENGAGED EMPLOYEES WILL LEAVE YOUR COMPANY.

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Engaged employees are 87 percent less likely to leave their organizations than disengaged employees.14 Do you measure employee engagement? If not, now is the time to start. Find out where you stand before attempting to address the problem. Don’t wait annually to measure engagement. Measure on a continuous basis. Listen to employees and respond to them quickly.

So what’s your next move? Change the way you drive engagement in your workforce. Make it unimaginable for them to leave your company. And of course, recognize achievements and the behaviors that lead to positive action and exemplary results.

On average, it costs retailers $3,328 to replace a $10/hour employee. For full-time employees earning less than $50,000 annually (three-quarters of all US workers), the typical cost of turnover is 20 percent of salary.15 This cost includes the following:

• Separation costs (exit interviews, severance pay, and higher unemployment taxes)

• Increased overtime and other costs incurred when existing employees pick up the slack to cover a former employee’s duties.

• Replacement costs associated with recruitment such as advertising, search and agency fees, applicant screening, interviewing, and applicant travel.

• On-boarding costs such as orientation, classroom training, and certifications.

Engagement matters. According to a keystone Kenexa study on employee engagement in retail, more than 50 percent of disengaged retail employees are planning to switch jobs in the next year, versus 10 percent of engaged employees.16

Companies with low engagement scores tend to have an operating income that’s 33 percent lower than companies with high engagement.Additionally, companies with a highly engaged workforce experience a 19 percent growth in operating income over a 12-month period.17

That’s bad news for retail companies, which have some of the lowest engagement scores across all industries. On average, customer-facing employees are the least likely group of employees to give their all on the job, solve customer issues in the moment, or stick around long enough to develop meaningful relationships with customers.18

6 6 THE COST OF DISENGAGEMENT TO THE RETAIL INDUSTRY

DISENGAGED EMPLOYEES NEGATIVELY IMPACT PROFITABILITY.

Companies with engaged employees drive profits as much as three times faster than their competitors.

Start building your recognition plan now with The Ultimate Guide to RecognitionGO!

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Disengagement is an ugly word. You know all about it and you may have already been aware of the toll it takes on business success. In the retail world especially, it is imperative to improve employee engagement, align employees to company values and business objectives, and encourage an in-the-moment environment of recognition when employees create great customer experiences.

This year will mark the lowest unemployment rate since 2008 meaning that your focus must shift to making employee retention one of your highest priorities through engaging employees and aligning then with your company values.19

Don’t roll the dice when it comes to your workforce. There is a better way: engage, align, and recognize your employees so they stay in the game—with you—and achieve greater success.

And in order to triumph over disengagement, your business must abandon old-school engagement strategies. Now is the time to adapt to your new reality as a future-focused employer.

Every employee must be engaged, must be aligned with business objectives, and must be recognized for meeting their objectives in the moment by their peers, by their managers, and even by their customers.

UNITED STATES UNEMPLOYMENT RATEPercentage of the Labor Force

Source: www.tradingeconomics.com | U.S. Bureau of Labor Statistics

Oct/13

7.3%6.6% 6.3%

5.9%6.2%

Jan/14 Apr/14 Jul/14 Oct/14

THE COST OF DISENGAGEMENT TO THE RETAIL INDUSTRY

Triumph over disengagement

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8 THE COST OF DISENGAGEMENT TO THE RETAIL INDUSTRY

What happens when a retail company changes the way it works:Save Mart Supermarkets is a regional grocery retailer serving Northern California and Nevada. With more than 16,500 employees, Save Mart’s enduring business philosophy is rooted in innovation and superior customer service. Over the past few years, the retailer has extended its focus to delivering superior customer experiences through employee engagement and recognition.

Save Mart implemented the Achievers Employee Success Platform in 2012 to align employees to business goals through rewards and recognition. Reinforcing desired employee behavior became the key driver in creating an exceptional customer experience and driving customer loyalty, which have been proven to increase revenue.

With Achievers, Save Mart conducted a mystery shop program with the goal of identifying factors that lead to increased customer satisfaction. Analysis of the program showed that rewards and recognition drove a significant increase in customer satisfaction. Before Achievers was implemented, just 33% of stores met the goal of 90% customer satisfaction. After using Achievers for six quarters, Save Mart saw an impressive 70% of stores surpassing the 90% mystery shop customer satisfaction goal. This translates into 112% growth in customer satisfaction across all stores, a massive business success for the organization, and proving the relationship between recognition and customer satisfaction.

Achievers allows all of our employees to align with our vision and our mission.

Save Mart Builds Stronger Customer Relationships With Achievers

Partners In Employee Success

See Save Mart’s commitment to employee recognition in action.

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The five all-important rules to remember about disengagement

Disengaged employees fire customers. The retail industry has the highest percentage of consumers who switch due to poor customer experiences.

Disengaged employees are not productive. They make 100 times the number of errors as their engaged colleagues.

Disengaged employees call in “sick.” A decrease of only 10 percent in employee absence could produce a one to two percent savings in payroll costs.

Disengaged employees will leave your company. More than 50 percent of disengaged retail employees are planning to switch jobs in the next year, versus 10 percent of engaged employees.

Disengaged employees negatively impact profitability. Companies with low engagement scores have an operating income that’s 33 percent lower than companies with high engagement.

Keep these rules top of mind when you consider the cost of disengagement to your company. You shouldn’t go another day without revamping your customer experience strategy – which means focusing on employee engagement so your employees are empowered to meet customer needs.

Engage your employees, align them to business objectives and company values, and recognize their achievements in the moment. This is the irrefutable way to overcome costly disengagement, retain your talent, and drive business success.

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THE COST OF DISENGAGEMENT TO THE RETAIL INDUSTRY

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Sources

1. Sorenson, Susan and Garman, Keri. “How to tackle U.S. employees’ stagnating engagement.” GALLUP Business Journal. 11 Jun. 2013. Web. 10 Feb. 2014.

2. “Retail Sector Struggles with Low Employee Engagement.” SHRM. 3 April 2012.

3. United States Department of Labor. Job Openings and Labor Turnover Survey (JOLTS). Bureau of Labor Statistics. Jan. 2014. Web. 10 Feb. 2014.

4. “2011 Customer Experience Impact Report.” Oracle. 2011.

5. “Accenture 2013 Global Consumer Pulse Survey: Global & U.S. Key Findings.” Accenture. 2013.

6. “2011 Customer Experience Impact Report.” Oracle. 2011.

7. PeopleStreme. “The impacts of disengaged workers.” Video. YouTube. 4 Sep. 2013. Web. 10 Feb. 2014.

8. “Employee Engagement: The Key to Realizing Competitive Advantage.” Development Dimensions International, Inc. 2005.

9. Lee, David. “Here’s Why Your Employees Are Just Not That Into You.” TLNT. Oct 10 2012. Web. Oct 2 2014.

10. “The causes and costs of absenteeism in the workplace.” Forbes. 10 Jul. 2013. Web. 10 Feb. 2014.

11. “Absent employees drain productivity and profits.” HR Blog. 23 Aug 2010. Web. 10 Feb. 2014.

12. Kiradhy, Matthew. “Why Is It So Hard To Say ‘Well Done’?” Forbes. Sept 13 2007. Web. Oct 2 2014.

13. “Hay Group study finds employee turnover in Reatil industry is slowly increasing.” Hay Group. 7 May 2012.

14. “Driving Performance and Retention Through Employee Engagement.” Corporate Executive Board. 2004.

15. “There Are Significant Business Costs to Replacing Employees.” Center for American Progress. 16 Nov 2012.

16. “Retail Sector at Risk Through Lack of Engagement, New Study Claims.” Kenexa. 21 Feb 2012.

17. Haydon, Reese. “Show me the money: the bottom line impact of employee engagement.” TLNT: the business of HR. 11 Jun. 2013. Web. 10 Feb. 2014.

18. Sager, Ira. Forget Employee Engagement; U.S. Companies Need Passionate Workers. BusinessWeek. 19 Sept 2013.

19. “United States Unemployment Rate.” Trading Economics. Web. 7 Oct 2014.

THE COST OF DISENGAGEMENT TO THE RETAIL INDUSTRY

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Achievers delivers the only true cloud Employee Success PlatformTM, a powerful new way for companies to engage, align, and recognize

employees, enabling remarkable business success. Every day.

Learn how your company can change the way the world works at www.achievers.com.

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