New Challenges in Retail Human Resource Management

Last Updated: 11 Jul 2021
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Such terms as globalization, process management, and value-based management dominate the current discussion of management in retail co mpanies. There has been an increasing realization that people are one of a company’s key assets. Re- tail means working and serving customers in a direct, personal way. This calls for special actions from retail companies to fulfill the demands of an increasing num- ber of well-informed and sophisticated consumers.

In view of all the c hanges in both national and international contexts, it is ab solutely essential to get the right people if a business is to be successful and sustainable. Retailing is a major labor-intensive industry sector. The refore, companies are continually challenged to re-organize and adapt their st ructures to become more efficient. The necessity for part-time workers, because of long store opening hours and peaks in the trading day/week, requires a flexible framework to optimize labor processes. Emotionally, the workforce needs orientation and vi sion in changing times.

Human resource management (HRM) has to provide a “coach,” not only to organize, but also to support employees and m anagement mentally and p rofes- sionally in fulfilling their tasks in terms of future company goals. People are the driving force behind all transactio ns that occur in retailing outlets. In the future world of retailing, there will be an increasing need to adapt and change towards a more formative and proactive style of HRM. M. Krafft and M. K. Mantrala (eds. ), Retailing in the 21st Century: Current and Future Trends. The formats of retailing have been evolving continuously over the last 100 years, and individual retailers have changed tremendously in the products they sell and in the manner in which they operate. Retailing of lifestyle products impacts directly on the changing culture of our societies—one has only to think of the introduction of the Sony Walkman or the Apple I-Pod to grasp the international range of con- sumer needs.

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In order to provide an expanding product and service range, retail has had to alter and amend its approaches to satisfy ever more voracious and in- creasingly sophisticated consumers. For several years, retailers have had a promi- nent role in today’s society in their capacity as employers: the retail industry em- ploys one in nine of the UK workforce, for example (Gilbert 2003). Nearly two thirds of employees are female. Therefore, special concepts in HRM are require d to allow for the compatibility of work and family.

Gilbert (2003) also points out that: “[T]he retail sector has had a reputation for not supporting its employees and for having lower pay and longer hours than other sectors. ” Future HRM h as to find a practical ap proach that will lead to the right balance of companies’ and employees’ needs in terms of pay ment and hours for the workforce, and service guarantees for their customers. The developments in many European countries show the changing attitudes of young university graduates for whom retailing now provides modern and attractive career pro spects.

However, retailing is still far from the first choice for top graduates and this needs to change. Environmental factors such as economic, social, political, cultural, and demo- graphic developments are driving the rapid changes in the retail business. Retail management and HRM departments have to be aware of all these changes. Some of the environmental factors are described below. New Forms of Trading New trading formats have been the lifeline allowing businesses to gain and sus- tain competitive advantage. New t rading form ats are constantly appearing at both ends of the spectrum.

Higher margin goods, sometimes even with designer labels, have coexisted with the increasing demand for more aggressive pricing such as that app lied by hypermarkets, off-price retailers, and hard discounters. Often, consumers switch from smaller local stores to supermarkets, and increas- ing numbers of consumers are using new channels for Internet and TV shopping. The international press reports the continuing success of new fo rms of online retailing (e-tailing) in Europe and the USA, as well as rapid changes in Eastern Europe and Asia in use of the Internet.

Within these trading formats, new pro- fessions, working careers, and functions are developing very fast. To succeed, HRM has to recognize and manage these changes in retailing human resource requirements.

Exchange of knowledge is one of the basic prerequisites

For ex- New Challenges in Retail Human Resource Management 259 ample, the German retailer METRO Group is installing software that will allow knowledge shar ing with sy stematic tr ansfer of all necessary infor mation and skills to METRO Group sites throughout the world.

It is imperative for a retailer to co llect and struct ure all exper ience and knowledge fro m d ifferent staffs, stores and country-markets. The challenge in the future for retail company man- agement i n general and HRM in particular will be t o ensure t hat th e right knowledge is available at the right time and in the right place. Consumer Behavior Closely aligned with the expansion of new trading formats are the changing needs of consumers.

Increasing social acceptance of women in the labor force has led to the emergence of a new l ifestyle and changed consumer purchasing patterns over the last seve ral decades (Gilbert 2003). Present-day consumers are m ore experienced, more aware of their important role in the business, and more self-confident than previous generations. Further, as international retailers have found out, there is a great need for retail chains to adapt to ‘local’ ways, so as to fulfill regional needs and shopping habits, especially in the food business (e. g. , see c hapter by Mierdorf, Mantrala and Krafft in this book).


Let us consider what retailing looked like 20-30 years ago: little or no EPOS tech- nology, electro-mechanical tills, paper-driven accounting, checking and co mptom- eter systems, perhaps enhanced by a ‘Kim ball tag’ system to aid stock replenish- ment. Thirty years ago there were not even many supermarkets—self-service was just appearing over the horizon for some modern retailers in the 1960s and 1970s. The advent of increasing computerization in the late 1970s started to affect busi- nesses as they adapted to possibilities that began to open up through IT-supported working practices.

Processes for controlling, distribution, payroll, accounting and, especially, merchandise management systems started to be aut omated during the early 1980s. E DI, scanning, and bar-coding were im plemented—after heavy IT investments—to lower costs and increase accuracy levels. Many organizations were downsized and refocused as these manual processes were converted to more customer-focused activities and professional supply chain management. Structural Trends and Competition In Europe and USA, retailing is characterized by increasing rates of market concentration.

This is caused by shareholders’ requirements for more cost-effective operations, mergers among suppliers, and the growth of technology. Future retail- ers have to be fast and flexible in making decisions about worldwide sourcing and selling. This calls fo r people to acquire skills and competencies that will allow them to compete successfully in both national and international contexts. Interna- 260 Julia Merkel, Paul Jackson, and Doreen Pick tional HRM has to consider different ways of working with people: in many Euro- pean countries, HRM departments have to cooperate with works councils, which influence companies’ management thinking.

HRM has the role of developing and defining human working processes fai rly an d prov iding for capability-oriented working conditions. Germany’s political debate about the consequences of capital- ism in 2005 shows the need for companies to act and communicate on the basis of consistent and balanced argumentation. HRM needs executives who are familiar with developments going on in a society, shifts in cultural values and behavior. To be competitive in global markets, many organizations reduce staffing levels and change to automated processes to lower costs.

Beyo nd this, however, more pro- gressive ret ailers, s uch as Carrefour, M ETRO G roup and Wal-Mart, have expanded their offerings: they have i nvested heavily in new product ranges, new trading f ormats, and joint v entures, o r i n shapi ng an d spreading t heir bra nds. Merely cutting investments, e. g. , in the sales force, or opening stores around the world per se i s not enough to meet the demands of the new retail age. A clear strategy, stable and IT-supported processes, and correct allocation of financial and management resources are needed for international success the future. Globalization of Sourcing

Sourcing from overseas vendors gathered momentum with the conclusion of trading agreements with, for example, the Peop le’s Republic of China and grants of ‘favored nation’ status. Manufacturing’s importance has decreased enormously in most W estern countries since the em erging Asi an “tigers” and less expensive Eastern European manufacturers began to dominate the supply of goods, especially, nonfood goods, to the industrialized countries. Consequently, in the West, distribution has become one of the most promising sources of improved margins as new technology drives down the cost of logistics.

However, with globalization of sourcing, it has become imperative to develop special strategies to enable the headquarters workforce to be aware of international processes, markets, and com- petitors. Further, domestic retail companies anywhere have to also stay on top of emerging global trends. Companies that plan to enter new foreign markets have to carefully consider local cultures, religious values, and national laws in developing their new market entry strategies. All the developments mentioned above are stron gly interrelated.

Retail man- agement and HRM have to jointly examine all these change s to m ake adequate and appropriate adaptations to organizational structures, systems, and processes. Changing Role of HR Departments HR departments—originally called payroll departments, then relabeled staff man- agement, followed by another m etamorphosis to personnel and then to human resource management—have been in the vanguard of change management in re- New Challenges in Retail Human Resource Management tailing. Many companies have recognized that HRM is an essen tial component in achieving long-term success, and not just a means of recruiting workers.

Areas such as the recruitment process, selection, induction, retention, performance moni- toring and evaluations, staff training, development and motivation. Decision mak- ing, and re-sourcing for expansion will continue to demand the professionalism of HRM workers. Personnel in different kinds of businesses have to adapt and change in response to emerging trends. The international HRM professional has to think globally, while rem aining ab le t o fu lfill lo cal asp irations. This i dea is based on Geert Hofstede’s theory of cultures. He turned the well-known slogan, “Think globally, act locally” into: “Act g lobally, think locally. A major task of th e international HRM professional is to provide expertise in terms of interpretations of the local laws and working practices, so as to offer practical steps for successful operation of the international retailer. Building the Future – HRM Challenges for Retailers Retailing means working in a g lobal con text but sim ultaneously adjusti ng to local needs. We describe below some international challenges to HRM in retail which are connected with national and local requirements. As mentioned above, major retail com panies have decided to invest globally to en sure greater po ten- tial for sustainable growth.

Several ret ailers have identified internationalization as a huge oppor tunity for growth. In 2006, about 50 % of the METRO Group’s employees work ed ou tside Germany. Th e Am erican retail g iant Wal -Mart, France’s Carrefour, and United Kingdom’s Tesco are thr ee more organizations that are aggressively pursuing international expansion. This immediately gives rise to qu estions that require answers in every ar ea of operati on. An swering these questions is key to successful transformation of a national business model into an international one.

HRM strategy builds on the business strategy of the firm. The HR persons in charge have to be b usiness partners for management, providing strategic and practical operational solutions in the form of HR concepts or staffing solutions based on thorough know ledge of the bu siness. Wal -Mart’s initial attempt at expansion in Germany failed—as did Marks and Spencer’s—because neither of these companies appreciated the nuances of German retail culture, underestimat- ing local competition and, especially, the price sensitivity of German customers.

Carrefour’s for ays i nto the United Kingdom lik ewise end ed with a strategic retreat. As long ago as in 1989, Dawson stated that: “Retail is a response to culture”—and the HRM function plays a c rucial role in assisting corporate man- agement understand and adapt to local cultures. For example, UK consumers’ resistance to th e use of self- scanners p rovided b y some retailers to r educe queues at checkou ts might have been anticipated by HR managers interacting with local employees. 262 Julia Merkel, Paul Jackson, and Doreen Pick Strategic Tasks of HRM: Key strategic tasks of human resource management of an international retailer include: ? Assisting the retailer’s top managers who work well over 60 hours a week negotiating myriad complex issues in a competitive marketplace, cope with stress arising from quick changes, fierce competition, cost pressures, time management problems, and the need to make quick decisions. Keeping up to date with continuously developing technology and being able to optimize its usage so as to achieve the right balance between pro- ductivity gains and service gains.

HR needs to find answers to the following question

How much technology can customers and the workforce handle in the store. Dealing with demography, e. g. , an aging workforce in Western Europe but predominantly young and inexperienced employees in other areas of the world, such as Asia and the Middle East. Strategically, this poses one of the hardest challenges for HR professionals who are required to recruit and develop t alented st aff, offer t raining f or all age gr oups, ens ure a well-balanced age structure, and build up a working climate enabling employees of all ages to buy in and show suitable results.

Cross-cultural recruiting and training

All cultures have their own unique practices and emphases, some of which are obvious while others are more subtle and harder to detect. HR departments need to be able not only to of- fer advice and professional preparation to local managers but also ensure that individuals appointed to these positions are aware of company policies as well as sensitive to the local culture. That is, in international settings, in- dividuals need both a common language and intercultural sensitivity. Identifying and retaining highly qualified, highly motivated individuals ready for international management appointments: The role of HRM is to provide an international assignment policy that takes into account individual prob- lems of expatriates, works around and supports family integration abroad.

Operational tasks of HRM

  • Some key HRM tasks that have to be fulfilled to enable the workforce to meet the needs of customers nationally and internationally include:
  • Reshaping andestructuring the workforce so as to broaden their e xperience by the acquisition of n ew skills:
  • Developments like automatic stock replenishment, new methods of conducting transactions, and alterations to the way goods are displayed, have increased retailer employee training re quirements. Also employees must learn to serve increasingly litigious consumers wh ile main taining h igh productivity wh ich is essen tial in h ighvolume, l owmargin enterprises.
  • Professional human reso urce m anagers must train employees on how to balance these oft-conflicting demands for high staff-productivity and great customer service.

Consequently, identifying and gathering the data for human capital valuation and assessment of the return on human resource investments is an important task for HR managers. ? HRM itself must develop, moving from being a ‘personnel’ department to its new role as a strategic business partner and building the basic structural foundation that will enable companies to organize and optimize their return on human resources. The emerging trends that persistently need HR attention currently include some of the areas discussed below.

We m ake a di stinction between HR challenges and general conditions. In the case of HR challenges HRM has direct influence, while general conditions are contingencies within which HRM has to operate. This list is not exhaustive, but looks at some selected current trends and needs. Current HR Challenges.

Company strategy

HRM has to adapt its entire program to the company’s overall vision and strategy. It is known that organizations with good human capital management generally create substantially more shareholder value than other companies.

The significance of human capital is especially visible in the case of a merger. The success of a merger depends much more on the competencies of the staff and m anagement than on other aspects, such as finance, IT, and production. Hax and Majluf (1991) feel that it is there- fore essential for well-planned practices and highly efficient HR functions to be aligned with the business of the company concerned. An HR strategy must be ‘com prehensive’ in the sense of addressing all the different personnel and HR activities central to the long-term development of the firm’s businesses.

HRM departments have to conceptualize and structure business Julia Merkel, Paul Jackson, and Doreen Pick plans with detailed operations extending from the current to the future state of strategy, organization, and action. These must be based on the organization’s mission and common values. Added Value Management. This confronts HRM with the critical q uestion of what actions add m easurable value to the business. There is less cer- tainty about the central direction and more about committed management setting the right tone within the organization for defined values to flourish.

Commitment in the form of personal engagement and belief in the organi- zation and its concepts is important. HRM has to support this by elaborat- ing concepts and criteria for their evaluation, some of which should be re- vised annually. The following behavioral aspects of the workforce should be included in the HRM concept:

  • Personal Honesty and Integrity
  • Self-Motivation and Entrepreneurial Style
  • Ability to Communicate the Values and Benefits
  • Encouraging Others to Want to Work with the Company and Share its Values

Pride in the company training and developing, coaching, and mentoring 

Change Management. The most important drivers for change are globaliza- tion, technology, and a workforce that is in creasingly knowledge-based. Ulrich has stated that there is a need to redefine firms’ performance less in terms of cutting cost and more in terms of profitable growth (Ulrich 1997). Managers have to be able to make changes happen of their own volition and also to support the company in its drive for sustained success. Manag- ers have to be able to empower their own staff.

Moss Kanter (1989) states that it is only through true empowerment that staff will really contribute to the changing needs of a busi ness, since they will then be doing things be- cause they understand them and for the right reasons, thinking and reflect- ing on the changes and t heir likely impact, and above all feeling at ease with the implementation of change. Change management recognizes the need to reflect on t he manager’s role in the management of cha nge, the identification of problems, and the ability to make changes in either a pro- grammed or a no nprogrammed manner.

HRM has to take account of the risks required for the achievement of change in the company.

Recruitment and Retention. Employee recruitment and selection is one the most vital HR functions. However, the retail industry is faced with difficul- ties in attracting highly educated people. Nonetheless there is a po sitive trend for change. The challenge for HRM is to show the attractiveness of the retail sector a nd ensure that appropriate training and careers are avail- able, so that this sector can take a leading place in t he competition for available talent.

Retail has recently been promoting opening up access to its workforce by declared rejection of discrimination on the grounds of gender New Challenges in Retail Human Resource Management or race, and, lately, also by employing more elderly persons. It is also nec- essary to build up programs for part-time workers. The ability to value diversity within the workforce is a strength, provided that this is backed up by continuous training and correctness. Many organizations run courses on this aspect, usually under the title of ‘Inc reasing Self-awareness,’ as t he ability to understand one’s impact on others is a powerful skill.

Next, retention focuses on the goal of keep well-performing staff in the company. This depends not only on interesting work, fair compensation, and a motivating climate and management culture, but also on transparent and achievable career paths combined with a supportive management that provides guidance.Employability and Continuing Education. This is a major area of challenge to most employers, but especially those who employ large numbers of staff, as retailers do. Staff have to take retraining in order to adapt to a constantly changing external environment.

It is a question of mindset, working environment, and attitude towards self-responsibility. The future will be characterized by the following needs, amongst others: The need to handle increasing complexity. The need f or co ntinual enh ancement of th e ma nagement skill sets known as ‘Life-Long Learning,’ i. e. the ability to adapt to changing environments, challenges and technology. The need for a positive attitude to newly emerging opportunities: Managers themselves have to become life-long learners.

This is of particular importance to the changing generations. The process can be aimed, for ex- ample, at obtaining further business qualifications, such as an M BA, a marketing diploma, or HRM qualifications, or attending training courses on key skills, such as lead ership, or personal development workshops. Some universities are now of fering master’s degree courses on wor k- based learning in which projects are directly related to the learning envi- ronment of the individual s tudent’s workplace.

Analysis of actual workproblems can be counted as a credit toward an MA o r an MSc. Classroom training fostering positive acceptance of new structures, top- ics, and technologies is necessary. The need to communicate regularly and precisely, and transmit meaning and values: While the company will provide support, it will be the indi- vidual managers who have to ‘drive’ their own learning and that of others in periods of intense change, often using technology such as video con- erencing or E-l earning/blended learning to pursue their studies. HRM needs to consult with managers on how best to use modern methods.

The need for creative management: This can be the way to bring new insights into common view or to introduce new issues as an area for the HRM specialist to develop. Many managers are locked into their own reality or their own version of their world, allowing themselves to be trapped into a mind-set of either success or self-perpetuating failure. One 266 Julia Merkel, Paul Jackson, and Doreen Pick f the keys to successful business growth is for managers not to allow themselves to be trapped in a ‘psychic prison’ (Morgan 2001) of t heir own making, causing them always to see retail in one dimension only. Current General Conditions ? Corporate Governance. The recent case of Enron and the difficulties faced by retailers such as Sainsbury suggest that the governance of these organi- zations was grossly at fault in permitting the excessive amounts of power vested in their chief executive officers (CEOs).

The nonexecutive directors seem to have abdicated their duties in not restraining the CEOs in their riskier schemes. Expansion, absolute power, soaring costs, and misinterpre- tation of facts and figures appear to have gone unchecked and a tacit acqui- escence to have been entered into, presumably with the goal of presenting stakeholders with a picture that was m ore positive than the reality. As th e impact of the backlash is always difficult to predict, it is likely that HR di- rectors will become more closely involved in the careful examination of candidates’ integrity and suitability for high office.

It is likely that this will slow t he decision-making process within t he board e nvironment, b ut i t might be a small price to pay for a more responsible environment acting in the best interests of all parties. HRM needs to motivate the entire staff of their company, to observe and evaluate the ‘political’ situation within the company, and to react in a n appropriate way that ca n influence the re- tailer’s level of success. HRM has the opportunity, and therefore the duty, to influence national and international codes of corporate governance.

Technology/IT Infrastructure

In some of the ne w and emerging m arkets management has to decide whether to implement a total system with all branches totally aligned with the parent company. It can be prohibitively expensive for a branch at the periphery of the organization to lock into a global IT infrastructure that is geared to operations in Western countries where labor costs are very much higher. Retailers operating internationally rely on com mon platforms and IT structures; the decision to be m ade is when is the time right for investments. A major change in retailing in the future will be the worldwide use of RFID technologies.

The success of the METRO Group in developing and running their “Future Store” in R heinberg as a tigh tly controlled experi- ment has had a strong impact on t he application of new technologies in ‘real business,’ since METRO Group has shared the results with industry and with its wholesalers, as well as its IT and logistics providers (see, e. g. , chapter by Kalyanam, Lal a nd Wolfram in this book). The scientific re- search involves customers’ reactions to the new shopping methods, and possibly also staff training in the use of intelligent technologies and intro- ductions to available information and changing processes for customers.

New Challenges in Retail Human Resource Management

In conclusion, there has been, and continues to be, a great deal of activity sur- rounding staff appraisal. The management of progression, or performance moni- toring, continues to exercise HRM professionals, who wish it to be as fair as pos- sible to individuals, but also want the company to obtain maximum benefit from the exercise. While the strategy should be systematic, it also needs to be continu- ous, with a fully im plemented set of key me trics.

A full look at each individual’s future, which can be a position as well as a set of personal goals, should be carried out at regu lar intervals. HRM professionals must ensure that line managers can perform this function. Next, we discuss approaches that address current HR challenges in retailing.

Retailers have to develop the employee value proposition. This means an attractive position with the fulfillment of employee needs and expectations and achievement of a go od, unique image in terms of re- cruiting and keeping human capital. We list below some approaches to retaining an adequate sales force. HR quality cannot be assured without investment.

Such investment has to be justified in economic terms and must therefore be constantly monitored:

  • Planning the HR costs and expenditures for the annual business budget and forecasts
  • Supplying key data needed for planning the workforce at all levels and providing benchmark data on key performance indicators, such as average working hours per store opening hour, turnover per w orking hour, profit per working hour 268 Julia Merkel, Paul Jackson, and Doreen Pick
  • Elaboration of systems to measure the work involved in and results of HRM (training investment per employee, rate of internal job placements, etc.
  • Providing common and communicated values of the com pany to give the workforce a strategic framework and common mind-set
  • Creating a transparent internal job market
  • Offering the staff a perspective for the future and clear career paths
  • Flexible models of working times, such as part-time working concepts, an- nualized hours contracts, and balancing of profession and family with the aid of sabbaticals
  • Ensuring adequate processes, tools, and budget to allow for members of the workforce to achieve their objectives and ambitions Continuing education of ex ecutives and employees within actual training programs and a corporate university
  • Training the workforce in soft skills and mentoring to ensure proper alignment of their values with the company’s values and beliefs
  • Initiation of an employee suggestion/inquiry system to improve the process of cooperation
  • Recruitment of talented graduates from exchange programs with universities worldwide
  • International education within internal exchange programs, with participants from different countries
  • Apprenticeships and e ducations in new professions to build up t he best workforce Sharing company success with e mployees (incentive systems at all sta ff levels, based on parameters that are accessible to employees)
  • Offering fringe benefits, such as discounts for shopping at the employer’s stores, company cars, equity programs, retirement arrangements, company nursery/kindergarten, and other social benefits.

The Future of HRM and final remarks

Most employees spend a substantial amount of time at work. Some people therefore consider their job decisions on joining a retail company or some other industry in the cont ext of social environment.

HRM has to keep an eye on s uch constraints, as the retail trade is anxious to attract the best employees. Future HRM will concentrate on supporting management and workforce and outsource administrative tasks to contractors. In future, there will be more intensive collaboration New Challenges in Retail Human Resource Management 269 and networking with external parties. New professions in retail, such as that of IT specialist, are developing. HRM must also place greater emphasis on ethical working conditions, safer working environments, and equalopportunity policies (ending sex/age discrimination, inclusion of minorities, etc. . In any company, HRM has to build up trust and commitment among all persons working in that organiza- tion. Continued reliance on traditional processes is d efinitely no longer a recipe that pr omises much success. HR m anagement has t o a ssure fast a nd market- oriented actions that are appropriate to complex market situations. HRM will have to set priorities on the HR strategy and its realization, but will be viewed on the operational side more in the role of a serv ice center. In future, the issue of management development will gain even greater importance.

To sum up, HRM has to be aligned with the business strategy of the company, to work in keeping with all of its corporate objectives, and to be prepared not only to help in implementing all changes necessary but also to instigate and be at the vanguard of change programs. Further, HRM should be aware of employee interests within the organization yet conscious of its place as the ‘power house’ when controversial business decisions, such as downsizing, have to be implemented. Lastly, it plays a key role in ensuring that constant retooling and retraining takes place in the operation to meet ever-evolving challenges.

Life-long learning should be an integral part of any business, to enable it to respond to its rivals’ activities with fresh initiatives within the company. HRM specialists have to ensure the long-term performance of “their” retail organizations. It is a big challenge for HRM to meet the future needs, and the task is wide ranging. How well HR managers perfo rm th eir fu nction will determin e whether a reta iler registers a sustainable success in the future. We have tried to show in this chapter the comprehensive and central role of HRM in retailing.

Retail has been and will continue to be an exciting field of business throughout the world. The main function of the retail sector is to wo rk with and for people all over the world, so that retail has the chance to give people interesting and fulfill ing workplaces.


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