Photo: Majestic WIne
Is store manager retention being neglected?
While there has been a great deal of recent discussion about raising starting wages at retail, Majestic Wine, the U.K.’s largest wine retailer, is focusing on store managers.
The emphasis comes as the retailer found store manager turnover had risen to 23 percent in 2015, up from 20 percent in 2014, 16 percent in 2013 and 14 percent during the two prior years. The rising attrition was making it “hard to maintain consistency” in a business relying on high customer-service levels, according to Majestic Wine.
Last fall, the retailer raised the annual salaries of its 213 store managers to an average of £30,000 ($42,800) from £28,000 ($40,000). A cap limiting bonuses to £1,000 ($1,425) was also scrapped in November, according to the Guardian.
Last week, Majestic Wine introduced a new long-term share incentive plan for the top 25 percent of staff, from store managers upwards. Shares will vest over three years, depending on Majestic Wine’s performance against a select group of peers.
Management set up a separate share incentive plan for other employees and overhauled the chain’s cash bonus scheme for all employees so that all payouts are based on the same factors.
According to Glassdoor, the average national salary for a store manager is $50,000. A new study from Cornerstone Research, University of Michigan and Stanford University found that retail wages overall were higher than some service jobs because “higher-quality workers” can earn much more than average as managers at larger retailers.
By comparison, store associate and cashier positions range from around $18,000 to $23,000, according to Glassdoor. The average annual turnover rate for retail overall is currently around 60 percent.
With many retailers raising entry-level wages, a recent Bloomberg article headline questioned why companies are: “Suddenly Desperate to Keep Their Least-Valuable Workers.” Beyond benefiting from better productivity on selling floors from more experienced staff, the reason given for raising starting wages was to avoid the heavy training and recruitment costs involved in replacing employees.
- Naked Wines Investor Presentation – Majestic Wines
- Review of Remuneration Policies – Majestic Wines
- Majestic Wine raises store managers’ pay in attempt to retain staff – The Guardian
- Do Large Modern Retailers Pay Premium Wages? – ILR Review
- Big-box retail work has its benefits – University of Michigan
- Why Retailers Are Suddenly Desperate to Keep Their Least-Valuable Workers – Bloomberg
Discussion Questions
DISCUSSION QUESTIONS: What do you think of Majestic Wine’s focus on store manager retention? What steps should stores be taking to improve retention rates for store managers?
Poll
BrainTrust
Michael Day
Retail Industry Executive, Genesys
Kai Clarke
CEO, President- American Retail Consultants
This is the soul of retail.
When there are swings in consistency between stores in the same chain, blame usually falls on the store manager. Retaining these people, incenting them and empowering them is the key to delivering on the promise of new technologies and processes. We’ve invested heavily in putting together a robust online presence; now it’s time to pay more attention to the store.
A long time ago my friend Michael Leboeuf wrote “The Greatest Management Principle in the World.” Basically the point of the book was: You get what you reward.
If your reward system is based solely on individual performance your team motto will become “Everyone for themselves.” It seems that retail has a propensity to do exactly that. One strategy for managers, another for “associates,” another for cashiers, etc. To be an effective manager there needs to be something to manage and it’s not the store. To be an associate there has to be an association to belong to. What’s missing, it seems to me, is the experience of a commercial community. An experience that our store’s success is due to the aligned and collaborative contribution of everyone. Reward that and you’ll see a big difference in not only retention but also in profit. Fail to do that and individuals will have only low-paying and relatively meaningless jobs that are easy to leave. It’s much harder to leave a community you actually care about and that wouldn’t be the same without you.
Regarding the paragraph about setting up “a separate share incentive plan for other employees and overhaul[ing] the chain’s cash bonus scheme for all employees so that all payouts are based on the same factors.” — That is exactly what I’m advocating for so kudos to Majestic!
Majestic Wine is doing the right thing. Based on my own operational retail experience with both Costco and Walmart/Sam’s Club, there is no more important leadership dynamic in retail — maybe now more than ever in our transformational digital world — than strong leadership at the store level. Again based on my experience, when you see high turnover at the store manager level you will also most likely see under-performing stores, etc.
Any retailer that offers true incentive plans to their people will benefit from increased retention. Store management can definitely see reduced turnover by offering profit sharing programs. I know of at least one retailer that offers bonuses to every staff member in the store based upon that particular store’s performance. Yes, even cashiers get bonuses.
Majestic Wines’ focus is spot on. Store managers are the vital link between the company and its store-level staff. Something that I learned a long time ago is, “change a manager, change a store.”
One of the issues the retail industry faces is that overtime regulations will impact store managers. Heretofore most store managers were salaried. Many companies will find they cannot afford the new $47,476 hurdle rate and therefore will move their salaried managers back to an hourly rate. We could argue that this is unfair or that the managers need to make at least the new rate but the move back to an hourly rate is likely to increase manager turnover. This may be due to many factors but one of them will be the psychological impact of the loss of the status that being salaried connoted.
Obviously compensation is a necessary factor to attract and retain good managers as well as associates. However, money is only one factor that keeps an associate on the job. Organizations need to do the following: create a culture of customer care, prepare the managers for the position and environment and make a commitment to ongoing development. Managers value being involved in the decision-making process as well as being recognized for doing a good job.
In addition to rewarding managers we need to constantly recognize their contributions. Recognition is non-monetary, psychological, personal and from the heart. It is designed to retain the associates who make a difference.
The cost of replacing employees is high so Majestic Wine will be well-served by restructuring their bonuses and raising employees’ salaries. If retail companies want to lower their turnover they should also work on offering career opportunities, supporting the employee development and providing top-notch training that leaves the employee feeling confident and knowledgeable.
Now I understand why the new overtime rules for low-wage salaried workers were enacted. I suppose small retailers simply don’t pay enough and it’s not worth crawling out of bed. From all my years in retail, long-term store managers were usually paid on commission, such as 20 percent of the store’s profit. I work in the supermarket industry where average sales are about $25 million a year per store. Therefore managers are well into six figures. But small retailers are paying only $50,000. That is about what a college grad averages their first year out of school. So I can understand the high turnover. Lucrative performance bonuses work best in my opinion.
One of my favorite quotes is, “The most important decision a manager makes is who he allows in the door to help take care of the customer.” Recently I realized and blogged about a change I make when I use the quote, “The most important decision an area manager or owner makes is who she allows in the door to help take care of her employees.”
Remember, new employees join companies but the main reason they stay or leave is the relationship they have with their manager.
This is one of the greatest travesties of retailing. Underpaying managers is a guaranteed way to ensure that you have poor performing stores, high employee turnover and a failing business. Paying your leadership a paltry $43K means that they will look for a position somewhere else, and leave your stores in a terrible position. Most of these store managers sell millions of dollars of products, and paying them below the pay scale of other managers in other sectors is crazy. New graduates from college get salaries of this much and more, and they don’t have the skills and experience that a store manager requires.