Photo: RetailWire
Does Target need to address its associate morale problem?
With its traffic, sales and profit growth, Target has been one of the great retail success stories of recent years. That doesn’t mean that CEO Brian Cornell and company do not have things to work on. One area where Target may need greater focus is associate relations. While the retailer has earned kudos for its commitment to higher wages for workers in its stores, some of those same associates say the chain has cut their shifts, costing them pay, endangering their eligibility for the company’s health insurance coverage and making it generally more difficult to do their jobs properly.
CNN reports that it has interviewed 23 current and former employees of Target in recent months who said they actually are bringing home less than they did before the retailer began raising its hourly pay. The chain has pledged to raise its minimum wage to $15 an hour by the end of next year.
“I got that dollar raise but I’m getting $200 less in my paycheck. I have no idea how I’m going to pay rent or buy food,” said Heather, an associate working in a Target store in Florida. The associate’s last name was withheld so that she would speak openly about her situation. She reported being scheduled to work fewer than 20 hours some weeks in recent months after having worked nearly full-time hours when she started last November.
A report by Business Insider last month said that Target has ended overnight shifts in some stores, putting increased pressure on daytime workers to take on additional duties with less time to complete the tasks. While some overnight workers shifted to daytime hours, others had to leave Target to find jobs that fit their personal schedules.
Reports of associate hours being cut is not unusual among retail chains that have increased wages in recent years. Walmart and others have had similar charges leveled against them after announcing pay increases for hourly workers. Sam’s Club caused some head scratching last year when it announced plans to close 63 clubs, resulting in job losses, on the same day that its parent company, Walmart, said it was handing out one-time bonuses to between $200 and $1,000 to eligible employees while raising the hourly minimum wage to $11 an hour.
- Target raised wages. But some workers say their hours were cut, leaving them struggling – CNN
- Target quietly ended overnight shifts in some stores, and employees say their workload has become ‘chaotic’ as they try to keep up – Business Insider
- Should retail rivals see Amazon’s $15 minimum wage and raise it $1? – RetailWire
- Will Costco’s new $15 minimum wage hurt or benefit the chain? – RetailWire
- How should retailer employers prepare for Gen Z workers? – RetailWire
Discussion Questions
DISCUSSION QUESTIONS: Do hourly associates have a legitimate grievance in connecting fewer shift hours with recent pay increases or are there other factors at work? How should retailer employers respond in circumstances such as this?
Poll
BrainTrust
Dick Seesel
Principal, Retailing In Focus LLC
Jeff Weidauer
President, SSR Retail LLC
The other factors at work are called capitalism and if they thought that Target (or any company) would just raise hourly wages without a compensatory action elsewhere, then they were naive. It’s not a grievance, it’s what everyone who knew anything about business predicted would happen.
I’m a big believer of there being two sides to the story. There are 350,000 Target employees – there are bound to be grievances. If they worked the overnight shifts, I can see how they would be upset. In addition, when more is rewarded, more is expected so I can see how a retailer would whittle some shifts. Target is functioning at a very high level now and I expect they will take the grievances seriously but doubt they will add those shifts back.
This is the kind of question we like to ask in our store surveys. The magic question is: Has the payroll-to-sales ratio gone up (more payroll), gone down (less payroll) or stayed the same? We didn’t ask it this year, but in every prior year, over-performers have been increasing the ratio. That means adding money to the number in aggregate.
So no, I think CNN was looking for some eyeball grabber and found it.
There will always be some tension in employee/management relations as retailers drive for sales growth and profitability. The workers do have a legitimate complaint – what’s the point of raising wages if hours are being cut? Ultimately, what matters to associates is how much money is on their check on pay day and if the net result is less than before, their concern is understandable. Management needs to assess not only the impact of raising wages, but the actual amount of take-home pay and other benefits of value associates receive. Making strong public statements about supporting stores associates with higher wages is merely PR fodder if actual take-home pay decreases.
Erratic weekly hours have been a sore point among retail workers for a long time, and it may not change anytime soon whether the hourly rate goes up or not. The reality: Most stores have volume peaks and valleys, and the peaks happen mostly in the 4th quarter when the hiring is done. This is just a fact of life, but it makes front-line retail work very unpredictable as a source of income and benefits.
As to the elimination of overnight shifts, I’m sure this depends greatly on each store’s sales volume and whether the task management involved in unloading trailers or stocking shelves can be done during open hours. One overall caution to Target: With its longstanding problem keeping those shelves and pegs filled, be careful not to be overly cost-conscious at the expense of good in-stock rates.
What if all the investments Target has made in recent years to automate DCs and the supply chain are now driving efficiencies to both optimize labor (warehouses to stores) and greatly improve in-stocks? Customer satisfaction is improved, and outdated replenishment activities are enhanced simultaneously?
This situation is not good news for Target or its employees, and I’m sure other retailers who have significantly increased hourly wages are facing the same problems. The more significant issue is minimum wage jobs and how we, as a nation, are getting off track. Is it fair to be paying a store associate who is working hard $8 an hour when the top executive is making millions of dollars? Unfortunately, the answer is “yes,” but why? Because the system of the minimum wage was the understanding that these jobs were designed to be entry-level positions for those going out into the workforce for the first time. The jobs were to allow the new hire to gain some experience as they began their journey up the corporate ladder. And those jobs were also designed to help students earn some money while in school. Also, those jobs were to give the stay-at-home parents an opportunity to work a couple of hours while the kids were in school as well as retirees who wanted to do something to make themselves still feel useful. But today, we have too many individuals stuck in a system that only allows those individuals minimum wage jobs with no opportunity for advancement. That is what needs to change. We have to provide training for these people, and surely a company as big as Target should have a program for employee advancement that contains all the steps for those wanting the chance. Yes, they have the employee management trainee program, but it’s not enough. As we continue to advance with technology, those stuck in the minimum wage jobs are going to find it even more challenging to keep their jobs, and we need to address those issues now.
Target is investing a lot of money into the business and it is trying to balance the drive to more complex and costly online sales. Against that backdrop there is clearly a need to review costs elsewhere; some of that will be in staffing. As regrettable as the changes may be for those involved, that doesn’t mean they should not be made. Overall, from my (admittedly unscientific and unrepresentative) discussions in stores most Target associates seem generally content and like working for the company. Does management need to review some things? Sure. Is Target a bad employer? No, I don’t believe it is.
Um, a sample size of 23 is not only statistically insignificant considering the tens of thousands that Target employs, drawing any conclusions based on it is sadly misleading.
Yeah, that was kind of my point. It’s not data, it’s a headline.
Regardless of the statistical significance of CNN’s data, the question posed is whether employees in this situation (at Target or elsewhere) have a legitimate grievance in connecting fewer shift hours with recent pay increases, and how retailers should respond to such grievances. The smart move here for Target (or insert other retailer) would have been to preempt the grievances with an internal warning that hourly wage increases could come with occasional reduction in hours, depending on the needs of the business. The goal here is to keep everyone employed, no? Why not say that? There’s no reason this message couldn’t have been tactfully delivered to manage expectations. Maybe Heather would have been able to save a few bucks from her previous paycheck to help with this month’s rent.
Facts matter. There are not enough facts here to draw conclusions. Lazy (or biased) reporting is no excuse.
As with most economic questions, nothing about this situation is simple. While there is likely a correlation between increased hourly pay and reduced hours, the fact that associates are now taking less home is the real concern. Think of it like this: if a store lowers prices on hundreds of items, but the customer ends with a higher total on the receipt, what was the point beyond being able to shout about lowering prices?
I would think that a business as sophisticated as Target, knowing that they were going to implement an increase, had calculated how to mitigate that cost as much as possible a long time prior, including by reduced floor coverage. It doesn’t seem fair, yeah, but when you’re looking to keep those great reports to Wall Street going, it’s kind of a “duh.” And besides, if they stay hot, those hours should (operative term) go back up eventually.
I don’t see a problem with a retailer doing the right thing by increasing hourly rates AND looking for efficiencies where ever they can find them. Target has been pretty smart lately. It’s tough to believe that heading into the holidays they would create a scenario where a broad swath of employees all of the sudden feels disenfranchised. Execution is everything. These are the people who execute. Target knows that. Right?
For once the answer to this question is simple. Learn from the competition — COSTCO.
On the floor, Target associates are the “in the moment” a shopper’s customer experience. Low morale is obvious, very counterproductive to the in-store experience. Cutting hours introduces a new human dynamic which will lead to turnover.
Messing with an associate’s livelihood is dangerous, leading to pushback from other associates and morale issues. Store managers should speak with each associate, understand their wage needs and then make the hard choices based on fewer shift hours to restructure schedules in the interest of the associates. Some associates will need to find other employment in a strong job market.
Being up front with individual associates, versus letting morale decline over the entire store, saves a lot of angst on the floor and in the lives of associates and managers.
Team morale is everything and it translates directly into customer experience in store. If the employees aren’t happy, customers will be less happy over time. Of course Target has to make smart business decisions, but with the cuts store managers should be granted some autonomy to take care of individual employees as needed to keep morale high. Communication is the most important thing here so everyone on the team feels part of the conversation, not at the effects of it.
But management couldn’t do THAT … right? There’s always a struggle between paying good wages, and cutting wage expense — yeah, Marx was right about that — so you can take the Costco, et al approach and say “we want the best and we’ll pay accordingly,” or you can play games. Unfortunately, I don’t think Target is really set up for the former approach.
This is tricky. You offer to pay more per hour. Nobody complains unless their hours get cut. I don’t know if we’re getting the entire story. Is Target cutting hours for all hourly employees? Or, are we mostly hearing from those that have had their hours cut? This is business and if any retailer plans to raise the hourly wages, they have to find ways to maximize their investment in their people. That may mean tightening up all types of expenditures, which could result in store closings, reduced operating hours and even reduced hours for certain employees.
What seems to be getting lost in the mix is a fundamentally important question — what impact does this dip in associate morale (if there is one) have on the customer experience and financial performance?
Curious, if this is even on Target’s radar and how they plan to measure it. It will be interesting to see if this comes back up if quarterly earnings fall short.
Target, and no other big box retailer, is simply going to raise hourly rates without a means of making it back? Profit is the overpowering mantra. No way will that be sacrificed, even to make a few headlines and look good to the public.
I spent 30 years in the retail sector as an executive leader with eight different retailers and there is a direct correlation between wages and hours. Every store has a set budget for payroll: average hourly wage and hours allocated. Each metric impacts the profitability of the store.
This is a “slippery slope” for all retailers because of the pecuniary ramifications required to support the wage increase. If you raise the minimum average wage for each store, the bar will be substantially increased for each store to achieve its profitability numbers.
For this method to work efficiently and consistently, each retailer will have to address and readjust its profitability standards for each store while accounting for their full-time/part-time mix. They might consider lowering the minimum standard for receiving benefits to 20 hours per week instead of the existing 30-hour benchmark.
I am looking forward to seeing this issue resolved so that retail employees can focus all of their energy on providing an excellent guest experience.