Retention and turnover. An age-old issue that's the focus for many of us involved in retail and hospitality operations. Turnover affects teams and impacts the customer experience negatively. This is the story of how one company cut turnover by 70 percent.
Last week, SHRM's All Things Work spoke with Jon Renaud, the Director of Operations at Kum & Go. Kum & Go, a family-owned Midwestern convenience store, operates about 400 stores in major American cities like Des Moines and Denver and smalltowns like Elk Point, South Dakota.
Among their hourly associates, turnover rose to about 160 percent annually. In a white-hot job market with traditionally high turnover, this is a major concern. It's a huge cost to them and it impacts the team experience which has a negative impact on customer experience.
The leadership team decided to make some major changes. Why? Let's do the math and see what we come up with for turnover costs.
Four hundred stores, on average, employ between eight and 10 hourly associates. Replacement costs vary from study to study, with some reporting $1,500 and others as low as $1,000. For our purposes, let's go with the lower number of $1,000.
160 % x 8 associates = 13 associates hired annually per store.
13 x $1,000 = $13,000 per store in turnover costs annually.
With me so far?
Now, multiplied by 400 stores and the costs are about $5.2M in turnover costs. $5.2M is the most conservative estimate! If we chose the higher number of 10 associates and $1,500 in replacement costs, the number could be as high as $9.6M.
Wow. Those are large numbers. These don't even factor in the additional overtime that managers were taking on to fill shifts left empty or the impact on team morale. It also doesn't take into account how customers felt seeing new people all the time. Turnover on that scale impacts everything. It had to change.
Here's the story of how Kum & Go got to 90 percent turnover, and why that's worth celebrating.
First, they realized that a certain part of the workforce is always going to turnover. They identified that for a portion of their associates, this was not their primary income job. It was supplementing something else. For example, at Kum & Go locations in Denver, many of their positions are filled by college students or teachers during the summer who leave when the season gave way to Autumn. This pattern emerged at many of their other locations.
Second, for employees with income solely provided by Kum & Go, they found that the value proposition was lacking and they needed to update their 'Employee Value Proposition.' Other offers were more competitive and the labor market was only getting tighter.
Kum & Go needed to change but where to start? Here's four specific things they worked on:
1. Technology and Associate Experience: Kum & Go's leadership team focused on technology that made the employee experience better. In addition to their Kronos platform, they utilize Branch that empowers both peers and general managers to swap shifts, update availability, flex shifts for an hour or two if needed, and chat in groups to recognize team members.
This was a huge improvement over their typical method. Typically, an associate called in can't make it today, a GM would start scrambling for 30 mins to fill the shift, and often, finding no replacement, would fill it themselves. Lots of overtime, stress and low morale. Now, the process takes seconds in Branch, and it updates Kronos in real-time.
2. Gig Workforce: Kum & Go looked at their workforce as almost a gig workforce. Instead of focusing on a 'per store availability,' they work on a district-wide availability. Each district is comprised of about 15 stores and when a shift needs coverage, anyone within that district can pick up the shift. Technology as an enhancer of the associate experience is paying off huge dividends for them. It's allowing for labor pooling and opt-in employee experiences.
More coverage with less scrambling. A very big deal indeed.
3. Move to more full time associates. Kum & Go is moving to a 70 percent full-time workforce from a 30 percent full-time workforce for the hourly associates. The amazing thing is this doesn't really cut the workforce. There's about a 10 percent drop in some areas but overall, instead of three full-time associates, they're working with seven full-time and three part-time assocaites, as needed.
4. A move to fixed schedules. As others are moving the same direction, like Wal-Mart, Kum & Go is making shift predictability a part of the job description. Fixed schedules are attracting more people and the full-time nature of positions is paying off in ways that management didn't think of originally.
So, what were the results?
Kum & Go saw a dramatic decrease in tine spent by GMs scrambling for replacements. In addition, they saw a 25 percent decline in OT and an increase in overall salaries because shifts are now being picked up with much greater regularity amongst stores and within districts.
Morale is up, GM's sleep patterns - better. Customer experience is much-improved.
And, according to first-hand feedback from Kum & Go Associates, members of the team are feeling income reliability notes John Renaud, director of operations.
"What we've discovered as we've been running the pilot is we've had associates coming up to us and say, 'You know what, I'm able to buy my first car now because I can show the lender I'm going to work 40 hours every week and I now have a dependable income coming in,'" says Renaud.
"So we're starting to see our intent was yes, let people be able to plan their life, plan their schooling, when they can pick up their kids. But what we're starting to see is benefit beyond what we anticipated, things that you don't think about at our point in our career and when you don't have to live paycheck to paycheck. So we're seeing some terrific benefits. That fixed schedule is huge for hourly associates.
What we're starting to see is benefit beyond what we anticipated, things that you don't think about at our point in our career and when you don't have to live paycheck to paycheck. So we're seeing some terrific benefits. That fixed schedule is huge for hourly associates.
So, what about the results? A 70 percent drop in turnover to about 90 percent and that number continues to drop as associates understand more and more about the value proposition.
Why should we celebrate 90 percent? Let's do the math.
At 160 percent turnover, replacement costs were between $5.2M and $9.6M.
At 90 percent turnover, replacement costs decrease between $2.8M - $5.4M. A decrease of $2.4M to $4.2M annually in operating costs!
That's a number that can hit a bottom-line which can make a huge difference in profit or loss. And, it has made Kum & Go a preferred employer.
If you haven't listened to the podcast - it's well worth your time. There's some very compelling and interesting ideas coming from the folks working hard in Des Moines, Iowa.
To learn more about Branch and similar stories from Target and others, click here.
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