The convenience retailing industry is beset by high turnover and increased competition for employees, who may not necessarily view an entry-level associate’s job as a path to a rewarding long-term career. The non-profit Good Jobs Institute (GJI) offers an intriguing proposition: Invest in employees and make key operational choices that leverage that investment to increase productivity and contribution, and businesses will decrease turnover and boost their bottom line. In some ways it seems counterintuitive, yet the strategy has produced tangible performance and operational improvements.
“There are so many options for people today … and increased competition,” said Varish Goyal, CEO of California-based Loop Neighborhood Markets. “A key [to success] is to have employees who are well trained on your front lines.”
Industrywide, convenience retailers are grappling with climbing direct operating expenses and rising turnover rates. Wages, taxes and benefits rose 12.4% between 2018 ($53,222/store/month) and 2019 ($59,839/store/month) for the industry’s top quartile performers, according to NACS State of the Industry (SOI) data. What’s more, the average turnover rate for sales associates has surged from 83% (2010 data) to 123% (2019 data) in less than a decade, with more than one in three full-time store associates bidding their employer adieu in less than 30 days, according to the NACS State of the Industry Compensation Report of 2019 Data.
“The conventional wisdom is that many companies have no choice but to offer bad jobs, especially retailers whose business models entail competing on low prices,” wrote Zeynep Ton, professor at MIT’s Sloan School of Management and co-founder and president of the GJI, in Harvard Business Review. “If retailers invest more in employees, customers will have to pay more, the assumption goes.”
At a minimum, a good job meets people’s basic needs such as pay and benefits, offers a stable schedule and enables a good life career path to higher positions and provides security and safety.
But nearly 20 years of research have revealed to Ton that companies can be successful by paying their employees more without increasing prices and produce better customer service outcomes and stronger operations and execution. It’s dependent on creating good jobs, which is a combination of investment in people and operational excellence.
“At a minimum, a good job meets people’s basic needs such as pay and benefits, offers a stable schedule and enables a good life career path to higher positions and provides security and safety,” Ton said during a recent segment of the NACS podcast Convenience Matters. “It also creates a sense of belonging for people where they feel proud of working for a company.”
But it’s not a matter of simply increasing wages to produce better employee outcomes, Ton stresses. “If you are Costco and you’re going to pay $23 an hour, your employees need to be able to contribute to more than $23 an hour or you’re not going to be profitable.”
A good job also gives employees the tools and resources to be productive, contribute to the business and shine in front of the customer every day. In Ton’s 2014 book, “The Goods Jobs Strategy,” she outlines what some of the best companies do to create jobs that provide high employee satisfaction, customer loyalty and productivity. Companies like Costco and QuikTrip invest in people, paying higher wages and offering better training and career opportunities. But they also make key operational choices that allow them to leverage that investment and ensure employees can contribute to better service and continuous improvement.
The four operational choices Good Jobs companies make are:
1. Focus and Simplify
Good Jobs companies have clarity on the ideal customer experience and what problem they are solving for their customer, and make strategic trade-offs consistent with that focus. With their strategic focus in mind, they simplify their operations, applying real rigor around new products, services, promotions, communication, processes and/or tools to maximize customer satisfaction and employee productivity. Paramount to developing a successful plan is for the company to understand its customers, “figuring out why they come to you and for what offerings,” said Sarah Kalloch, executive director of the GJI. “Then, companies can simplify based on what adds value to customers. For instance, there are a lot of tasks that waste employees’ time. One retailer gave employees 170 tools they were expected to use. Of course they won’t use them all, and there will be uneven execution.”
2. Standardize and Empower
Good Jobs companies standardize routine processes, communication and management practices—with employee input—while empowering their employees to make decisions that improve customer service, reduce cost and improve the business. “Retail is detail, so strong standards, set with frontline worker input, is critical. But you can’t legislate every customer interaction, so empowering your staff to solve customer problems and identify ways to improve the business is important,” Kalloch said.
Cross-training involves training every employee to undertake both customer-facing and non-customer facing tasks. This allows them to respond to variability in customer demands, increasing productivity, employee motivation and the speed and quality of customer service. “If you train an employee to be a cashier only, they’re not going to be as productive as they could be during downtime,” Kalloch said. “It’s important to train them flexibly with both customer-facing and non-customer-facing work.”
4. Operate With Slack
Once a company has removed waste, standardized work so everyone knows how long tasks should take and empowered and cross-trained employees to promote flexibility, they can staff with more labor hours than the expected workload so they can always meet peak demand. “Staff more hours of labor than you expect, making sure your stores are [well-serviced] no matter when customers come in, especially as traffic can be uneven,” Kalloch said.
The Good Jobs Strategy shows that providing good jobs is a “dynamic combination of operations and HR, creating a virtuous cycle of great jobs, great customer experiences and more financially sound business,” Kalloch said.
Implementing the GJS
Ton’s work caught the attention of NACS during the 2018 NACS Innovation Leadership Program at MIT. A multifaceted partnership was created to roll out the GJS approach to NACS member retailers.
“I’m a huge believer that customer experience is grounded on great employees,” said Henry Armour, NACS president and CEO. “If you don’t have the right people behind your counter serving your customers, you’re not going to have a good customer experience. Implementing the Good Jobs Strategy is essential to your long-term success.”
“We think the c-store industry can find great value in the GJS,” Kalloch said. “There is high employee turnover, which can be incredibly challenging to operational excellence and customer service. And if you’re the corner store, you want relationships and you need loyalty. We think the GJS answers those [challenges].”
A c-store-specific calculator to help forecast the impact of increasing employee wages and assess the benefit of implementing a Good Jobs system is available for retailers (see the sidebar “Calculating Change”). In addition, to help propel good jobs adoption, NACS and GJI are searching for companies ready to make a real commitment to good jobs in the convenience store industry. (See more at “Be a Good Jobs Champion” on page 48.)
“We’ve always tried to put our employees first,” explained Courtney Buckley, head of marketing for VERC Enterprises, which operates 34 stores in Massachusetts and New Hampshire. “If they’re happy, they’ll make our customers happy.”
With such an employee-centric focus, it’s little wonder that VERC decided to explore the Good Jobs Strategy to see how they could profitably enhance their offerings to employees.
With COVID-19 and national discussions about racial injustice, people are asking more of businesses.
Earlier this year, GJI staff led a webinar for Buckley and other VERC team members. “That struck a chord for me because it highlighted the things we are asking [our staff] to do, and I saw that many tasks are now outdated,” she said. “[The GJI] is looking to increase productivity, getting rid of processes and procedures that are unnecessary. You don’t want to pay people more if they’re still doing things that don’t need to be done. We want to hire the best employees, and if they don’t need as much guidance, our other costs will decrease.”
Buckley and VERC executives are piloting the GJI Good Jobs financial calculator, developed for the convenience store industry. This tool helps them determine what cost savings and revenue uplift they could see by offering good jobs, and how much that would allow them to raise wages to hire and retain the best employees.
VERC is committed to the underlying philosophy of the GJS. “We want to pay our employees more because the cost of living here is high,” Buckley said. “Right now, we pay more than minimum wage, but how much higher can we go while remaining profitable is what we want to find out.”
Buckley anticipates “doing this slowly,” increasing employee pay by perhaps $1 an hour “and seeing what happens.” VERC and the Good Jobs Institute will stay in touch so they can discuss the results and offer ideas for challenges specific to VERC’s operating system. “We’ll be presenting a NACS Show education session and going over our experience, too,” Buckley said.
Loop Neighborhood Markets
California-based Loop Neighborhood Markets includes 130 sites, a diverse mix of urban, suburban and highway properties. After hearing Ton speak at a leadership program, Loop CEO Goyal was hooked. “There’s a lot of turnover in our industry, and it felt like no matter how high wages were rising in our area, we couldn’t resolve the issue,” he said.
He reached out to NACS and GJI to get their perspective on how he can achieve two goals. “First, I want to help the industry figure out how to improve. Nobody grows up saying they want to work in a c-store; it’s not a dream job. But it doesn’t have to be something that people look down on.” To that end, Goyal is hoping that his involvement will help his company with recruiting and finding the best long-term employees.
Second, Goyal is looking to reduce his employee turnover rate. “At the end of the day, it’s about providing good customer service and increasing your sales, becoming the destination of choice for the consumer. If your employees are well-trained and happy, that will show in everything that happens in your store. That’s what we’re trying to do.”
But it’s not just about boosting the company’s productivity that has prompted Goyal to explore good jobs and operational excellence. “There is a moral obligation to help people and provide them with a job that they can support themselves with. We have businesses that can do that, and I hope we can do that over time. If we can develop the right processes, improve our sales, that will in turn benefit our employees.”
Creating a Better Future
Kalloch believes “good jobs and strong operations can pay dividends for the industry and our country.”
The case for good jobs is multifaceted and touches on both economic as well as ethical principles. “First, there’s a strong financial case for good jobs. Retaining highly trained and motivated employees can help reduce costs, drive revenue and increase labor productivity,” Kalloch said.
“Second, there’s a strong competitive case for the GJS,” she continued. “COVID has shown just how fast companies need to adapt to changing business conditions. Having a more engaged, longer tenured staff can help companies adapt faster to new business conditions and technologies, increase customer loyalty and boost market share.
“Finally, there is a strong moral case for good jobs. With COVID-19 and national discussions about racial injustice, people are asking more of businesses,” she said. “Convenience stores can make real investments in the vibrancy of local communities and economies by offering better jobs.”