Plans to bump up the minimum wage have kicked into high gear. Cities including Los Angeles, Seattle, New York and Chicago have already voted to increase the minimum wage to $15 by 2020. While these regulatory changes are a big win for the hourly workforce, they’ve added pressure to employers, especially grocers.
Wal-Mart is just one of the many large-scale grocers feeling the heat. Back in April, the company decided to take a gradual approach to the proposed minimum wage hike and raised its hourly starting wage to $9—but the move is starting to take a toll on operations and profitability. Profits are down and hours are being cut, and the company is blaming this partly on the wage increases.
The higher minimum wage revolution is here and grocers need to figure out how they can optimize labor to better manage their costs. Rather than reducing workers’ hours, grocers should instead focus their attention on improving their labor management processes. Most organizations use outdated and unreliable methods to manage their scheduling needs. Proper shift management can have a significant impact on a company’s bottom line. If grocers want to avoid additional overhead and operational costs, it’s time they consider upgrading their scheduling processes.
How rising wages can spark internal improvements
As wages continue to increase, growing labor costs have become a top concern for grocers, and understandably so. However, this regulatory shift should be seen in a more positive light. Increased wages give companies the chance to kick their hiring, retention and operational strategies up a notch.
In the past, grocers were typically left with two options when they wanted to keep profit margins in check: increase prices or lay-off workers to reduce costs. While these seem like reasonable solutions to control costs, they also put businesses at risk for increased operational inefficiencies and losing customers as a result of high prices. Before resorting to these options, grocers should first consider improving back-channel efficiency and internal cost management. Taking this approach may encourage grocers to re-evaluate their current operational planning.
When looking into operational planning, grocers should consider adjusting several key components:
Hiring and training: Minimum wage hikes mean grocers need to be extra cautious during the recruitment process. Hiring the wrong employee can have drastic implications on recruiting and training. With this in mind, employers will need to hire more carefully and train their staff more quickly, but still effectively.
Scheduling: As we’ve seen with Wal-Mart, labor costs can put a major dent in a company’s bottom line. With this issue becoming more prevalent, grocers will need to implement more effective scheduling methods and use more advanced forecasting tools. Now is the time for retailers to shed manual, clunky scheduling processes (e.g., Excel spreadsheets, paper charts, and first-gen scheduling software) and start considering new solutions that optimize and automate shift management.
Retention: With rising minimum wages, grocers face increased competition when it comes to pay. However, companies need to look past monetary constraints if they want to stand out among the competition. Having a stable income is an important retention factor, but offering employees more consistent and predictable schedules that fit their lifestyles will go farther in the long run. Employees will feel a greater sense of value if they have more input and control over their scheduling. Grocers should also consider moving past “employee of the month” programs to recognize workers’ performance. Companies that can connect with their staff on a deeper and more meaningful level will see lower turnover and avoid unnecessary recruiting and re-training expenses.
A new outlook can go a long way
Many grocers perceive higher wages in a negative light, but they can have a positive and even profitable impact on a company’s operations if handled right. Rising minimum wages give grocers the opportunity to re-examine their current internal strategies and improve them. Higher wages impacts all facets of an organization, not just costs—from recruitment and training to scheduling and retention.
If grocers want to accommodate these higher wages and keep some money in their pockets, they’ll need to embrace new technologies and processes. Using clunky, manual processes to handle employee scheduling and relationship management won’t cut it anymore with increased regulatory pressures. Instead, grocers should invest in solutions that incorporate all areas of managing hourly workers in an efficient and automated way.