Labour deployment has become the preeminent issue in retail and hospitality industries due to inflation-driven wage spikes and disruption sparked by the pandemic.
Customer journeys have changed drastically, and many businesses have not adapted their strategies accordingly, but at Metyis, we’ve developed a three-pillar solution to these challenges:
Right people: reinvigorating the skills and structures devastated by the pandemic and Brexit.
Right place: establishing processes for teams to improve the customer experience.
Right time: forecasting customer demand to optimise schedules.
Metyis holds significant experience in implementing this strategy across retail and hospitality. While brands can tackle each pillar separately, the best results emerge from working on all three simultaneously. We have achieved a significant reduction in labour costs (-10%) while driving incremental profit (+5%) and customer experience (+10% NPS) improvements through a pragmatic execution of this strategy, leveraging data and analytics to accelerate improvements. The question we have explored is why companies should do this now.
A pivotal moment for embracing change
A year after the UK reopened from pandemic closures, the physical retail and hospitality sectors continue to struggle immensely. Traffic in general retail stores is still 23% down from pre-pandemic levels, with consumers not returning as hoped. Falling revenue is hard enough to deal with and is only exacerbated by spiralling costs. Inflation and falling consumer confidence are a global trend which will make it harder to achieve profitable physical retail across the global landscape.
Employees are a key vehicle for selling in physical commerce, but they are also one of the largest cost lines. On average, the labour bill as a percentage of sales is 14% for retail and 48% for hospitality.
Unfortunately, the weight of the pressure faced by the labour bill has not peaked and is set to increase in the next 12 to 24 months. Physical retail and hospitality have seen two of the largest wage jumps from Jan 21 to Jan 22 of 6% and 13%, respectively, well above the average increase of 3% during the same period. Combined with falling demand, physical retail and hospitality businesses will struggle to maintain profits and must proactively address this whilst providing a great customer experience. So, how can the three “rights” help solve these issues?
“Right people” is the most ignored or uninvested pillar, yet it poses the most significant risk if not controlled. An inexperienced and unstructured workforce undergoing transformation and hour reduction is a recipe for disaster and places immense pressure on the system.
Businesses often neglect this pillar because, unlike the other two, it is an investment of time and money. However, we challenge our clients to lean into this investment by demonstrating the benefits and level of returns it can generate if successfully managed.
Building and shaping highly-skilled and motivated teams
A business can cultivate a highly skilled workforce in many ways. We focus on equipping workers with skills and motivating them to perform. In every store, there are roles which require different levels of specialisation. By understanding and mapping technical and non-technical skills and the activity level in each, you can see the benefits of specialised skill training. With this approach, colleagues can deliver excellent service in their areas of expertise during peak times with the flexibility to adapt to and prioritise other demand areas during quieter periods.
The second part of developing a highly skilled workforce is hiring workers, investing in their professional development, and facilitating the long-term retention of their talents. This can be achieved by motivating their performance with clearly defined KPIs and resources for skill-building. For stores to schedule better or upsell more, workers’ KPIs must incentivise and reward these behaviours.
Many leading businesses have invested in cutting-edge methods to produce highly skilled workers. Gamifying training, or using VR to coach colleagues to achieve their training objectives, has shown significant benefits in engaging a younger and more dynamic workforce.
Furthermore, technological solutions that automate advanced tasks can reduce training and allow colleagues to focus on customer support. Introducing fully automated coffee machines to replace manual ones would enable café staff to prioritise other functions in their training.
To complement any investment into learning and development, ensuring the right leadership structures are in place to enforce the execution of business objectives is crucial.
In-store leadership are responsible for running the day-to-day business to meet location-specific goals and KPIs. One of the common mistakes we have seen is overloading them with the time-consuming admin. In-store leadership should spend +80% of their time on the shop floor, interacting with customers, ensuring swift reaction times, role-modelling behaviours, coaching colleagues, and upholding standards.
Eliminating admin tasks by leveraging data
Centralising or removing the level of admin required to run a store is a great way to make this happen. Regional structures are essential to ensuring quality and consistency across multiple locations. The regional structure should be a key training force, upholding standards and improving processes across the estate. Investing in these structures is not cheap, but they are crucial for excelling in your brick-and-mortar locations. It is key to give stores and regional structures the correct data to succeed. Ensuring the data is real-time and linked to the stores’ KPIs is critical to empowering performance.
Often in physical retail environments, there is a lack of real-time information available to leadership and colleagues. Creating the systems and tools for this to exist can take your in-store leadership to the next level. Order management systems in hospitality environments are useful for this as they can provide data which can provide real-time information on the speed of service KPIs, which would allow issues and mitigations to be highlighted in real-time.
Day to day, the "right place" pillar presents the optimal way to deploy colleagues within the store environment. Role deployment is a crucial leadership task to be developed in any store. When we work with our clients, we work with them to design their versions of two key tools for effective deployment: 1) resource maps and 2) the “Wheel”.
To develop resource maps, you need to understand two things: all the roles in your organisation and how much activity and time is required to fulfil that role successfully. Once you understand this, you can start to map the relationships between the number of colleagues in the store and what roles each should fulfil. When three colleagues are in the store, they cover multiple areas. However, if more colleagues are working, their tasks should become more specialised. This improves the effectiveness of resources during the quieter times of the day while improving customer service during peak times.
“The Wheel” guides colleagues and leadership regarding what activities they should complete at each point of the day. The tool aims to utilise quieter parts of the day to complete non-service activities, freeing busier times to focus on excellent customer service.
Further to these tools, a common mistake we see in stores is misaligning skills to roles during busy periods. During peak activity hours, the aim should always be to have your highest skilled colleagues in the right positions, your “aces in places”. We have seen this have a significant effect at a café business we worked with by compelling the most efficient baristas to stay making coffee rather than swapping in and out of other tasks. The busier the store is, the more focus should be placed on specialisation.
Deploying these tools and ensuring management use them can greatly affect customer experience and service. Getting the right place correct can quickly increase demand and provide the best customer service.
To innovate in this space, you want to use all the data at your disposal to deploy the right people to the right place and task. For example, tracking customer traffic around a theme park will unlock the ability to provide early warning about what attractions might get swamped shortly.
The right time is the technical part of this process and can be complicated. However, it is also the area where you can drive real efficiencies. To be good at the right time, you need an accurate forecasting model and the ability to schedule to it, which achieves labour matched to demand.
A business needs to be able to translate forecasted activity into hours of labour. One method uses a standard minute value (SMV) model. You can then turn a forecast of the drivers into labour hours. You drive incremental value both with the granularity of your SMV model and the sophistication of your demand planning. But both come with a cost which is more likely to pay back for larger and more complex businesses – so you need to find the right balance for your business.
You also need to schedule the demand that has been forecasted. Increasing flexibility is vital; Fixed hours and shifts, locked-in schedules weeks in advance, and inability to make short notice changes hamper retail and hospitability businesses looking to drive down their wage bill. Complete flexibility, such as a gig-economy model, comes with its downsides, such as lack of specialisation and lower morale due to constant change. Therefore, the right balance must be struck to retain staff and avoid a high turnover rate.
Our maturity model below shows how and when you might want to improve your labour forecasting and scheduling maturity based on the complexity of your location.
To be at the forefront of this, you must update smart forecasts with in-day factors like weather or outside events. For a pub company we worked with, an unexpectedly sunny day could cause a major spike in the number of visitors and lingering time for a pub with outdoor seating. However, for this to be worthwhile, you also need a very high level of labour flexibility to react appropriately.
Alongside these changes, there are challenges to be faced around getting the correct trading and operating hours.
As people's habits have changed (e.g. high work-from-home rates), the patterns in which they shop, especially during the week, have also changed. Without changing trading hours, ineffective time can quickly build up, with staff activity being unbalanced to customer demand. It can also work oppositely with a lack of reaction to where customer demand may have increased, e.g. the evening or at weekends. To tackle this, the store needs a reset with a profitability deep-dive to understand when the right time to trade is.
Reducing loss-making hours when the store is not earning money is vital for driving profit. Limiting this time to as little as possible is key. This should be achieved by moving as much activity into the trading hours, with colleagues completing these tasks in less busy times – the “wheel” should help with this.
Truly innovative businesses will consider a “gig economy” approach to bringing in resources to meet spikes in demand. The ability to offer shifts on the day to colleagues with the right skills to maximise your ability to service spikes in demand is invaluable. Perhaps even a bidding capability so you can entice the right colleagues into work to service the customers is a potential option. However, there should be strong awareness of morale and brand representation when considering this option.
Achieving excellence with the right support
Times are tough for customer service businesses in physical locations – and we predict they will become more challenging. We believe that now is the time to ensure that you consider a full right people, the right place, and the right time assessment. It should allow you to reduce costs while improving the customer experience, putting you in the best possible position to weather the upcoming storms.
Metyis have significant experience executing these strategies and empowering clients to achieve excellent outcomes. The three main benefits we have achieved with our clients were reductions in operating costs, driving incremental profit through upselling, and enhancing the customer experience.
Now is the time to act by embracing the three pillars. As physical locations adapt to challenging times, Metyis can be a strategic partner for redesigning and executing programmes that grant a competitive advantage and allow brands to stand out.
About the author behind the article
Robert Nagle is a Director in London and has over 15 years of working in the Retail and Consumer industry as both an employee and an advisor. He has a breadth of experience; but is particularly strong in Business Strategy, Analytics, Operating Models and Business Change. Jack Wray is an Associate in our London office. He has experience in delivering strategic and operational projects in retail and hospitality businesses, developing a strong approach for resource optimisation and labour deployment.