The case, based on the company Blinds to Go, emphasizes the importance of staffing in stores as they expand to meet their growth objectives. Being a manufacturer and retailer, with a unique sales model – 100% commission based and focus on customer service gave the company an advantage over its competitors. According to the senior management Quality of staff was paramount and hence their original compensation system motivated best performance and fostered a high energy, sales hungry culture at BTG.
To attract more recruits for its expansion phase, the management changed the compensation system from full commission to salary on the recommendation of a newly hired vice president. Sales declined and the overall staff turnover increased. Seeing this the company brought back the old culture and experienced a sales turnaround. This shift also caused another huge turnover in stores. A large percentage of voluntary turnover occurred in the first four months. The higher turnover after eight months was partly due to termination because of sales performance.
The biggest challenge the company now faced was understaffing. The need for additional staff was further aggravated due to its continued push for growth and the tight US and Canadian labour markets. Another concern to be addressed was that the company had planned for 80 per cent of its expansion in US where the employees preferred the fixed pay than the company’s commission based pay structure. During this period BTG had tried several recruiting methods with varying degrees of success. With an IPO in the pipeline and plans to add on average 50 stores per year for the next five years, it was critical for the company to come up with a staffing strategy with focus on Quality of the staff and low employee turnover.
Blinds To Go (BTG) was a retail fabricator of window dressings. It was started by David Shiller in 1954 in the Cote-des-Neiges district in Montreal, Canada. From the mid 1970s, BTG focussed on the sale of blinds. It was able to create a production system that reduced the delivery time frame of custom blinds from six to eight weeks to 48 hours. The reduced delivery time led to overwhelming customer response and the business flourished. The firm, realising their unique advantage of being a manufacturer and retailer simultaneously, began expansion by opening stores throughout Canada and US. By June 2000, BTG operated 120 corporate owned stores in North America. BTG expected to add 50 stores per year for the next 5 years, 80 percent of which targeted to US expansion stores.
BTG’s business philosophy was that quality of staff was cardinal than the store location, customer demographics or advertising. The firm established this by experimenting with a store that was locationally disadvantaged and had declining sales. BTG was able to triple the sales of the said store in one month by deploying their ‘A’ management team and trained staff there. The four staff roles in BTG stores were 1. Sales associate 2. Selling Supervisor 3. Assistant Store manager & 4. Store Manager. Sales associates were the junior most employees and their job was to follow a set plan to help walk in customers to make a purchase. Consistent sales performers among them were promoted to selling supervisors, who were assistant store managers in training, or assistant store managers. Assistant store Blinds to Go: Staffing a Retail Expansion
SECTION E: Group #5 managers were in charge of the stores in the absence of store managers. The store manager was responsible for overall store operations. The BTG selling process involved a high level of customer interaction, which set a very high level of service expectation. Their emphasis on customer satisfaction and sale closure led to higher volume of orders relative to their retail competition
Original Compensation of Retail Staff:
The compensation structure at Blinds To Go incentives performance based on number of sales deal closed. The commission based structure fosters the high energy, sales hungry culture at BTG. This structure was believed to be a motivating factor to boost performance. High performers at BTG actually made more money than comparable retail outlet salesman.
For Sales Associate the salary structure was a mix of fixed pay and variable pay with $3 – $5 comprising of fixed and 3% of sales as variable component.
For Managers/Assistants the salary structure was $10,000 – $15,000/yr as fixed pay with 1.5% to 3% of overall sales as variable pay.
Changes in Compensation Structure – 1996:
As per the recommendations from a newly hired Vice President of store operations the compensation structure for the store staff was changed from being fully commission based to salaried. Under the new structure, the sales associated were paid Cdn $8 per hour as a fixed component. For the store managers a higher base salary component as compared to the commissions was set. The main focus of the move was to make the compensation more attractive to the prospective hires. Another change being brought was to limit the involvement of store managers in the sale process. All these changes had an adverse effect on the sales figures which showed a decrease of 10 to 30% from 1996 to 1997. The staff turnover increased to 40% from the earlier 15%. Even thought the new pay structure helped in recruiting more hires, it led to the hiring of lower calibre people.
The existing good performers did not appreciate the changes, thus affecting their morale and hence their commitment to sales. To counter this adverse effect, the management introduced a variation of the commission based compensation plan in May 1998. The effect of the change could be seen in the 10 to 30% increase in store sales from the previous year. Still the BTG stores experienced a high employee turnover that year. It was probably because of the employees accustomed to fixed pay were leaving the organisation, being dissatisfied from the commission based structure. Analysis of the employee turnover reflected that the highest no of employees left the firm in the first 4 months from their hiring.
Most of the new expansion plans were in US. But the people of US were uncomfortable with the 100% commission based pay structure. Thus there was a requirement in the change to the structure to adapt to the US market.
Blinds to Go: Staffing a Retail Expansion
SECTION E: Group #5
Channels of Recruitment
To be able to attract and recruit people who had certain sales driven qualities, several channels of recruitment were harnessed to fill in the job positions. Since BTG was already understaffed and with massive growth plans (50 stores per year ) lined up, we need to analyse the various pros and cons of the channels of recruitment. Employee Referral: Current staffs refer friends and family to BTG which helped company attract candidates already briefed on the company’s ideology. This channel was very effective which is evident by its highest ratio of leads to hire. The success of the ER scheme was partially due to the fact that referrals generally continued employment excited by the opportunity that the friend or family member who is a BTG employee recounted. Though maximum hiring was effected through this channel yet this alone did not currently satisfy BTG’s hiring needs.
Internet Sourcing: This is one of the non-store recruitment channels which BTG used in two ways. First, BTG solicited resumes at its blindstogo.com site. Second, DSM’s and recruiters actively searched online jobs sites like Monster.com to contact potential candidates. Currently 12 out of 143 recruits were through this channel. DSM Compensation Readjustment: DSM’s were mainly responsible for store source of recruitment mainly walk-ins and employee referrals. They had to hire 10 new sales associate every month. Their importance in recruitment process is highlighted by the fact that their salary was based on number of new staff selected rather than on sales targets. Currently 16 out of 143 sales associate were recruited through this channel in past two months.
BTG Retail Recruiters: They were professional recruiters who were paid @20000/year with a bonus of $150 -$500 for each successful hire. They generate leads through cold calls, networking referrals, colleges, job fairs, Internet and employment centres. Though they had performed sub- optimally in terms of number of number of new recruits, their training had increased to enable to get in at least 4 new recruits per week. Newspaper Advertising: Newspaper channel generated the maximum number of leads but the senior management believed that this medium did not generate the quality of candidates that BTG needed. This channel attracted more of the people who did not meet the desired skills standard and core values expected by BTG in potential candidates. To be able to meet our desired staff requirements, we believe this channel needs to be harnessed to its full potential and complemented by necessary training to new recruits to enable them to meet company’s performance standards.
Store Generated Leads: BTG believed in direct store walk-in mode of recruitment as well. It had put “help wanted” signs on its windows to attract potential candidates to meet its recruitment needs. But this policy was successful only in densely populated areas with high footfall. HR Strategy:
Udofia, Vice Chairman BTG, is looking for a strategy that solves all the major issues currently faced by the company, which would include unstaffed stores, staffing for future expansion and high employee turnover. Following are the steps that could be taken by him to achieve its growth objectives: A Robust Training Module: As mentioned, the quality of staff is extremely important in the retailing business. The crunch in the labor market doesn’t give the company a flexibility to choose Blinds to Go: Staffing a Retail Expansion employees on a strict criterion.
A training module would help BTG to relax the criterion and increase the number of selected employees by recruiting people who are trainable. In order to keep a check on the quality of the employees, the company can recruit the employees at a trainee level with a fixed pay. The training would be mostly on the Job led by experienced Store Managers. A review system would help these selected candidates to get promoted as Sales Associate. The initial pay as a trainee would be low. But the incentive to get promoted as Sales Associate would drive them to work and learn quickly.
Currently we can see that there are large numbers of people who are attracted by the Newspaper Channel and Internet. But the problem is with this medium is that it didn’t generate quality employee. By a robust training module the company would be able to hire trainable people and give them opportunities on the basis of their performance.
The Promotion Structure: A scheduled review and internal promotion structure could be followed which attracts the current employees and increases the retention rate. The review can be conducted on at 2 levels, Sales Performance and Soft skills. A feedback mechanism would help the employees to work on the areas they lag. The review can be scheduled every 8 months and every employee can be given an opportunity to get promoted.
The internal promotion structure could be leveraged as a tool to advertise. This would attract people who currently don’t want to join at Sales Associate Level. The promotion structure would also help in filling up the vacancies of Supervisors and Managers. Pay Structure: The pay structure for Sales Associate could be revised in a manner as explained below:
According to the current pay structure, a Sales Associate is paid $6-$8 per hour or 6% of sales, whichever higher. Clearly it can be seen that the Marginal and the Poor performers are the once who are enjoying the fixed compensation system. In order to motivate them, fixed + variable compensation could be followed for these below par performers. This structure would demotivate the top performers as there will be a reduction in their salaries. So it would not be the best idea to implement this structure for top performers. A benchmark of $10000/sale/week could be set. This would not only motivate them to perform but the company also would overcome the problem of social loafing. The structure is explained below:
Marginal-Poor Performers ($10000-/sales/ week) $3 per hour + 3 % of sales Leadership Program: The highly experiences set of Store Managers could be given an option to join the leadership program. Under this program the Senior Employees would take up the responsibility of the training module and help the company attain the level of quality it requires in its workforce. Their compensation could be based on the rate of conversion of trainees to Sales Associate instead of Sales. Increased Stock Options to senior and experienced Store Managers would give them a feel of ownership in the firm which is what an employee needs after serving an organisation for years.
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