Home Center – Not Just Minimum Wage

Home Center is a retail chain that sells products for the home and garden.
Founded in 1993, the company operates 38 branches throughout Israel (and three in Cyprus). The company management believes they have maximized their potential in Israel and therefore seek to expand overseas. A new branch will be opening this March in Russia.
The chain, whose annual sales amount to approximately NIS 1 billion, has approximately 1,750 employees in Israel.
The size of the individual branches varies from a small branch employing 13 workers to a large one employing 90.
We spoke with Aran Shadmi, vice president of human resources, about the types of jobs available at Home Center and the techniques used to manage the chain’s employees.

That’s it? The company’s not expanding anymore in Israel?
Aran Shadmi, vice president of humanf resources: Not exactly, though we have maximized our branches’ growth potential. But now we are concentrating on maximizing each individual branch’s sales potential. We’re becoming more efficient; we’re closing branches that are not profitable and opening new branches instead in better locations. The total number of branches has not increased during the last several years, however.

How do you realize each branch’s sales potential?
By entering into new fields that we hadn’t been involved in before, such as selling white, electrical appliances [refrigerators, washing machines, etc. - S.S.] or by changing the way we relate to our suppliers. If, for example, we used to sublet floor space for the sale of rugs, cabinets or light fixtures, today we sell our products (with the exception of rugs) directly to the customer and the profits have increased accordingly.

How would you categorize the different types of jobs at the chain?
There are three types of workers employed at every branch: cashiers, storeroom workers and salespeople. The larger the branch, the more cashiers and salespeople it will have. The chain employs approximately 400 cashiers and 550 salespeople; the rest of the employees are storeroom workers and general help, such as data-entry workers or cash handlers, and of course the managerial staff that supervises them.

What is the chain’s employee turnover rate?
Approximately 1,000 employees per year. There’s an average turnover rate of 60% a year, which is very high, but it’s still relatively low compared to other chains. There are retail chains that have turnover rates of 100% and more.

Which segment has the largest turnover rate and why?
The cashiers, which is true at every other retail chain. The cashiers’ salary is low and they don’t have job benefits at most of the chains. The position also has little prestige and so it’s only natural that the cashiers consider it a temporary job and would like to find their job satisfaction in other areas. The same is true about storeroom workers. But the turnover rate is lower among salespeople.

What is the profile of new employees who join the chain?
Really varied. Some of the workers come right out of the army; others are students while others are retirees, some of whom work part-time. We also encourage the hiring of disabled people and minorities. This approach is mutually satisfactory – both for the employees and for the company.

These are sources of relatively inexpensive labor.
Yes and no. While it’s true that a retail chain’s human resources budget is tight and limited by its very nature, we already have a large group, numbering approximately 400 employees, with substantial seniority. Some of them have been employed by the company for ten years or more. These are not necessarily people who have advanced to more senior positions. They might be working in the same position for several years, but have decided their future lies with Home Center. They view the chain as the best place for them, both in terms of employment and income.
These employees are not necessarily looking for career advancement, but for stability and job security. We encourage this approach even though it costs us more to employ such workers.

Routine doesn’t cause burnout among the veteran employees?
Not necessarily, since we invest a lot in them through ongoing training seminars.  It can be problematic when a new branch manager wants to change the way things are done. For example, if a veteran employee has been working the morning shift for years and, suddenly a new branch manager appears on the scene and tries to change the veteran’s work schedule. Sometimes they can work things out and sometimes they can’t. Experience shows sometimes veteran employees leave when the managers change.

Since the chain’s management wants to retain experienced employees, what do they have to say about this?
The manager decides who will be on his staff. We generally respect his decisions and don’t get involved. There are exceptions, though. For example, once a new manager joined a large branch and caused several veteran employees to leave. We got involved in this case. It wasn’t just me, but the chairman of the company. We eventually adopted the manager’s approach. As it turns out, the manager needed to implement significant changes in the system because the veteran employees were already worn out and were trying to tell the management how to run the store.

Why did you become involved in this case?
Because it was an exceptional case. If only one veteran employee were sent packing, it wouldn’t have weakened the entire system. But if a manager wants to replace a number of veteran employees, the entire branch’s functioning could very well be affected, especially if the new manager was no longer manning the job six months after having gotten rid of most of the branch’s experienced employees.

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How does the chain find new employees?
The individual branches do most of the searching for new employees. The managers receive support from the Human Resources Department. Potential candidates come to the branch, are interviewed, and whoever is accepted goes through the branch’s training process.  The Human Resources Department offers support in two ways: First, the managers are trained to seek and select new employees. Second, Human Resources offers support by taking responsibility for placing wanted ads, for instance, even if the advertisements are placed in the branch’s immediate area. Handwriting analysis, for example, would be a type of support offered to facilitate the selection process.

Does every potential candidate undergo handwriting analysis?
No. Only those people in positions requiring a certain level of trust, such as managers and assistant managers, cash handlers and cashiers.

What resources does the company use to find employees?
Job-placement agencies, newspaper ads, employment services, referrals and people who walk in and inquire if any jobs are available. Many people have joined Home Center this way.

What about seeking employees through the Internet?
We do that, too. I didn’t mention it because we use the Internet mostly in searching for managerial candidates, since it’s a resource used by relatively educated people to search for jobs. Cashiers and storeroom workers won’t search for jobs on the Internet. It makes sense that candidates for these positions use traditional methods to look for work.

Which of the traditional methods are the most effective?
Newspaper ads and job-placement agencies. Employment services are less successful. Employee referrals is also not particularly successful.

Many organizations report that employee referrals is an important strategy, why doesn’t it play a significant role in your chain?
That may be true in high-tech. There friends are involved in the same professional areas so in many cases one employee brings a friend who may not be unemployed, but works at a different high-tech company. That means he continues working in the same field, only for a different employer.

In a retail chain it doesn’t work like that. It’s not a case of a prestigious field of employment or significant wage differences luring a friend from one organization to another. If the worker is employed he has no special reason to leave a job to work at a retail chain.

On the other hand, if he has been unemployed for a long time, that’s another story. Then the employee referral system can bring in job candidates. 

How is the wage level for different types of employees determined?
Cashiers and storeroom workers receive minimum wage. Sales consultants received higher pay, NIS 22-23 per hour. (The current minimum wage is around NIS 19 per hour. - S.S.)

How do you keep the workers happy? Minimum wage is not a very sophisticated incentive tool to encourage employees engaged in sales promotion.
You’re right, and that’s why Home Center uses a range of incentive systems. I’ll give you three examples:

1. Next to the cash register are items the cashier can offer the customer as he is paying. If the cashier sells over 100 products per month she receives a bonus for every item beyond the first 100.
2. We encourage customers to join the Call Power Card Club. Anyone who signs up a new member receives a bonus. Some employees earn hundreds of shekels per month through this form of compensation alone.
3. There are departmental bonuses in departments where sales are more complex, like ceramics, kitchen, or built-in closets. It’s very different from selling a toothbrush holder. Bonuses are not given for a simple item because there is no need for a long process of consulting, guidance and dealing with resistance, such as in the sale of a washing machine.

Are there incentives for meeting storewide goals?
Definitely. If the store meets a certain level of business performance the manager receives a sum of money for use at his discretion. He may decide to give it to only a portion of the workers. He may decide to put some of the money aside for later and use it to hold a party for the employees.
The decision depends on the manager’s individual character. There are some managers who feel it’s important to bring the staff together and will save up money for a party. Another manager may want to encourage excellence and will reward a few exceptional employees. We are not involved in the decision.

What kinds of non-material incentives are offered at Home Center?
We run extensive training in which all employees take part. We have different 13 training programs. I see the training activity not just as a tool that provides professional tools, but also as a central motivating factor.

Why invest in employees when, given the high turnover rate, most are bound to leave soon?
At a retail chain the options for promoting employees are very limited. It’s important to create interest and stimulation for the workers beyond the work routine. For the same reason we also try to do task enrichment. For example, every store has an instructor whose job is to introduce new employees to work at the store. He receives training to carry out this task and of course a fixed salary bonus of hundreds of shekels.

Another example: An employee who occupies the post as shift manager is authorized to take the place of the manager (or the assistant manager, if there is one at that branch) when he’s not at the store. This also involves job enrichment and a fixed bonus.

Sometimes a customer asks the employee for an explanation and then he goes and calls another employee to supply the explanation. Do the employees have different levels of knowledge?
That’s part of the enrichment program. The chain operates 15 professional departments. Every department has a coordinator who is the branch’s supreme professional authority in that area. He’s very useful in the commercial sphere, as well, both in training activity and when starting a new store.

But to expand the enrichment pool we divided up areas of responsibility. Today there is a professional coordinator who specializes in the commercial aspects and a professional coordinator involved in training. The goal is to have as many employees as possible execute a second task in additional to their designated task. It’s important to make the workers feel they’re part of an organization that offers opportunities.

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