The Walmart Problem: How Slashing Hours and Staff Hurts Profit Long-Term

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Firing people and cutting hours is a quick and easy way to cut expenses. Just ask Walmart.

Slashing Hours and Staff

Unfortunately, it’s also killing the goose that laid the golden egg.

Treating your customer support agents well is an investment that will pay off. MIT Adjunct Associate Professor Zeynep Ton and Ananth Raman of Harvard Business School studied what makes retailers successful.

We know superior customer service is secret to profitability. Winners don’t constantly find new customers, they keep their customers consistently coming back for more.

That’s exactly what Ton and Raman found as well. High-profit retailers provide better customer service than their competitors.

“The University of Michigan’s American Customer Satisfaction Index ranks Costco as high as Nordstrom—a department store chain known for outstanding customer service—and consistently higher than Sam’s Club.”

Here’s how to do it.

Ensure that training is up to date and readily accessible.

Ton and Raman found significant variation in operational performance between Borders stores using same information technology and offering the same employee incentives. The best store performed 43 times better than the worst. They found that employee training made a huge difference.

Slashing Hours and Staff

Employee training must, at a minimum, keep pace with changes in policies and procedures. Don’t leave it up to employees to schedule more training. When things change, let your employees know.

Let employees know when they’re performing well.

The best way that employees can understand they are doing their job properly is for their superiors to let them know. Give concrete and consistent praise for employees who carry through on their work.

Step in to help employees with difficult customers.

It isn’t necessary to do an employee’s job for them, but there are times that it becomes clear a manager’s attention is going to be necessary. Moving in to support the customer support in these cases makes it clear to employee and customer that you have the employee’s back. Naturally there are times a customer service agent will require correcting. Remember, “Praise in public, correct in private.”

Answer your agents’ questions quickly.

Nobody likes to be left on hold, including customer service agents. Your customer service agents are the ones enabling you to meet your service goals. When they bring issues to management’s attention, work on resolving them expeditiously to improve their satisfaction with and personal investment in your organization.

Empower your agents.

Talented individuals often know a way to satisfy the spirit of the policy without strictly adhering to its form. If an employee brings you an idea of this sort, give it the attention you would want for an idea of your own, and the support you would want in turn if it seems workable.

Ton and Raman found that high-performing retail stores empowered low-level retail workers to make decisions about product returns and customer complaints. And employees who work closest to the merchandise at QuikTrip, Trader Joe’s, and Mercadona make the call on how many units to order for their stores. When employees are responsible for making sure units don’t sell out or sit on shelves, they’re more engaged. Management can mitigate risk by making these small decisions and constantly measuring results.

This strategy translates into a superior customer experience. As Ton wrote for HBR, “Quik­Trip performs better than its competitors in evaluations by mystery shoppers. Customers get in and out of QuikTrip stores quickly because merchandise is always where it is supposed to be, and employees have been trained to ring up three customers per minute (often by not having to scan merchandise and by calculating change in their heads).”

Stop wasting customer service agents’ time.

Customer service agents are less motivated to be fast and efficient when they have to use poorly designed processes and outdated tech.

Profitable retail stores constantly innovate. For example, Costco shelves their wares on pallets so their employees don’t have to unload and shelve them. Trader Joe’s speeds up checkout by selling perishable products pre-packaged instead of loose. QuikTrip and Mercadona constantly improve their manufacturing and logistics processes by incorporating feedback from their employees. Mercadona’s managers leave headquarters at regular intervals to talk to employees about how to improve specific processes in stores. They also employ people specifically to move employee and customer feedback up the chain to purchasing and marketing departments.

Hire more of them

Every $1 increase in payroll results in a $4 to $28 increase in monthly sales, according to Ton and Raman’s analysis. They found that a one-standard-deviation increase in labor levels at a store increased profit margins by 10% over the course of a year.

Having more agents than you absolutely need to operate sures that they’re not too rushed to serve customers well and finish their tasks. Marshall Fisher, Serguei Netessine, and Jayanth Krishnan found that successful stores overstaffed. For instance, QuikTrip employs hundreds of people who don’t report to a specific store but are ready to fill in for people who get sick, take a vacation, or have an emergency.

Pay them better

High-profit retailers pay their employees better than the competition. They also offer them better benefits and more convenient schedules.

Supporting employees when they try to adhere to company policy against a customer’s wishes

Insisting that check payment must be accompanied by ID, declining to process a return without a receipt, only releasing account access when the relevant passcode or process is complete – these things can all be infuriating to a customer, but the policies are usually there for a reason. There are times when policy needs to be gone around, but make it clear that you’re making an exception and that the employee was right to adhere to policy.

Supporting your support works.

When CEO Vineet Nayar felt like his company was slipping behind, instead of cutting hours, wages, and jobs, he invested in employees.

By focusing on employee satisfaction, training, and support, employee engagement and investment in the company jumped upward, and HCL Technologies replaced its steady but unremarkable growth with far more substantive improvement.

Conclusion

When times get tough, companies often want to trim their payroll budgets. Sure, it’s a fast and effective way to cut costs. But it’s also an effective way to forfeit profits over the long term. Ultimately, superior customer service marks the difference between companies that succeed and those that flounder and fail. And superior customer service comes from well-trained, well-treated, well-supported, well-paid customer service agents.

What tips would you include for treating customer service agents well to get the best performance from them? When is cutting staff and hours the best option? Let us know in the comments!

Looking for Customer Service software? Check out Capterra's list of the best Customer Service software solutions.

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William Cain

William Cain is a content marketer and ghostwriter for multiple clients including Textbroker and Brandsplat.

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