Retail Store Operations Benchmark Report

Automated Workforce Management Improves Performance

APRIL 2007

Underwritten, in Part, by

The Store Operations: Workforce Management Benchmark Report

Executive Summary

orkforce Management (WFM) is playing a pivotal role in shaping performance management in retail stores. Best in Class retailers are setting themselves apart from the rest when it comes to increased employee retention and bottomline performance due to better WFM processes. As a result of superior store manager and associate empowerment, use of WFM analytics, and optimum staffing, 80% of Best in Class have improved or met their labor turnover rate goals, indicating that effective WFM programs and procedures are in place. Additionally, WFM processes assisted 63% of Key Report Demographics Best in Class companies improve operating profit as a Retail Segment: Spepercent of sales. Reasons for superior Best in Class percialty (37%), Supermarformance when compared to Average and Laggard reket/Grocery (23%), Hostailers are: pitality/Food-Service Establishments (16%), Better use of scheduling optimization solutions for Hardware (10%) and effective staffing Store Concepts (Drug, Increasing WFM analytics solutions for store opWarehouse, Department erations performance management & Convenience)-14%. Greater implementation of employee self-service Geography: Americas HR (paid time-off, FMLA, benefits etc.) and train(57%). EMEA (25%) ing applications (retail processes: workforce, inand Asia-Pacific (18%). ventory, other retail policies and procedures) Our results show that automation and integration are playing a key role in the workforce management strategies of retailers. Consider the following scenarios: Sixty-Three percent (63%) of enterprises surveyed reported that they plan to spend money on WFM solutions during the 2007-2008 fiscal year. Retailers have planned to adopt integrated WFM solutions1 (31%), WFM analytics solutions (60%), self-service process and product training solutions (32%), and task management solutions (30%) within the next 12-months.

Best in Class Performance

Aberdeen used four key performance indicators (KPIs) to distinguish Best in Class. Improved labor cost containment Reduced employee turnover rates Improved operating profit as percent of sales Improved schedule effectiveness2

An application suite that consists of: time and attendance, task management, analytics, forecasting, budgeting, and labor scheduling tools.

All print and electronic rights are the property of Aberdeen Group 2007. Aberdeen Group i

The Store Operations: Workforce Management Benchmark Report

Competitive Maturity Assessment

Best in Class performers shared several common characteristics with respect to their WFM solution implementation strategy such as: By using the WFM process more effectively than the rest, 80% of Best in Class have improved or met their labor turnover rate goals, resulting in improved bottomline performance due to retention savings and higher service standards. Best in Class retailers are 9 times more likely than laggard retailers to utilize WFM metrics for measurement and reporting store workforce performance. Best in Class are currently 6 times more likely than laggards to utilize long-term forecasting tools for budgeting and labor allocation.

Required Actions
In addition to the specific recommendations in Chapter 3 of this report, to achieve Best in Class performance, retailers must: Adopt a detailed workforce strategy for workforce functions including scheduling, task management, training, and store-level HR procedures. Automation can play a pivotal role. Implement web-based processes and eliminate paper-based manager and associate procedures that lead to poor utilization of labor hours and higher operational costs. Provide store teams with a common dashboard for executing workforce functions and tasks to enable a planned and systematic approach towards sales and service. Plan a phased-integration of WFM strategies and solutions; preferably using a single solution platform to merge all Point-Of-Sale (POS) and HR data into a one system of record.

Accuracy of actual scheduling of labor hours to projected daily schedule patterns (e.g.-morning: low scheduling; evening: high) and weekly forecast of labor hours per department in a retail store.

All print and electronic rights are the property of Aberdeen Group 2007. ii Aberdeen Group

The Store Operations: Workforce Management Benchmark Report

Table of Contents
Executive Summary .............................................................................................. i Best in Class Performance ............................................................................. i Competitive Maturity Assessment...................................................................ii Required Actions.............................................................................................ii Chapter One: Benchmarking the Best in Class ....................................................1 Best in Class PACE Model............................................................................. 5 Aberdeen Insights Part 1 ............................................................................ 6 Chapter Two: Benchmarking Requirements for Success ....................................7 Competitive Maturity Assessment.................................................................. 8 Organizational Capabilities and Technology Enablers ................................. 10 Aberdeen Insights Part 2 .......................................................................... 11 Chapter Three: Required Actions ...................................................................... 13 Laggard Steps to Success........................................................................... 13 Industry Norm Steps to Success ................................................................. 14 Best in Class Next Steps ............................................................................. 14 Featured Underwriters ....................................................................................... 15 Appendix A: Research Methodology .................................................................. 17 Appendix B: Related Aberdeen Research .......................................................... 19

All print and electronic rights are the property of Aberdeen Group 2007. Aberdeen Group iii

The Store Operations: Workforce Management Benchmark Report

Chapter One: Benchmarking the Best in Class

Fast Facts By using the WFM process more effectively than the rest, 80% of Best in Class have improved or met their labor turnover rate goals, resulting in improved bottomline performance due to retention savings and higher service standards. Pressure to reduce payroll costs and employee turnover is driving the use of WFM solutions for 69% of retailers

orkforce Management (WFM) is playing a pivotal role in shaping performance management in retail stores. Best in Class retailers are setting themselves apart from the rest when it comes to increased employee retention and bottomline performance due to better WFM processes. As a result of superior store manager and associate empowerment, use of WFM analytics, and optimum staffing, 80% of Best in Class have improved or met their labor turnover rate goals, resulting in better bottomline results. Additionally, WFM processes also assisted 63% of Best in Class companies to improve operating profit as a percent of sales, compared to the Average and Laggard retailers. According to survey data, lower turnover rates enable Best in Class retailers to attain employee retention savings and maintain service standards. The cost of churn in one retail position can add up to $6,467 when one considers separation, replacement, training, and opportunity costs. Constant churn also impacts store sales and service due to inadequate associate coverage on the sales floor. Reasons for superior Best in Class performance when compared to the Average and Laggard retailers include (Figure 1): Better use of scheduling optimization solutions for effective staffing: Best in Class companies are more proficient at assessing the skills and development needs of their employees. More than half (56%) of Best in Class use store associate needs, skills and talent development programs for optimum scheduling and task allocation. These companies develop multiple skill sets of associates to fit the diverse store labor needs. Multi-tasking is very common in retail stores. Additionally, forty-four percent (44%) of Best in Class companies are currently applying the work/life balance to employee scheduling leading to less absenteeism. Further scheduling optimization is attained as labor allocation and tasks in different parts of the store is based on the store department labor guidelines. Best in Class retailers also pre-set their scheduling patterns for better balance between customer service and tasks (e.g.-morning: low scheduling; evening: high scheduling). These patterns are determined by the retailer for all the stores in the chain. Increasing use of WFM analytics solutions for store operations performance management: Thirty-Eight percent (38%) of Best in Class companies are diligently measuring and reporting WFM analytics for store operations performance

All print and electronic rights are the property of Aberdeen Group 2007. Aberdeen Group 1

The Store Operations: Workforce Management Benchmark Report

management. These companies develop best practice modules based on their metrics to enable strong field-level execution of established standards for success. Higher implementation of self-service HR and training applications: SixtyThree percent (63%) of Best in Class companies have established guidelines for self-service procedures. The self-service approach provides store managers and associates with a sense of empowerment in the form of web-based retail process (policies and procedures) training. These capabilities also enable accessibility to basic fieldlevel human resource procedures for faster HR issue resolution and program fulfillment (FMLA, Paid-time off, Benefits, etc.)

Figure 1: WFM Process, Knowledge and Organization in Retail

70% 60%

63% 50% 33% 27% 26% 13% 0%

Staff needs, skills and talent development Prioritize tasks versus service in scheduling Workforce Guidelines for management workforce process and product training metrics measured and reported

% of Population

50% 40% 30% 20% 10% 0%

45% 29% 21% 13% 7%

Best in Class

Average

Laggard
Source: AberdeenGroup, April 2007

Our results show that automation and integration are playing a key role in the workforce management strategies of retailers. Consider the following scenarios: Sixty-Three (63%) of enterprises surveyed reported that they plan to spend money on WFM solutions during the 2007-2008 fiscal year. Retailers have planned to adopt integrated WFM solutions (31%), WFM analytics solutions (60%), self-service process and product training solutions (32%), and task management solutions (30%) within the next 12-months. Sixty-Nine (69%) of enterprises surveyed indicate they will likely adopt WFM solutions in order to contain internal pressures such as high employee turnover and spiraling payroll costs as a percent of sales. Retail segments such as specialty, store concepts (i.e. convenience, department, warehouse and drug), supermarket-grocery, and hospitality are showing higher than average spending on workforce management capabilities and solutions (Figure 2). These segments are the most effected by high employee turnover and pressure to reduce rising payroll costs.

The reasons for higher adoption are:

All print and electronic rights are the property of Aberdeen Group 2007. 2 AberdeenGroup

The Store Operations: Workforce Management Benchmark Report

Our data shows that traditional WFM pressures are still a dominant force in retail. Spiraling employee turnover rates and escalating payroll costs are the internal pressures forcing retailers to re-think their WFM strategies for improved productivity and bottomline performance. However, there is a clear distinction between the top pressures impacting Best in Class retailers and all others. Containing payroll costs is the single biggest pressure impacting the WFM strategies of 50% of the Best in Class retailers. The inability of Average and Laggard retailers to reduce employee turnover is forcing them to re-evaluate WFM plans and objectives. This pressure is currently impacting 40% of the Average and Laggard retailers. Figure 2: Store Concepts and Supermarkets Lead Retail WFM Adoption (Next 12 months)
68% 54% 71% 56% 60% 80%

Supermarket Specialty Store Concepts Hospitality 0% 20%

32% 46% 29% 44% 40% % of Population

No

Yes

Source: AberdeenGroup, April 2007

In response to the internal pressures, the Best in Class apply distinct strategies towards workforce management when compared to the Average and Laggard retailers. The key strategies include: Fifty-Six percent (56%) of Best in Class are implementing optimized staffing plans by balancing operational tasks, customer service, and selling procedures for actual We were using spreadlabor scheduling. sheets, gut-feel and exThese top performing companies are applying a checks and balances strategy for containing payroll expenditure. Best in Class are placing stringent internal controls to be in line with the planned labor for the week. Monitoring and trimming down labor hours without effecting service levels are common practices.
perience for workforce management. We now have a solution that evaluates workload changes continuously and positively impacts customer service. We need effective workflow for our workforce

- Senior Vice-President, FMCG Retailer

All print and electronic rights are the property of Aberdeen Group 2007. Aberdeen Group 3

The Store Operations: Workforce Management Benchmark Report

On the other hand, 50% of the Average and Laggards surveyed are still trying to get beyond the reactive approach to staffing plans. Our data indicates that these companies lack self-service training and staffing optimization capabilities to empower store associates and managers.

Case Study: Muvico Theatres Opts for a Web-Based Workforce Solution

Over the next three years, Muvico Theaters will grow their number of screens from 233 to 353 representing a 52% screen count increase. Challenged by a cumbersome and outdated workforce management system, Muvico required the adoption of a solution that would significantly reduce payroll processing costs and accurately forecast future labor needs while complying with complex labor laws. Muvico recognized they could not meet their workforce management needs with a piecemeal approach. To achieve their goals, the company required a highly flexible real-time, web-based labor management solution. Muvico benefited from the solution with a 30% reduction in administrative costs. This company was also able to develop a consistent workforce management blueprint that can be extended to each new theater and help Muvico achieve its growth objectives.

Maturity Class Framework

While the steps towards enhancing workMaturity Framework Key force management can be both time and capital-intensive, leading retail companies The Aberdeen Maturity Framework defines have made significant strides towards enterprises as falling into one of the three streamlined workforce processes and broad following levels of practices and performtechnological transformation. Aberdeen used ance: four key performance indicators (KPIs) to Best in class (20%) practices that are the distinguish Best in Class companies from best currently being employed and signifiIndustry Average and Laggard organiza- cantly superior to the industry norm tions. These KPIs were rated on a weighted performance scale. The top KPIs for calcu- Industry norm (50%) practices that reprelating Best in Class performance are: process sent the average or norm measures schedule effectiveness, financial Laggards (30%) practices that are signifimeasures operating profit and labor cost to cantly behind the average of the industry sales, and quality measures employee turnover rates. Table 1 summarizes the findings and defines Best in Class performance for this study.

All print and electronic rights are the property of Aberdeen Group 2007. 4 AberdeenGroup

The Store Operations: Workforce Management Benchmark Report

Table 1: WFM Best-in-Class Overview Definition of Maturity Class

Best in Class: Top 20% of aggregate performance scorers Industry Average: Middle 50% of aggregate performance scorers Laggard: Bottom 30% of aggregate performance scorers

Mean Class Performance

Improved operating profit Reduced labor costs Reduced employee turnover rates Improved schedule effectiveness No decernable change operating profit No marked reduction in labor costs No marked reduction in employee turnover rates No decernable change in schedule effectiveness Decreased operating profit Increased in labor costs Increased employee turnover rates Decreased schedule effectiveness
Source: AberdeenGroup, April 2007

Best in Class PACE Model

Best in Class use of WFM solutions in retail contributes to their performance in the two key performance metrics cited above, each of which has a direct impact on the retailers goal to increase efficiencies and profit. Using workforce solutions effectively to meet or outperform goals requires a combination of strategic actions, organizational capabilities, and enabling technology that can be summarized as follows: Table 2: Best in Class PACE Framework

Pressures

Actions

Capabilities
Enhanced insight into staff needs, skills and talent development

Enablers
Web-based Integrated WFM solution

Balance opera Need to retional tasks and duce payroll customer service cost as a perin labor scheduling centage of sales Improve monitoring and control of Need to repayroll expendiduce emture ployee turnover Create a talent development and workforce performance culture

Staffing optimization and work WFM metrics measured force simulation solutions and reported for store Automated task management operations performance and employee scheduling sysmanagement tems with internal and head Work/life balance apquarter-directed tasks, labor proach towards emavailability and optimization ployee scheduling (tracking) Guidelines for workforce POS-web based self-serve process and product time clock and training training Annualized labor planning and budgeting integrated with schedule optimization Portal-based hiring system with behavioral assessment, background checks and reporting functions
Source: AberdeenGroup, April 2007

All print and electronic rights are the property of Aberdeen Group 2007. Aberdeen Group 5

The Store Operations: Workforce Management Benchmark Report

Best in Class retailers deploy WFM successfully by using select distinct strategic approaches beginning with one of the following: Labor/workforce structure for all stores based on store execution management (SEM) principles. Enterprises assess labor drivers or levers that are ascertained on customer service time, labor laws, workflow, or daily functional tasks. Guidelines for workforce process are used for planning and forecasting labor hours based on historical sales, product preferences, affinity, and customer traffic. Workforce process visibility through workforce management metrics that are measured and reported for store operations performance management (to combat process, financial, quality, and customer service challenges due to workforce management practices in a specific retail store).

Aberdeen Insights Part 1

Lack of understanding the ROI model, executive mandate, and concerns over infrastructure costs restrict the implementation of WFM solutions for large retailers despite the growing need for better workforce management planning and forecasting. Thirty-Seven percent (37%) of retailers point out that in order to move forward with a WFM implementation or upgrade plans, they need better and more precise ROI modeling from solution providers. Thirty-Four percent (34%) reported that executive mandates have been a reason for the lack of a comprehensive WFM solution deployment in the past. Cost concerns were cited by 29% of respondents as a reason for lack of deployment.

Case Study: A Supermarket Chain Benefits from Optimum Staffing & Scheduling Solutions
A 145-store supermarket chain had 18 different time & attendance and 9 different POS systems. The chains stores had functional challenges related to scheduling, forecasting, and labor allocation. The retailer also faced numerous problems such as the inability to determine actual versus planned labor, as well as the issue of labor allocation based on sales data alone. This supermarket chain required a common centralized system that had forecasting, planning, scheduling, and time & attendance all on a single user interface. This retailer chose to optimize labor scheduling but also to allocate labor based on accurate SKU-level data and service drivers. An integrated WFM solution helped this retailer attain a 2% decrease in labor cost to sales and an overall improvement in the accuracy of front-end labor scheduling based on forecast need.

All print and electronic rights are the property of Aberdeen Group 2007. 6 AberdeenGroup

The Store Operations: Workforce Management Benchmark Report

Chapter Two: Benchmarking Requirements for Success

Fast Facts Best in Class retailers are 9 times more likely than laggard retailers to utilize WFM metrics measurement and report of store workforce performance. Best in Class are currently 6 times more likely than laggards to utilize long-term forecasting tools for budgeting and labor allocation. Companies that have exceeded their employee turnover goals are 63% more likely to use Integrated WFM solutions.

verage and laggard performance is not matching up to the standards of Best in Class companies due to manual workforce procedures such as scheduling, lack of WFM analytics, and fragmented WFM solutions. This fragmentation is due to several non-integrated WFM solutions and legacy systems deployed within the enterprise. The fragmentation leads to flawed interaction of labor, sales volume, and customer traffic data for long-term labor forecasting and planning purposes. For instance, We had a problem related to 69% of Laggard enterprises are still applying a manual procedures, repetitive reactive approach towards labor scheduling, schedules and paper-based hiring, training, and task management. This scheduling. We opted for an approach leads to: optimized scheduling solution Under or over scheduling of hours Fluctuating service levels High non-completion rates of tasks during a typical week at a retail store location
and found that there was a 2.6% improvement in conversion rates. Optimized scheduling and forecasting helped us in improving our sales per labor hour by 6%. -Senior Executive, $2 billion Specialty Retailer

One of the most critical WFM challenges for the Laggard enterprises is the task management function. Ninety percent (90%) of tasks are still manually managed and assigned to the store-level associates with little or no task completion reporting and labor compliance. This challenge creates an imbalance between routine operational tasks and customer service levels. Such an imbalance leads to a less inviting shopping environment for customers, due to a lack of service focus. Another conundrum often felt by field store managers is maintaining compliance towards ad hoc projects sent to field stores without taking into account the labor forecasts and the delicate balance between tasks and service. According to the survey data, Best in Class are more likely to adopt and continue to use varied WFM capabilities to overcome workforce challenges when compared to Average and Laggard enterprises (Figure 3). The core objective of Best in Class is to constantly improve key metrics and address challenges around workforce pressures such as employee turnover and payroll costs. These retailers are utilizing their internal
All print and electronic rights are the property of Aberdeen Group 2007. Aberdeen Group 7

The Store Operations: Workforce Management Benchmark Report

capabilities such as long-term forecasting and workforce structure, among others, to implement WFM solutions successfully. Consider the case of the capabilities that support scheduling optimization solutions: Best in Class retailers are 45% more likely than the rest of the retailers to use capabilities that support scheduling optimization solutions. This solution is based on three core capabilities: long-term forecasting to align workforce operations with store demand fluctuations, labor budgeting processes through enhanced automation, and guidelines for workforce process and product training. These capabilities are aiding 50% of the Best in Class to improve labor cost containment in the enterprise. The data indicates that Best in Class retailers are three times as likely as the Laggards to reduce their labor costs as a result of using capabilities that support scheduling optimization.

Figure 3: Retailers with WFM Capabilities

50% 45% 40% 35% 30% 25% 20% 15% 10% 5% 0%

42% 29% 29%

47% 33% 28%

36% 28%

Scheduling Optimization Capabilities All BIC

Integrate Labor Management Capabilities

Self-service employee training Capabilities

Web-based time-clock and task management Capabilities Source: AberdeenGroup, April 2007

Competitive Maturity Assessment

Survey respondents fell into one of three categories Laggard, Industry Average, or Best in Class based on their characteristics in five key categories: (1) workforce management process (ability to detect and respond to changing demand fluctuations conditions without placing additional burdens on labor); (2) organization (corporate focus and collaboration among stakeholders to provide a flexible and proactive approach towards labor management); (3) knowledge (contextualizing transaction data, human resources, sales and customer data for managing results and exposing actionable insights for better customer service and task management); (4) technology (selection of appropriate tools and intelligent deployment of workforce management tools), and (5) performance management (ability of the organization to measure the benefits of technology deployment and

All print and electronic rights are the property of Aberdeen Group 2007. 8 AberdeenGroup

The Store Operations: Workforce Management Benchmark Report

use the results to improve key processes further). In each of these categories, survey results show that the firms exhibiting Best in Class characteristics also enjoy Best in Class performance (Table 3). Table 3: Competitive Framework Laggards Process Average Best-in-class

Long-term forecasting (annualized) procedures to align workforce operations with store demand fluctuations currently in use: 5% 21% 31%

Organization

Departmental guidelines for workforce process and training currently in use: 30% 45% 63%

Knowledge/ Data Management

Self-service approach to associate and manager towards basic tasks and human resources procedures (i.e. task view, time-clock and paid-time off): 32% 42% 56%

Self-service approach to product and process training for associates and managers currently in use: 14% 22% 38%

Automated WFM technology solutions currently in use:

Technology Usage

32% use Time & Attendance solutions 16% utilize SelfService e-learning for associate and manager training 14% utilize Labor Scheduling solutions that tie in HR, Sales and POS data on customer traffic

43% use Time & Attendance solutions 20% utilize Self-Service e-learning for associate and manager training 22% utilize Labor Scheduling solutions that tie in HR, Sales and POS data on customer traffic

53% use Time & Attendance solutions 27% utilize SelfService e-learning for associate and manager training 27% utilize Labor Scheduling solutions that tie in HR, Sales and POS data on customer traffic

Performance Measurement

Current Workforce management metrics measured and reported for store operations performance management 4% 23% 38%
Source: AberdeenGroup, April 2007

All print and electronic rights are the property of Aberdeen Group 2007. Aberdeen Group 9

The Store Operations: Workforce Management Benchmark Report

Organizational Capabilities and Technology Enablers

The essential ingredients of a well-designed WFM implementation strategy are the technologies that come together to form a working solution and the qualities of the organization that give it the ability to turn those technologies into a competitive advantage. Long-term forecasting, store workforce best practices exposed by WFM analytics, and self-service approach to basic HR procedures at the retail store are capabilities that have a bearing on integrated WFM solutions and KPIs such as schedule effectiveness and labor cost to sales. The integrated WFM solution is based on the three capabilities mentioned above. Forty percent (40%) of Best in Class plan to adopt integrated WFM solutions within the next 1-2 years. Best in Class retailers are 65% more likely than the rest of the retailers to use integrated WFM solutions. Retailers that have exceeded their schedule effectiveness goals are more than twice as likely as all others to use integrated WFM solutions. Also, retailers that have exceeded their operating profit goals are 56% more likely to be currently using these solutions. Capabilities such as WFM analytics, work-life balance to employee scheduling, and self-service approach to basic HR procedures at the retail store are aligned with the employee self-service HR and training applications. Fifty-Six percent (56%) of Best in Class retailers use the self-service approach for associate and manager human resources procedures, training and tasks. Companies that use self-service applications are 40% more likely to attain lower employee turnover rates due to better associate empowerment. The success of self-service applications is also seen as Best in Class meet or outperform their budgeted goals on employee training completion due to the flexibility and ease of use associated with web-based training applications. The Best in Class are 8 times more likely than the Laggards and 6 times more likely than the Average to attain 80% or higher employee training completion. Guidelines for workforce process and product training, WFM analytics and work-life balance to employee scheduling conform to the web-based time-clock and task management solutions. Currently, the adoption of both these solutions is low despite the fact that web-based time-clocks provide further empowerment to the stores and allow retailers to better manage absence management costs. Our results show that Web-based time-clock and task management solutions enable better focus on customer conversion rate. Twenty-Five percent (25%) of Best in Class retailers have improved their customer conversion rate using these tools. This result is 5 times more likely than the conversion improvement a laggard retailer has experienced. Companies that have exceeded their operating profit goals are 77% more likely to use POS web-based time-clock and task management applications.

All print and electronic rights are the property of Aberdeen Group 2007. 10 AberdeenGroup

The Store Operations: Workforce Management Benchmark Report

Aberdeen Insights Part 2

A retailer can achieve performance improvements similar to those enjoyed by the Best in Class participants in this research study. As is apparent from the results of this survey, Best in Class retailers are constantly evaluating their WFM capabilities and solutions. It is vital that retailers across revenue size and segments evaluate their dependence on manual procedures or disparate legacy solutions and then create a road map for automation that is based on self-service training, WFM analytics, and optimum staffing. Budgeting and long-term forecasting are also important features in a WFM suite. Forecasting and budgeting for labor allocation should not be based on just aggregate sales. Optimization is best achieved when POS traffic, task management and item-level granularity in terms of the labor and service component is incorporated into the scheduling and workforce process. While retailers measure the value of workforce management tools based on the impact to employee turnover and the ability to adhere to a labor budget, customer satisfaction will dictate the retailers success or failure at the end of the day. Fifty-one percent (51%) of our respondents recognized the connection between the workforce strategies and customer satisfaction. Given this impact on customer satisfaction, retailers should constantly strive to optimize in-store workforce management. This will ensure sufficient customer coverage while avoiding unnecessary payroll costs driven by emergency scheduling, excessive overtime, or failure to correctly anticipate necessary areas of customer coverage.

All print and electronic rights are the property of Aberdeen Group 2007. Aberdeen Group 11

The Store Operations: Workforce Management Benchmark Report

Case Study: Tesco Benefits from Customer-Traffic Based Scheduling and Forecasting Solution
Tesco has a Best in Class customer-centric one-in front (OIF) policy. At any point, this company focuses on only having one customer ahead of another waiting to checkout. While one-in-front is one of Tescos core disciplines, it also presented a formidable challenge to balance employee schedules with customer needs at the store level. According to Tesco, this balance is also one of their biggest challenges. In order to monitor the effectiveness of OIF and provide accurate forecasting, Tesco had developed an in-house scheduling system. However, the system was spreadsheet-based and therefore not particularly user-friendly. This retailer required a powerful scheduling system, which was simple to use and would enable managers to accurately forecast cost effective workloads to meet predicted customer trade patterns. A solution provider worked closely with the Tesco productivity team and set about tailoring a scheduling product to fully integrate company specific productivity and workload issues. For example, productivity equates the average time needed to serve a customer with a certain number of grocery items. Workload then quantifies the number of staff needed to serve customers according to historic trading patterns for any given hour of the day. This system went on trial in eight stores and piloted at a further 30 sites. This allowed the software to be extensively tested to ensure that it seamlessly integrated with the Tesco culture and ways of working. The managers are now able to see which store areas are over-manned and which are under-deployed, allowing them to properly manage staff allocation. Tesco now plans to use a similar solution to improve service standards across other in-store service areas such as the delicatessen, fresh fish, and rotisserie counters.

All print and electronic rights are the property of Aberdeen Group 2007. 12 AberdeenGroup

The Store Operations: Workforce Management Benchmark Report

Chapter Three: Required Actions

Fast Facts If an industry Laggard, build a 6-12 month plan for deploying automated WFM solutions. Automate the existing manual workforce procedures including paper-based scheduling. If an industry Average, integrate the fragmented workforce solutions into a single user interface or a dashboard. Adopt features such as simulation tools and what if scenarios that enable store teams to test the most appropriate scheduling plans. If an industry Best in Class, Develop a 6-month application review plan for your existing scheduling, task management, and long-term forecasting capabilities. hether a company is trying to move its performance in workforce management technology usage from Laggard to Industry Average, or Industry Average to Best in Class, the following actions will help spur the necessary performance improvements:

Laggard Steps to Success

1. Build a 6-12 month plan for deploying automated WFM solutions. Automate the existing manual workforce procedures including paper-based scheduling. Consider time and attendance, web time-clock, and employee scheduling solutions for the front-end and other departments. 2. If you are a first-time WFM solution user, select a solution that has both fixedclient or hosted application deployment options. Evaluate your IT infrastructure and network architecture for deploying web-based WFM solutions as they provide ease-of use and scalability. Opt for the hosted solution, if there is shortage of bandwidth in the field stores. Select either a .NET or J2EE platform depending on the deployment timeframe, user interface and scalability. 3. Eliminate the culture of using manager gut-feel and repetitive scheduling. Choose your scheduling pattern based on the customer traffic times. Scheduling patterns can be customer-traffic based if the customer flow is consistent throughout the day or inverse to customer traffic-based scheduling if the traffic is intermittent. These patterns are selected by stores to create a balance between customer-centricity and tasks. 4. Improve performance measurement by using a few critical WFM metrics. Start by measuring and reporting labor cost to sales ratio and schedule effectiveness (planned versus actual hour utilization).

All print and electronic rights are the property of Aberdeen Group 2007. Aberdeen Group 13

The Store Operations: Workforce Management Benchmark Report

Industry Norm Steps to Success

1. Integrate the fragmented workforce solutions into a single user interface or a dashboard. Adopt features such as simulation tools and what if scenarios that enable store teams to test the most appropriate scheduling plans. Consider deploying task management, long-term forecasting, and web-based time clock for better labor cost containment. 2. Make training and self-service knowledge management concepts mandatory at the corporate and field-level. Encourage a culture of continuing empowerment. Measure results based on training completion and employee satisfaction. 3. Create a best practices module exposed by WFM analytics. The weaker performing stores should work directly with stores in the district or region that are performing well. Delegate the onus for improved WFM performance to store managers, district managers, channel managers (headquarter store operations personnel), and regional executives. 4. Improve store performance management further by using a few critical WFM metrics. Select relational database-based performance management tools. Relational SQL-based tools including SQL server-based database tools provide a robust user-interface, flexibility and scalability for enterprise-wide data management and analysis.

Best in Class Next Steps

1. Develop a 6-month application review plan for your existing scheduling, task management, and long-term forecasting capabilities. Curtail your WFM metrics to a limited list that are most meaningful and actionable for your store teams. Include 1-2 process, financial, and quality-related metrics. 2. Aim for 100% chainwide deployment of integrated WFM solutions or use of cohesive WFM solutions. Create a road map for introducing the ability to source and use on-demand WFM analytics reports in real-time, based on HR, Sales, and Customer volume data. 3. Introduce broad-based incentives for both field and headquarter teams for meeting and outperforming WFM performance management.

All print and electronic rights are the property of Aberdeen Group 2007. 14 AberdeenGroup

The Store Operations: Workforce Management Benchmark Report

Featured Underwriters
This research report was made possible, in part, with the financial support of our underwriters. These individuals and organizations share Aberdeens vision of bringing fact based research to corporations worldwide at little or no cost. Underwriters have no editorial or research rights and the facts and analysis of this report remain an exclusive production and product of Aberdeen Group.

Microsofts Retail Industry Group provides software that helps retail organizations thrive in todays competitive global marketplace by making better decisions at every stage of the value chain. Microsoft software helps retailers strengthen customer relationships, build high value business connections and improve operations empowering retail employees in areas such as store systems, real-time analytics and supply chain management. Through a combination of Microsoft- and partner-based solutions, retail customers can turn data into insight, ideas into action and change into opportunity. More information about Microsofts work in the Retail industry can be found at http://www.microsoft.com/industry/retail For additional information about Microsoft: Microsoft 1 Microsoft Way 22/6055 Redmond, WA 98053 800 426 9400 www.microsoft.com/retail

All print and electronic rights are the property of Aberdeen Group 2007. Aberdeen Group 15

The Store Operations: Workforce Management Benchmark Report

WorkPlace Systems is a leading supplier of Workforce Management software and of consulting solutions which help reduce staff costs and increase staff utilization and service levels, leading to improved organisational performance and profitability. Key software modules include Budgeting, Forecasting, Scheduling, Time & Attendance and Management Reporting. In addition to configuration and project management of WFM implementations, Consulting services include Workforce Management Business Case and Strategy Development, Labour Standards Analysis and Creation, Schedule Assessment and Improvement, Operational Schedule Improvement, Labour Budgeting and KPI Design and Analysis. Specialising in both Tier 1 and Tier 2 Retail organisations, WorkPlace has implemented solutions in leading Retailers across the world such as:- Albertsons, Argos, Babies R Us, Country Road, Fred Myer, Focus DIY, H&M, Hema, The Home Depot, IKEA, Kroger, Lowes Home Improvement Warehouse, Metro Cash & Carry, NEXT, Nuance, PETCO, PETsMART, Raleys, Shopko, Shoprite, Stop & Shop, Travis Perkins/Wickes, Travelex, WH Smith Travel, Winn Dixie, Woolworths. WorkPlace is headquartered in the UK with regional offices in North America (LSI Consulting) and Australia. For additional information about WorkPlace Systems: WorkPlace Systems Precedent Drive Milton Keynes MK13 8PP United Kingdom 44.1908.242042 ian.baxter@workplacesystems.com www.workplacesystems.com

All print and electronic rights are the property of Aberdeen Group 2007. 16 AberdeenGroup

The Store Operations: Workforce Management Benchmark Report

Appendix A: Research Methodology

Responding retail executives completed an online survey that included questions designed to determine the following: The degree to which WFM is deployed in their retail operations and the financial implications of the technology The structure and effectiveness of existing WFM implementations Current and planned use of WFM to aid operational and promotional activities The benefits, if any, that have been derived from WFM initiatives

etween January and April 2007, Aberdeen Group examined the use of WFM in the retail industry, the experiences, and intentions of more than 130 enterprises in a diverse set of retail enterprises.

Aberdeen supplemented this online survey effort with telephone interviews with select survey respondents, gathering additional information on WFM strategies, experiences, and results. The study aimed to identify emerging best practices for WFM usage in retail and provide a framework by which readers could assess their own management capabilities. Responding enterprises included the following: Job title/function: The research sample included respondents with the following job titles: Senior Management (CEO, COO, President)-22%; Vice-President (12%); Director (17%); Business Line Managers (28%), Development Staff & Others (24%). Industry: The research sample included respondents exclusively from retail industries. Specialty was the largest segment with 37% of the sample. Supermarket/Grocery accounted for 23% of respondents, Hospitality/Food-Service Establishments (16%), Hardware (10%) and Store Concepts (Drug, Warehouse, Department & Convenience)-14%. Geography: Americas (57%). Remaining respondents were from the Asia-Pacific region (18%), and EMEA (25%). Company size: 28% of respondents were from large enterprises (annual revenues above US$1 billion); 37% were from midsize enterprises (annual revenues between $50 million and $1 billion); and 36% of respondents were from small businesses (annual revenues of $50 million or less).

Solution providers recognized as sponsors of this report were solicited after the fact and had no influence on the direction of the Store Operations: Workforce Management Benchmark Report. Their sponsorship has made it possible for Aberdeen Group to make these findings available to readers at no charge.

All print and electronic rights are the property of Aberdeen Group 2007. Aberdeen Group 17

The Store Operations: Workforce Management Benchmark Report

Table 4: PACE Framework PACE Key

Aberdeen applies a methodology to benchmark research that evaluates the business pressures, actions, capabilities, and enablers (PACE) that indicate corporate behavior in specific business processes. These terms are defined as follows: Pressures the forces that impact an organizations market position, competitiveness, or business operations (e.g., economic, political and regulatory, technology, changing customer preferences, competitive) Actions the strategic approaches that an organization takes in response to industry pressures (e.g., align the corporate business model to leverage industry opportunities, such as product/service strategy, target markets, financial strategy, go-to-market, and sales strategy) Capabilities the business process competencies required to execute corporate strategy (e.g., skilled people, brand, market positioning, viable products/services, ecosystem partners, financing) Enablers the key functionality of technology solutions required to support the organizations enabling business practices (e.g., development platform, applications, network connectivity, user interface, training and support, partner interfaces, data cleansing, and management)

Source: AberdeenGroup, April 2007

Table 5: Competitive Framework Competitive Framework Key

The Aberdeen Competitive Framework defines enterprises as falling into one of the three following levels of FIELD SERVICES practices and performance: Best in class (20%) Retail WFM practices that are the best currently being employed and significantly superior to the industry norm, and result in the top industry performance. Industry norm (50%) Retail WFM practices that represent the average or norm, and result in average industry performance. Laggards (30%) Retail WFM practices that are significantly behind the average of the industry, and result in below average performance
Source: AberdeenGroup, April 2007

Table 6: Relationship between PACE and Competitive Framework PACE and Competitive Framework How They Interact
Aberdeen research indicates that companies that identify the most impactful pressures and take the most transformational and effective actions are most likely to achieve superior performance. The level of competitive performance that a company achieves is strongly determined by the PACE choices that they make and how well they execute.
Source: AberdeenGroup, April 2007

All print and electronic rights are the property of Aberdeen Group 2007. 18 AberdeenGroup

Appendix B: Related Aberdeen Research

Related Aberdeen research that forms a companion or reference to this report includes: Enterprise Talent Management: Hire Right, Hire Smart (March 2005) Future Shock: Tomorrows Workforce, Todays Challenge (May 2005) Hiring Management Technology: High Growth, High Value (May 2005) The Key to Mid-Market Success: Creating a Brand of Workforce Talent (May 2005) Market Alert: Taleo Heads to the Middle Market, Expands Customer Reach with Recruitforce Acquisition (April 2005) The Technology Foundation for Hiring Management: Market Requirements (May 2005) The E-Recruiting Payoff: The ROI of Online Hiring Management Systems (September 2004) Managing the Hourly Workforce: Hiring, Retention, and Performance Management (June 2004) Hourly Hiring in Retail: The Flight from Crisis Management (June 2004) Business at Risk: Is Performance Management the Antidote? (March 2004)

Information on these and any other Aberdeen publications can be found at www.Aberdeen.com.

Aberdeen Group, Inc. 260 Franklin Street Boston, Massachusetts 02110-3112 USA Telephone: 617 723 7890 Fax: 617 723 7897 www.aberdeen.com 2007 Aberdeen Group, Inc. All rights reserved April 2007

Founded in 1988, Aberdeen Group is the technologydriven research destination of choice for the global business executive. Aberdeen Group has over 100,000 research members in over 36 countries around the world that both participate in and direct the most comprehensive technology-driven value chain research in the market. Through its continued fact-based research, benchmarking, and actionable analysis, Aberdeen Group offers global business and technology executives a unique mix of actionable research, KPIs, tools, and services.

The information contained in this publication has been obtained from sources Aberdeen believes to be reliable, but is not guaranteed by Aberdeen. Aberdeen publications reflect the analysts judgment at the time and are subject to change without notice. The trademarks and registered trademarks of the corporations mentioned in this publication are the property of their respective holders.

THIS DOCUMENT IS FOR ELECTRONIC DELIVERY ONLY

The following acts are strictly prohibited: Reproduction for Sale Transmittal via the Internet
Copyright 2007 Aberdeen Group, Inc. Boston, Massachusetts

Terms and Conditions

Upon receipt of this electronic report, it is understood that the user will and must fully comply with the terms of purchase as stipulated in the Purchase Agreement signed by the user or by an authorized representative of the users organization. Aberdeen has granted this client permission to post this report on its Web site. This publication is protected by United States copyright laws and international treaties. Unless otherwise noted in the Purchase Agreement, the entire contents of this publication are copyrighted by Aberdeen Group, Inc., and may not be reproduced, stored in another retrieval system, or transmitted in any form or by any means without prior written consent of the publisher. Unauthorized reproduction or distribution of this publication, or any portion of it, may result in severe civil and criminal penalties, and will be prosecuted to the maximum extent necessary to protect the rights of the publisher. The trademarks and registered trademarks of the corporations mentioned in this publication are the property of their respective holders. All information contained in this report is current as of publication date. Information contained in this publication has been obtained from sources Aberdeen believes to be reliable, but is not warranted by the publisher. Opinions reflect judgment at the time of publication and are subject to change without notice.

Usage Tips
Report viewing in this PDF format offers several benefits: Table of Contents: A dynamic Table of Contents (TOC) helps you navigate through the report. Simply select Show Bookmarks from the Windows menu, or click on the bookmark icon (fourth icon from the left on the standard toolbar) to access this feature. The TOC is both expandable and collapsible; simply click on the plus sign to the left of the chapter titles listed in the TOC. This feature enables you to change your view of the TOC, depending on whether you would rather see an overview of the report or focus on any given chapter in greater depth. Scroll Bar: Another online navigation feature can be accessed from the scroll bar to the right of your document window. By dragging the scroll bar, you can easily navigate through the entire document page by page. If you continue to press the mouse button while dragging the scroll bar, Acrobat Reader will list each page number as you scroll. This feature is helpful if you are searching for a specific page reference. Text-Based Searching: The PDF format also offers online text-based searching capabilities. This can be a great asset if you are searching for references to a specific type of technology or any other elements within the report. Reader Guide: To further explore the benefits of the PDF file format, please consult the Reader Guide available from the Help menu.