Chapter 17
Managing the Store
McGraw-Hill/Irwin
Retailing Management, 7/e
© 2008 by The McGraw-Hill Companies, All rights reserved.
17-2
Store Management
Layout, Design,
and Visual
Merchandising
Chapter 18
Customer
Service
Chapter 19
Managing
the Store
Chapter 17
17-3
17-4
Questions
■ What are the responsibilities of store managers?
■ How do store managers recruit, select, motivate, train,
and evaluate their employees?
■ How do store managers compensate their salespeople?
■ What legal and ethical issues must store managers
consider in managing their employees?
■ What can store managers do to increase productivity
and reduce costs?
■ How can store mangers reduce inventory losses due to
employee theft and shoplifting?
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Store Managers Run a Business
“This is your business. Do your own thing.
Don’t listen to us in Seattle, listen to your
customers. We give you permission to take
care of your customers.”
James Nordstrom, the CEO of Nordstrom’s
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Strategic Importance of Store Management
■ Opportunity to Build Strategic Advantage


Difficult to Have Unique, Compelling Merchandise
Customer Loyalty Often Based on Customer Service
■ Difficulty of Store Managers Job


Managing Diverse Set of Unskilled People
Increasing Empowerment and Responsibility to
Tailor Merchandise and Presentation to Local
Community
17-7
Store Managers’ Responsibilities
■ Varies Dramatically By Type of Retailers

Specialty Store vs. Department Store
■ Entrepreneur

P & L Responsibility

Manage People
© Digital Vision
■ Responsible for Two Critical Assets

People
Sales/Employees

Real Estate
Sales/Square Foot
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Responsibilities of Store Managers
Undertaken by Store Managers
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Steps in Employment Management Process
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Recruiting and Selecting Employees
Undertake
Job Analysis
Identify essential
activities and
determine the
qualifications of
employees
Prepare
Job
Description
Activities to be
performed and
performance
expectations in
quantitative terms
Select
Employees
Locate
Prospective
Employees
Use
employees as
talent scouts
Screen
Candidates
Application forms
references, testing,
realistic job preview
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Questions for Undertaking Job Analysis
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Interviewing Questions
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Suggestions for Questioning Applicant
■ Avoid asking questions that have multiple parts
■ Avoid asking leading questions like “Are you prepared to
provide good customer service?”
■ Be an active listener. Evaluate the information being
presented and sort out the important comments from the
unimportant.



repeat or rephrase information
summarize the conversation
tolerate silence
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Legal Considerations in Hiring
and Selecting Employees
■ Equal Employment Opportunity Commission
(EEOC)
■ Age Discrimination and Employment Act


Disparate Treatment
Disparate Impact
■ Americans with Disabilities Act (ADA)
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Orientation and Training Employees
■ Orientation Program
■ Training Store Employees





Structured program
On-the-job learning
experiences
E-training
Blended Approach
Analyzing Successes and
Failures
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Nike’s e-learning training solution:
Sports Knowledge Underground
17-17
Motivating and Managing Employees
Setting
Goals
Providing
Incentives
to Achieve
Goals
Measuring
Performance
Providing
Feedback
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Motivating and Managing Employees
■ Leadership
Process by which one person attempts to influence another to
accomplish some goal or goals
■ Leader Behaviors


Task performance behaviors – planning, organizing, motivating,
evaluating, coordinating store employees’ activities
Group Maintenance – activities undertaken to make sure that
employees are satisfied and work well together
■ Leader decision making


Autocratic leader
Democratic leader
■ Leadership Styles

Transformational leaders – get people to transcend their personal
needs for the sake of the group and generate excitement
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Democratic Leader
The manager of this Sandy
Hill, Utah, Shopko store is
a democratic leader who
holds meetings to keep
employees informed
about company and store
activities. He encourages
them to make
suggestions about
improving store
performance.
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Motivating Employees
Motivating employees to perform up to their
potential may be store managers’ most
important but also frustrating task
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Setting Goals
How High?
How Easy to
Achieve?
Get Participation
of Employees
in Setting Goals
Royalty-Free/CORBIS
This Sears manager builds morale and
motivates her sales associates by holding
“ready meetings” before the store opens.
At this meeting, the manager is discussing
Approaches for improving customer service.
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Why Set Goals?
Employee performance improves when
employees feel:
■ That their efforts will enable them to
achieve the goals set for them by
their managers
■ That they’ll receive rewards they
value if they achieve their goals
Royalty-Free/CORBIS
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Individualized Motivation Programs
■ Impact of Goals Differs Across
People
■ Different People Seek Different
Rewards
 A La Carte Reward Programs
 Selection of Compensation
Plans
Steve Cole/Getty Images
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Maintaining Morale
■ Meetings before store opening to talk about new
merchandise and hear employee opinions
■ Educate employees about the firm’s finances,
set achievable goals and have a pizza party
when goals are met
■ Divide charity budget and ask employees how
their share should be used
■ Print stickers – sandwich was “wrapped by
Roger”
Pando Hall / Getty Images
■ Give every employee a business card with the
company mission statement printed on the back
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Sexual Harassment
Sexual harassment is
unwelcomed sexual
advances, requests for
sexual favors, and other
verbal and physical contact
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Procedure for Sexual Harassment Allegation
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Evaluating and Providing Feedback to
Employees
Evaluation
Who, when, how often?
Feedback
Performance outcome vs. process
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Factors Used to Evaluate Sales Associates
at a Specialty Store
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Evaluation
■ Who Should Do the Evaluation?
In large retail firms –

System is Designed by Human Resource Department

Evaluation is done by immediate supervisors
■ How Often Should Evaluations Be Made?


Annually or semiannually
Feedback from evaluations is the most effective method for
improving employee skills
■ Format for Evaluations


Objective measures (sales, margin, shrinkage, etc)
Subjective measures (supervisors’ evaluations)
■ Evaluation Errors
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Common Evaluation Errors
Strickness
Ratings unduly negative
Leniency
Rating unduly positive
Haloing
Using the same rating on all aspects of the
evaluation
Recency
Placing too much weight on recent events rather
than evaluating performance over the entire
period
Contrast
Having the evaluation of a salesperson unduly
influenced by the evaluation of other salespeople
Attributions
Making errors in identifying causes of the
salesperson’s performance
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Jim Taylor’s Six Month Evaluation
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Compensating and Rewarding Employees
■ Extrinsic Rewards are rewards provided
by either the employee’s manager or the
firm such as compensation, promotion and
recognition

A la carte plans: give effective employees a
choice of rewards for their good performance
■ Intrinsic Rewards are rewards employees
get personally from doing their job well like
doing their job well because they think it is
challenging and fun

Job enrichment: the redesign of a job to include
a greater range of tasks and responsibilities
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Compensation Programs
■ A compensation plan is effective for motivating and
retaining employees when the employees feel the plan is
fair and that their compensation is related to their efforts
■ Types
 Straight salary compensation
 Incentive compensation plans
• Straight commission
• Quota bonus plan

Group incentives
Royalty-Free/CORBIS
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Designing the Compensation Program
■ Two elements:


the amount of compensation
The percentage of compensation based on incentives
■ Incentive compensation is most effective when
performance can be measured easily and
precisely

Difficult to measure teamwork, non-selling activities,
customer service, merchandising performance
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Straight Salary vs Incentive Compensation
Straight Salary
Incentive Compensation
Offers flexibility in assigning employees
to activities
Has high motivating potential
Builds stronger employee commitment
Has more variable cost
Is easy for employees to understand
Relates compensation to productivity
Is easy to administer
Allows for better performance of
non-selling activities such as customer
service
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Setting the Commission Percentage
Determine
Appropriate
Compensation
$12/Hour
Decide on
Percent of
Incentives
1/3 Salary
2/3 Incentive
Use Average
Sales Per
Employee to
Set Incentive
Rate
Sales/Person - $150
5.33% Commission
$4/Hour Salary
$4 + 5.33% x $150
= $12
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Controlling Costs
Energy
Heating
Lighting
Labor
Scheduling
Costs Controlled by
Store Managers
Maintenance
Inventory
Shrinkage
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Labor Scheduling System
17-39
Reducing Inventory Shrinkage
Total shrinkage in the U.S. is estimated at $40.5 billion annually
Shrinkage is the difference between the recorded value of inventory (at
retail prices) and the value of the actual inventory (at retail prices) in stores
and distribution centers divided by retail sales during the period
Shrinkage =
Accounting Record – Actual Inventory
$1,500,000 - $1,236,00
Sales
=
6.2%
$4,225,000
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Sources of Inventory Shrinkage
Shoplifting 32%
Mistakes and
Inaccurate
Records 14%
Vendor Errors 4%
Unaccounted 3%
Employee Theft 47%
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Organized and High Tech Retail Theft
■ Concentrate in over-the-counter
medications, infant formula,
health and beauty aids,
electronics and specialty clothing
■ Items that are easy to sell through
Internet like eBay auctions
■ Technology based scams



Counterfeit bar codes at lower prices
Gift cards
Receipt frauds
PhotoLink/Getty Images
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Detecting and Preventing Shoplifting
■ Store design
■ Merchandise Policies
■ Security measures
Dye capsules, CTV cameras
Electronic Article Surveillance (EAS)
■ Personnel Policies
■ Employee training
■ Prosecution
EAS tag
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Spotting Shoplifters
17-44
Reducing Employee Theft
Total inventory shrinkage attributed to employee theft is
approximately $19 billion annually in the U.S.
■ Trusting, supportive work atmosphere
■ Employee screening

Honesty test, extensive reference checks, drug testing
■ Security policies and control systems
Employee theft is an HR problem
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Security Measures Used by Retailers
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