Retailers have a new tool to turn up the heat on their salespeople: computer programs that dictate which employees should work when, and for how long.AnnTaylor Stores Corp. installed a system last year. When saleswoman Nyla Houser types her code number into a cash register at the Ann Taylor store here at the Oxford Valley Mall, it displays her "performance metrics": average sales per hour, units sold, and dollars per transaction. The system schedules the most productive sellers to work the busiest hours.
"We are under the gun to be a much more efficiently running organization," said Scott Knaul, director of store operations at the women's apparel retailer, which said earlier this year that it is closing 117 underperforming stores over the next few years. There was an initial "ego hit" for some employees, he said at a gathering of retailers in May. But the system, he said, has helped turn more store browsers into buyers.
Such "workforce-management" systems are sweeping the industry as retailers fight to improve productivity and cut payroll costs. Limited Brands Inc., Gap Inc., Williams-Sonoma Inc. and GameStop Corp. have all installed them recently. Some employees aren't happy about the trend. They say the systems leave them with shorter shifts, make it difficult to schedule their lives, and unleash Darwinian forces on the sales floor that damage morale.
"There was a lot of animosity" toward the system, says Kelly Engle, who worked at an Ann Taylor store in Beavercreek, Ohio, until late last year. "Computers aren't very forgiving when it comes to an individual's life."
The systems stand to have a broad impact on the work lives of Americans. Some 15 million people work in the U.S. retail industry, making it the nation's third-largest private-sector employer. The work isn't especially lucrative. Many jobs are part-time, the hourly pay is low, and most sales floors aren't unionized. At Ann Taylor, part-time sales clerks have no guaranteed weekly minimum pay.
The sluggish national economy has put pressure on many retailers to pinch pennies. "The single biggest controllable cost in retail is people," says Carl Steidtmann, chief economist at Deloitte LLP. Because few retail workers belong to unions, he says, it is easier for employers to "move people around."
Vendors of the systems claim they can boost productivity by 15% or more, and can help cut labor costs by 5% or more. Wal-Mart Stores Inc. just completed a yearlong rollout of a computerized scheduling system for 1.3 million workers. It cited 12% labor-productivity gains as a key reason for improved results in its fiscal quarter ended Jan. 31.
"There's been a natural resistance to thinking about human beings as pieces in a puzzle rather than individuals," says John M. Gibbons, a senior research adviser at the Conference Board and a former director of human resources at Gap. "When you have those clear methods of measurement, and just-in-time delivery for supply-chain management, it's a natural transition to apply it to human resources as well."
Vendors call their industry human-capital management. It notched $7.2 billion in revenue last year, and is projected to grow at 12% a year over the next five years, according to Boston-based AMR Research, which advises companies on information technology. Major providers of business systems, including Oracle Corp. and SAP AG, are now in the business.
AnnTaylor calls its system the Ann Taylor Labor Allocation System -- Atlas for short. It was developed by RedPrairie Corp., a retail-operations software firm based in Waukesha, Wisc. "We liken the system to an airplane dashboard with 100 different switches and levers and knobs," said AnnTaylor's Mr. Knaul. "When we launched that, we messed with five of them." Giving the system a nickname, Atlas, he said, "was important because it gave a personality to the system, so [employees] hate the system and not us."
Culture Change
Current and former employees of the Langhorne store say that within months of the system's installation in May 2007, the culture shifted from collegial to highly competitive. "You could see people stealing sales from other people," says Julie Abrams, a former cashier at the store. Salespeople were "trying to get each other out of the way to get to the client," she says.
AnnTaylor spokeswoman Maria Sceppaguercio says the company's goal was "having the right people in the stores at the right time, and about being more productive with the store labor hours. It wasn't about cutting payroll."
Work Standards
AnnTaylor, which targets fashion-conscious working women, operates 959 stores, including its namesake Ann Taylor stores, factory outlets and LOFT casual-apparel stores. Battered by slumping mall traffic, it is immersed in an overhaul that has included store closings, job cuts and senior management changes. Its shares have fallen about 15% over the past year, closing Tuesday at $26.18 in 4 p.m. composite trading on the New York Stock Exchange.
Before it installed the system, AnnTaylor spent a year studying labor efficiencies. It established standards for how long it should take for employees to complete certain tasks: three seconds to greet a shopper; two minutes to help someone trying on clothing; 32 seconds to fold a sweater; and most importantly, five minutes to clinch a sale. Its goal was to figure out how many employees it needed in a store at any given time, based on customer traffic.
[Retailers Reprogram Workers in Efficiency Push]
"If we know that it takes five minutes to work with a client when they walk in the store, we won't go over five minutes" in time planning per store, Mr. Knaul explained to other retailers at the May gathering for RedPrairie software customers, which was attended by a Wall Street Journal reporter. "We don't need it. It's surplus." He added that the time standards can be modified for labor-budget purposes.
AnnTaylor decided that employees were taking too long to open stores. Workers who came in two hours before opening "got a coffee and sat down and caught up with what was on TV the night before," Mr. Knaul noted. The time was cut to one hour.
Because the system awards more-productive salespeople with favorable hours, it gives employees an incentive to persuade shoppers to buy things.
In May 2007, after Atlas was tested in some stores, James M. Smith, chief financial officer at the time, said those stores were seeing a "pickup" in comparable-store sales. Kay Krill, AnnTaylor's chief executive, reported a "very promising" increase in conversion, meaning that more browsers were becoming buyers. AnnTaylor declined to elaborate on the financial effect.
The system was rolled out that spring in nearly 350 Ann Taylor stores. Kristi Connell, an assistant manager at the time in the Langhorne, Pa., store, recalls that headquarters had high hopes for Atlas. "They were trying to have less staff on hand and see how the level of service was," she says.
It used to be up to store managers to come up with weekly schedules for employees, and to accommodate their personal preferences. The system automated that task. It created shorter shifts -- part of its push to more closely align staffing levels with customer traffic. The system, for example, showed that many stores had too many people starting at 9 a.m., and not enough on hand at peak hours, such as 2 p.m. and later in the afternoon, Mr. Knaul said.
In the Langhorne store, after sales-per-hour figures became the determining factor in scheduling, the atmosphere changed dramatically, current and former employees say. When a customer entered the store, employees would angle to get credit for a sale, and thus boost their sales-per-hour numbers, says Ms. Abrams, who started as a cashier but was later moved to the sales floor, at $8.85 an hour. After one salesperson greeted a shopper, she explains, another would butt in to offer an opinion, then take over the transaction.
Ms. Abrams says she was expected to sell $250 of merchandise an hour. In the Princeton, N.J., store, where Ms. Abrams occasionally worked, employees were given headsets so managers could announce store-wide sales levels and remark on the performance of individual employees, says Ms. Abrams. "I would have on the headset and they would say, 'OK, it's 3 o'clock, and we have in this much money,'" Ms. Abrams recalls.
Varying Pay
AnnTaylor began ranking its salespeople according to their average sales-per-hour, among other things. When Ms. Abrams's sales-per-hour dropped, so did her ranking, she says. Her schedule changed accordingly. "My hours started being less when the heavy traffic was in the store," she recalls. The slow shifts, in turn, made it harder to boost her ranking.
Her pay varied widely week to week, she says. Before the system was installed, she says, her weekly pay sometimes was nearly $300, for about 34 hours of work. Afterward, she says, "I remember some weeks when the most hours I was getting was just eight. It is hard to budget that way." She took on two other part-time jobs. In April, she quit Ann Taylor to take a job that guaranteed her 30 hours a week.
Many other Langhorne employees also saw their hours cut back, and a few of them left, according to several former and current employees.
"A lot of people would be really upset about the way [the system] would schedule," says Tim Fasnacht, who managed an Ann Taylor Factory store in Philadelphia until March. "Sometimes, people would get a three-hour shift -- and you have people coming on public transportation from far away." Because the system didn't award seniority, he says, longtime employees would sometimes be scheduled for as little as 10 hours a week. "There was this huge battle between some of the longtime workers and the management over their schedules."
Ms. Sceppaguercio, the AnnTaylor spokeswoman, says the company "didn't have a big change in turnover associated with this. A lot of our work force is part-time. Maybe they are working from two to six, and we needed them to work from 12 to four, and people were able to flex their availability, pretty much."
Ms. Houser, a 59-year-old retired first-grade teacher, took an $8.50-per-hour part-time job at the Langhorne store in 2006 to supplement her retirement income. "She knew everybody and she spent sometimes half an hour with one customer," says Ms. Connell, a former assistant manager at that store, who left Ann Taylor last year. "One day, she would have $750 in sales per hour, and the next day it would be $250 per hour."
The new system, Ms. Houser says, doesn't reward her style of selling. It no longer pays to spend time developing relationships with shoppers who might not buy anything on a particular visit, she says. "My client [contact] book is fatter than anybody else's in the store," she says. "Does that mean I will get a bigger raise next time? No. Not if my [average sales] numbers don't reflect that."
When making up the Langhorne store schedule, Ms. Houser's manager used to give her 20 hours that didn't conflict with her personal commitments -- she directs a church youth group on Sundays and occasionally cares for an elderly aunt in the evening. "Before Atlas came in, you would put a note in the manager's envelope, saying when you could work next week," Ms. Houser says.
Each Wednesday, the new system generates the following week's schedules, broken into 15-minute increments for maximum efficiency. At first, Atlas scheduled Ms. Houser to work many Sundays and evenings, and her shifts varied from week to week, she says. The system enables employees to block out hours when they aren't available. Ms. Houser said she couldn't work Sunday mornings, Thursdays, or weekday evenings.
That left more than 30 possible work hours each week, she says. Atlas cut her to eight hours, and on some weeks, as little as four. Atlas "dehumanized the managerial process," she complains.
Ms. Sceppaguercio, the spokeswoman, says that "availability is the biggest factor" in determining whether an employee gets a lot of hours. "You could be a wow-wee associate who does great, but if you're not available during peak times, you won't get scheduled....Associates with limited availability were going to wind up with less hours. Clearly that was going to happen." She said the company tried to work with employees to minimize disruptions caused by schedule changes.
Too Aggressive
Pete Reilly, a senior vice president at RedPrairie, which developed the Ann Taylor system, says it's possible for retailers to get too aggressive about slicing and dicing work schedules to match customer traffic. "The system will allow you to push it too far," he says. "But at the end of the day, it is based on business principles and how I treat my employees. That is really up to the retailer."
At AnnTaylor headquarters, executives were braced for complaints about the scheduling system. "Store managers have to talk to [employees] and tell them, this is about the business needs and not about the associate needs," Mr. Knaul, the operations director, said to other retailers in May. "You anticipate the avalanche of complaints and that a lot of people will quit. But then people just go on ahead and change their availability." Overall, not as many people quit as AnnTaylor feared, he said.
Nearly a year after Atlas was rolled out, 76% of store managers said they believed the system was better than writing schedules by hand on spreadsheets, Mr. Knaul said. AnnTaylor's target was for 80% of store managers to view the system as an improvement, he said.
Mr. Knaul said the new system exceeded the company's targets for converting more browsers into buyers. He said that AnnTaylor hopes to refine the system, possibly with features that rank employees based on skills other than their sales proficiency, such as how well they operate cash registers.
Another option, Mr. Knaul added, was to begin using the system to more efficiently schedule managers.
By: Vanessa O'Connell
Wall Street Journal; September 10, 2008
