Human Capital

The efficiency conundrum

This image is from Waitrose’s own site - even they couldn’t find someone excited to self scan!

Wander about in Japan for a while, and you’ll notice something interesting. By comparison with many aspects of UK life, a lot of services in Japan seem to employ a lot more people than a time & motion study would suggest they really need.

Tube and rail stations are filled with uniformed staff checking tickets and giving directions. Trains themselves will always have a conductor and, most notably, when a Shinkansen (bullet train) has terminated its journey a huge crew of uniformed cleaners descend, cleaning the entire train in a few minutes and then bowing out before the next set of passengers are allowed on. Even roadworks and building sites seem to follow the same ‘full staffing’ model - not only having plenty of people doing the work but often also having several much older colleagues standing around directing traffic and pedestrians.

There are lots of reasons, I suspect, for this kind of heavy staffing in Japan. An aging population, compulsory retirement ages in big corporations, the very unique ‘job for life’ working culture are all factors. It is also the case that in response to a long period of low or negative inflation and low growth the government in Japan has engaged in a huge wave of public spending to try to ignite growth, and that public spending inevitably involves hiring more people into public works.

The case against such lavish employment practices is straightforward, and often made here in the UK. If you staff public services more than you strictly need to, the inevitable corollary is the need for higher taxes to pay for them, which might end up creating the very low growth you were worried about in the first place.

What has that got to do with retailing?

Equally, for commercial operations like retail and hospitality businesses, hiring more people than you need pushes up costs, which pushes up prices and, if it makes the operation uncompetitive, results in lower market share and lots of those people (and more) lose their jobs again.

And yet. I can’t help wondering if that analysis misses some of the magic of the customer experience and brand value that can be created when we as customers get to interact with actual human beings.

I wrote about this a few months ago in When Spreadsheets Ruled the Earth and cited the example of a Lush store which had far too many people in it for any reasonable financial analysis, but was delivering terrific interactive and brand-enhancing experiences for everyone who walked in.

But I also think about it whenever I go to my local supermarket. One of the better parts of an otherwise dull shopping expedition for me is passing the time with the nice folks on the tills, and whilst I’m perfectly capable of using the self-checkout the result of doing so is that I’ll often not have spoken to anyone from the brand in my entire visit, which somehow feels like a missed opportunity.

This is a tricky space for any of us running retail or hospitality businesses. The cost of colleague-hours in store is very easy to measure and sits there on the P&L as a visible reminder than running stores is expensive. It is also easier to vary than many of the lines around it like rent, rates or utilities costs and so when times are tough it is often a lever Boards reach for.

Sometimes that choice is unavoidable. But it is worth taking stock of the impact you are likely to have on the experience you deliver to your customers and consider whether that might have knock on implications for your market share in the longer term. Given that much of your staff bill in store will be for processes that are essential to the operation, even relatively small cuts can have a big impact on the volume of customer interactions your brand delivers every day.

After all, your self-checkout machines rarely make your customers smile.

It is, though, considerably harder to measure that intangible benefit delivered by your colleagues every day, and therefore easy to overlook or underestimate it by comparison with the glaring pound signs on the P&L.

What do you think? Are you getting the balance of staff costs right? Who do you think does this well, and who is imperilling their brand with short term cuts? I’d love to hear from you in the comments.