There are two ways to survive the onset of the national living wage.
One is to duck and dive around the edges, employing younger people or just cheating on the regulations. After all, the Government is going to be hard pressed keeping an eye on all those care service providers who will be hit even harder by the measure.
The other is to take a good hard look at yourself as an employer and challenge yourself to find a way to prosper while paying over 25s 7.5% more from next April: and just under 6.7% every year up to 2020 to hit the Government’s £9 target plus a bit.
Design and manage your operations in a way that makes your employees more productive, suggests Zeynep Ton, who has analysed successful retailers world wide.
Putting employees at the heart of a company’s success centres on four operational choices:
- Offer less, which reduces your costs and can increase customer satisfaction. “Model retailers offer fewer products and no promotions,” she says.
- Standardise and empower, which means give your employees more decisions to make.
- Cross train, which means that employees can change what they do according to customer traffic rather than you having to set up complex rotas.
- Operate with slack. Build slack into your hours because it improves customer service and allows employees to be involved in continuous improvement.
If you are not doing these things but buy into the idea, the first thing you need to do is to take control of the conversation about the national living wage. Set up a meeting with your staff to share the numbers and what the implications are likely to be.
Ask them questions about how they think these increases in costs could be paid for. Ask them for ideas and write them all down. Talk through how the ideas might work. If they suggest raising prices, ask them what they think local customers will pay more for. If they suggest cutting costs, ask them what the impact would be on shoppers. Prompt them to think about what the competition might do.
A good question may be to share the gross margin of your business and ask them how many more items they need to sell each hour to cover the wage increase. And if that is possible!
Make the conversation one about serving customers and helping them more. It is the shoppers that will pay the living wage or not and you need to build competitive advantages into your business.
Focus on the purpose of your shop. A Southern Season, a food shop in Chapel Hill, North Carolina, thrived on owner Michael Barefoot’s mission: “We’re here to make people feel better when they leave than when they came in.”
He started with an 800sq ft shop in 1978. Today it’s 59,000sq ft. His management policy when employing his first member of staff was to draw a line of chalk down the middle of the store and say: “OK this is my half. In my half I do everything. I mop the floor at night, I order the merchandise, I stock the shelves, I sell things, and I write checks for bills. That’s your half. Do the same over there.” It has not changed much.
Your vision does not have to be his vision. Perhaps start with asking your team how the doormat to the store should look at all times to welcome shoppers. And build from there.
Finally, one retailer I talked to recently pointed out how positive the words “living wage” are compared to “minimum wage”. While this retailer has still not worked out their strategy forward, they have already found something positive to say.