As the introduction of George Osborne’s living wage nears, the thorny issues of pay and productivity are taking centre stage in retail.

Many of the headlines have focused on changes by retailers to staff wages and benefits.

Last week, for example, Tesco, Wilko and B&Q all revealed plans to raise their basic pay, but change staff premiums for shifts worked during weekends and bank holidays. Their rationale is that it will create a “fairer” approach.

Clearly retailers are being forced to make tough choices about how they deal with the cost impact of the living wage.

But following George Osborne’s bombshell, dropped last July, arguably the issue of productivity will be, or should be, occupying boardroom minds just as much.

Productivity shortfall

In general terms, retail has a reputation for low productivity.

A Government report last year – titled ‘Fixing the foundations’ – identified retail as one of the five sectors where there is a “productivity shortfall”.

It has prompted left-wing think tank the Fabian Society to launch a taskforce of retailers and trade unions, led by former Morrisons executive Norman Pickavance, which will look at ways to boost retail productivity and highlight best practice in the industry.

“Jobs that build skills, experience and relationships also build performance in stores and stability in communities”

Norman Pickavance

Writing for Retail Week last week, Pickavance said: “A good job is about more than a pay packet. Jobs that build skills, experience and relationships also build performance in stores and stability in communities.

“So we can only do things differently and better if we consider the productivity equation in a different way.”

Measuring productivity

Part of the issue for retailers is working out the best way to measure productivity in the fast-evolving retail environment.

KPMG head of retail David McCorquodale, who has studied the issue of productivity, admits it is difficult to measure because retailers assess it in varying ways across different sectors. The way Aldi and Lidl track productivity, for instance, is different to the methods used by non-grocers.

However, McCorquodale says: “Retailers are getting more sophisticated at how they measure productivity.”

“The old ways of measuring productivity are not always the right ones for the new ways of doing retail”

David McCorquodale, KPMG

For example, Marks & Spencer has store managers on bonus schemes that reward store performance and customer satisfaction, he says.

Another factor to add into the equation is the rise of multichannel, which has meant that tracking sales can no longer be used as the only gauge of productivity because staff have been handed new roles to fulfill. 

“Stores are dealing with more returns than ever which means staff have different tasks to perform,” McCorquodale explains. “As a result the old ways of measuring productivity are not always the right ones for the new ways of doing retail.” 

Employee engagement

Overall, McCorquodale says there is “more to do” for the industry, but he adds: “I have no doubt that the first step to take with customer retention is to work on employee engagement.”

It is on that point in particular where trade unions are, inevitably, having their input on the issue of productivity and its impact on workforces.

Productivity in retail is set to come under the spotlight

Productivity in retail is set to come under the spotlight

Productivity in retail is set to come under the spotlight

Paul Sellers, the Trade Union Centre’s pay policy officer, says retail’s approach to productivity “isn’t the worst, but could be better”. He claims the adage of ‘employees are our greatest asset’ is said more than it is done.

The key, according to Sellers, to having productive employees is making them feel “engaged” so they “go the extra mile”. He adds: “If you feel you’re not really valued and you have a good idea, you might keep it to yourself.”

The Union of Shop, Distributive and Allied Workers (USDAW) argues there’s “more to be done”, particularly in the grocery sector in balancing productivity with customer care.

“There’s been an improvement, but sometimes there’s too much of a concentration on speedy scanning,” a spokesman says. “There’s a danger that if you just concentrate on scan rates, you end up with the customers not feeling welcome.”

Career longevity

Central to the concept of productivity in retail is promoting the idea that the sector can be a career, as opposed to just a stop-gap.

There are plenty of high-profile examples of retail chief executives who have made it to the top after starting on the shopfloor, the most notable recent example being Marks & Spencer chief executive in waiting Steve Rowe.

But a report last year by the UK Commission for Employment and Skills (UKCES) argued that retail needed to “improve its image, develop clear progression routes and promote opportunities to use technology-based skills”.

“There is scope to improve productivity by making full use of existing talent and ensuring that workers have the opportunity to build their skills and experience, and progress within the sector”

Vicki Belt, UKCES

Vicki Belt, UKCES’ assistant director said at the time: “The wholesale and retail sector is the largest sector in the UK economy by employment, but sector productivity is relatively low.

“There is scope to improve productivity by making full use of existing talent and ensuring that workers have the opportunity to build their skills and experience, and progress within the sector.”

With the Fabian Society due to report in September, retailers may be wary of what Pickavance’s taskforce digs up in its investigations. But with the productivity gap still prevalent in retail, it should at least be a piece of work the industry can learn from.

Richer Sounds: A shining example

Among those that the Fabian’s Society productivity taskforce will highlight for best practice is Richer Sounds.

The hi-fi retailer has a long tradition of rewarding its staff well and looking after them, led by the retailer’s inspirational founder Julian Richer.

For Richer’s head of salaries, Julie Abraham, the productivity equation is simple.

“People are more productive once they are paid well and treated nicely,” she says. Richer Sounds is already paying above Osborne’s living wage, as it is accredited by the Living Wage Foundation.

In London the foundation’s current pay minimum is £9.40. Abrahams is clearly proud of the way her colleagues are looked after and the benefits Richer Sounds offers.

Among them are several company holiday homes that employees can stay at and an annual trip for all staff from their fifth year of service onwards. 

In the last year, the retailer has also introduced a system where it pays for two drinks for each member staff at the end of each month.

In Richer Sounds’ 52 shops, trophies are displayed showing off the number of combined years’ service among employees. “In our Romford branch, it’s over 100 years,” says Abraham.

She adds: “It’s about making colleagues feel engaged, unlike someone who clocks in and clocks out. We feel if we look after them, everything else will come into place.”