Automated worker scheduling may boost retail profits in the short term but can be harmful to competitive advantage in the long run, a former Gap Inc. human resources executive told an academic panel Dec. 7.
Eric Severson, former co-chief human resources officer and senior vice president of human resources for Gap, said the shift by retailers to flexible employee hours scheduled by software algorithms over the past two decades has caused excessive staff turnover costs and can be just as harmful as it can be beneficial in the long run.
Severson made the comments at a future of retail webinar event hosted by Cornell University's School of Industrial and Labor Relations.
Most retail businesses now use algorithmic scheduling, he said, essentially where software optimizes when, where, and how employees work. This coincides with a trend of reducing the number of full-time workers and replacing them with multiple part-time workers to optimize shifts.
"Businesses did this because they think it's good for the business," Severson said. "But they've discovered these not-so-hidden costs."
Severson, now an executive at a Denver-based kidney care company, said the majority of turnover in retail has to do with scheduling, especially when workers are trying to balance other priorities.
Because many retailers are now open 16, 18 or 24 hours per day, this has changed the demands for shifts and changed when people have to work. Automated scheduling could force retail employees to work a late shift followed by an early shift, and could interfere with work-life balance, especially considering that 67% of households now have both heads employed.
Severson cited data from the Center for American Progress on staff turnover costs for companies. The average cost of turnover for an hourly retail employee is 16% of that worker's salary or roughly $1,664 for a company with 10,000 part-time employees. That figure is based on the cost needed to retrain that previous worker as well as seeking out staffing companies to find a replacement employee.
And according to a 2015 study by the University of Chicago cited by the formal apparel executive, the average annual retail employee turnover rate in the U.S. is 73.8% for full-time employees and 107.3% for part-time employees.
Compounding this is the growth of digital and mobile technology, he added. Over the past 15 years, the ubiquity of mobile devices has led to the personalization in marketing and advertising. This has made it more difficult to predict foot traffic in stores, especially compared with previous marketing done through billboards, signs and ads, which were easier to staff because of the predicted rise in shoppers.
Gap, like several other apparel sellers, dropped on-call shift scheduling for employees across its five brands in August 2015, Severson said.
"When you do right by the people, you do right by the company," Severson said.
The United States' retail industry added 12,900 jobs over October, excluding automobile dealers, gasoline stations and restaurants, the National Retail Federation said Dec. 8, citing figures from the U.S. Labor Department. The increase in employment, driven by a boost in holiday hiring, is a bounce-back for retail, which lost 10,300 jobs in October.