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Wages, Employee Performance and Retail Industry Trends: Looking at Walmart’s New Approach

Following an important topic that has been widely discussed throughout 2016, recent retail industry trends have explored the relationship between wage increases and the impact on employee performance. For example, we can look at the recent protests associated with the “Fight for Fifteen” and employee efforts to raise the minimum wage to $15 per hour as a testament to those efforts and what it would mean for our workforce. And as many employees and other interest groups across the country have expressed their opinions about wage increases and their impact on all involved, a recent article that appeared in the New York Times explores the subject and the potential impact that wage increases can have on employee performance by taking a closer look at the world’s largest retailer.

A couple of years ago, Walmart, which once built its entire branding around a big yellow smiley face, was creating more than its share of frowns. Shoppers were fed up. They complained of dirty bathrooms, empty shelves, endless checkout lines and impossible-to-find employees. Only 16 percent of stores were meeting the company’s customer service goals. The dissatisfaction showed up where it counts. Sales at stores open at least a year fell for five straight quarters; the company’s revenue fell for the first time in Walmart’s 45-year run as a public company in 2015.

To fix it, executives came up with what, for Walmart, counted as a revolutionary idea. In early 2015, Walmart announced it would actually pay its workers more. That set in motion the biggest test imaginable of a basic argument that has consumed ivory-tower economists, union organizers and corporate executives for years on end: What if paying workers more, training them better and offering better opportunities for advancement can actually make a company more profitable, rather than less?

“Sometimes we don’t get it all right,” Chief Executive Doug McMillon said in a company video. “Sometimes we make policy changes or other decisions and they don’t result in what we thought they were going to. And when we don’t get it right, we adjust…It’s clear to me that one of the highest priorities today must be an investment in you, our associates.”

- Digital Partner -

The results are promising. By early 2016, the proportion of stores hitting their targeted customer-service ratings had rebounded to 75 percent. Sales are rising again. At the store level, managers describe a big shift in the kind of workers they can bring in by offering $10 an hour with a solid path to $15 an hour. “We’re attracting a different type of associate,” said Tina Budnaitis, a manager of a local Walmart location. “We get more people coming in who want a career instead of a job.”

From a loss prevention perspective, results from the annual National Retail Security Survey (NRSS) and other research conducted by Dr. Richard Hollinger often considers the relationship between employee satisfaction, employee wages and the impact of these critical retail industry trends on employee theft. How exactly would higher retail wages impact shrink in retail stores? Would higher wages influence overall store performance?

Similarly, the research and content supported by Dr. Read Hayes and the Loss Prevention Research Council also looks at retail industry trends and the many influences that support the motives behind employee theft, including employee wages and job satisfaction.

In a volatile corporate world, an unexpected recession or management change, or rise of a new competitor, could upend any plans. But in the short term, the Walmart experiment shows pretty clearly that paying people better improves both the work force and the shoppers’ experience.

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As retailers look for answers to the ongoing threat of theft, fraud, and the many factors that impact retail shrink, let’s hope that these recent retail industry trends can have a similar impact on the loss prevention industry and our ongoing battle with retail industry shrink.

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