The retail sector is a fiercely competitive one – both across Australia and the world. Nic Paton examines the HR strategies of leading UK supermarket chains Tesco, Asda and Sainsbury’s, and examines their HR plans for gaining a competitive advantage in the future
The retail sector is a fiercely competitive one – both across Australia and the world. Nic Paton examines the HR strategies of leading UK supermarket chains Tesco, Asda and Sainsbury’s, and examines their HR plans for gaining a competitive advantage in the future
The UK supermarket and grocery market is worth an estimated £5.7 ($13.2) billion, of which, according to researcher Verdict, Tesco accounts for more than half – an astonishing £3.1 ($7.2) billion of sales.
The dominance of Tesco has been the primary story of the sector for the past decade. As the first UK company to report profits of more than £2 ($4.6) billion, the first (and so far only) UK supermarket chain to become a truly global player and increasingly dominant in non-traditional grocery areas – such as convenience stores, clothing and non-food – Tesco has been a success story without parallel.
In such a competitive industry, where every customer lost or gained counts, supermarkets have long recognised the value of giving HR a high profile. They all spend vast amounts of time and effort on coaching, leadership, talent management, retention and reward strategies.
Supermarket sweep: Tesco
If Tesco was big three years ago (240,000 staff worldwide and the UK’s largest private sector employer), now its statistics are mind-boggling. It employs 367,000 staff worldwide (250,000 of them in the UK), has 2,365 stores (1,770 in the UK), sales of more than £37 ($85.3) billion, and last year reported pre-tax profits of just over £2 ($4.6) billion. It also has an estimated 30 per cent of the UK grocery market.
Tesco now ranges far beyond food, offering services including banking, flower delivery, online diets, legal advice, DVD rental and telecoms. There have even been suggestions that it might branch out into estate agency. It operates in 13 countries and is the market leader in six.
Recruitment: Tesco aims to recruit 11,000 new employees this year, having hired a similar number last year. It takes on between 80 to 150 graduates each year to two training schemes, one store and one office based.
Common recruitment methods include in-store advertising, events in local areas, and recommendations from existing employees through an employee referral scheme. Last year, for instance, Tesco asked checkout staff to help identify and recruit 12,000 temporary Christmas staff.
Interviews are conducted by the line manager to help build loyalty and buy-in to the decision. There is no probation or trial period. “If we think you are the right person to be hired, then we are committed to you,” according to personnel services director, Catherine Glickman.
People can also ‘job sample’– trying out jobs for a short time to see whether working for Tesco is for them.
Retention: Three years ago, staff turnover was said to be 29.9 per cent. Now, no specific figure was available but, says Glickman, turnover is below the industry average of around 35 per cent.
Looking at the age spectrum, one in five staff are over 50 and Tesco employs more than 30,000 students. Last year, it also became the first business to set targets for the recruitment of disabled people.
Tesco offers a wide range of flexible working options, including maternity and paternity leave, career breaks, job shares and shift-swaps. It has a company pension, plus a share ownership scheme, which, in March, shared out £220 ($507) million.
Training and development: Most training is delivered in-house or in-store by training or personnel managers. At a group level, training is coordinated by the central personnel team and the ‘Tesco Academy’, which oversees the design of programs.
Within stores, training is split into three levels. Bronze is basic training based on developing core skills, such as health and safety or hygiene, alongside specific departmental skills. Silver is about developing product knowledge or stock processes, and gold is aimed at encouraging people to become experts in their field. For management, there is a scheme called Options, which is designed to give shop staff the skills and experience to develop into managers.
On average, its retail staff receive more than 4.5 million hours of training each year, Tesco estimates.
Performance management: All staff have an annual performance review and work towards a personal development plan, with objectives set at the beginning of the year. They also have a career discussion with their line manager.
This is then fed into Tesco’s talent-spotting process, where all senior managers within the team will sit down to plan any moves within teams or departments. At a conference last year, Tesco chief executive Terry Leahy said one in 10 staff were being targeted for training and promotion.
“People want feedback, and they want it from their boss,” says Glickman. There is also the TWIST (Tesco Week In Store Together) program, where senior management regularly go out onto the shop or departmental floor to find out what impact their policies are having.
Tesco uses a balanced scorecard approach to management through its ‘Steering Wheel’ program. Managers monitor customers, operations, staff and finances using a traffic light system to denote meeting targets and finding problems.
HR fact file: Tesco
The HR team has 50 employees, split between its Cheshunt headquarters and stores and depots around the country.
Outside head office, there is a personnel manager within each big store, a manager to cover a cluster of smaller stores, and then group managers to coordinate HR issues at a wider level. There is also a group team that deals with HR issues within the international operations and a senior group HR team sets policies and processes.
Group personnel director, Clare Chapman, is not on the board, but reports directly into Tesco chief executive Terry Leahy. She also sits on Tesco’s People Matters Group – a board-level group that meets fortnightly.
The main HR challenges over the past few years, and looking forward, says personnel services director Catherine Glickman, continues to be finding and getting the most out of leaders, both current and future.
“When I joined in the 1990s, Tesco tended still to be operationally and finance driven. Now it has been transformed into a customer-driven business. The people plan is as serious and heavyweight as the customer, finance or operational plans,” she says.
Supermarket sweep: Asda
Asda is the UK’s second biggest supermarket chain after Tesco. It has 279 stores, including its first 12 in Northern Ireland added in June 2005, 150,000 employees and sales in 2003 (the last figures available) of £14.4 ($33.2) billion. It was bought in 1999 by US retail giant Wal-Mart.
Unlike the troubled industrial relations of its parent company, Asda has a very different reputation in terms of how it treats its workers. In the 1980s, the business was considered something of an industry basket-case, but it was turned around and then massively expanded in the 1990s, first under Archie Norman and then Allan Leighton.
Recruitment: Asda recruits between 7,000 and 10,000 people a year. The ethos behind recruitment is to hire “for attitude rather than skills”. Between 60 and 70 graduates are hired a year, and are put through a three-year training scheme in one of the following fields: finance, logistics, IT, buying or trading, retail and the clothing arm George. Graduates on the retail scheme can also do a stint with Wal-Mart.
Preferred recruitment methods for colleagues are in-store advertisements and job centres, while for graduates, the internet and signing up people who have had holiday jobs are common routes. Four years ago, it launched a ‘talent race’, designed to recruit or promote a more ethnically diverse range of managers.
Retention: Staff turnover is currently 25 per cent, which Asda argues is the lowest in the sector “by a substantial margin”. At manager-level, the split between home-grown and imported talent is about 70 per cent and 30 per cent respectively. Women make up 45.2 per cent of its managers at all levels, and 25,000 colleagues are aged 50 or over.
The chain offers 52 weeks maternity leave (half of it paid), five weeks paternity leave (three unpaid) and adoption leave, the option of flexi-time or home working, and career breaks after three years service.
Like the rest of the sector, talent retention at all levels is the key HR challenge going forward, says people director David Smith. “Food retail has always suffered from high turnover and is something most retailers have to grapple with,” he says.
Training and development: All staff get a basic two-day induction on joining the company. Store managers receive eight weeks’ intensive training, while colleagues get a week’s basic training followed by 24 weeks on-the-job training.
Asda runs 15 ‘Stores of Learning’, spending more than £5 ($11.5) million a year on training new and existing managers, and has a ‘Stepping Stones’ development program to encourage people to move up a level at a time. It also runs an adult-learning initiative.
Performance management: Smith says evaluation and assessment is continuous at all levels. Managers are formally evaluated three times a year, and how they manage their team is one of the key performance indicators.
Good performance management, Smith argues, is all about reinforcing behaviours and getting people to want to do a good job. “Ninety-five per cent of people will respond to that,” he says.
Graduates get six-monthly reviews throughout their training program. The company also runs monthly ‘We’re listening’ surveys and has an employee suggestion scheme.
HR fact file: Asda
Asda has an HR team of 100 colleagues at its headquarters in Leeds and 16 regional people managers around the country.
In May, it announced that five of its female staff were to be promoted into more senior positions and five new positions were to be created: a people director for policy and development; a retail people director; a head of reward and benefits; a head of people for logistics; and a head of colleague relations.
People director David Smith has been with the company for 12 years and has a background in the coal industry. He has a seat on the board. Starting salaries in the department range from about £14,000 ($32,200) for a clerical position up to £20,000 ($46,100) for a managerial position. Smith declined to reveal his salary.
Smith says his priorities are simple: get the right talent for the business and keep them. “It is about leading, modelling and encouraging people,” Smith explains.
Within HR, he says, this means getting a mix of HR professionals and line people. The HR strategy is very much linked to the business values of the company, he adds. “You start with the needs of the business and then develop your strategic thrusts from there.”
Supermarket sweep: Sainsbury’s
On the front cover of Sainsbury’s most recently published annual report, the supermarket chain asks: “What will it take to make Sainsbury’s great again?”. It is this question that has dominated the progress of the retailer since the trauma of being overtaken by Tesco a decade ago.
With 153,000 employees and 728 stores, Sainsbury’s is the UK’s third largest food retailer and, after struggling for a number of years, has been showing signs of recovery under new chief executive Justin King. Although profits are still hugely down –£254 ($585) million in May against £675 ($1,555) million the year before –its market share has been growing, and is now at 15.9 per cent – up from 15.5 per cent on the year before – according to research from TNS SuperPanel.
King, who was hired from Marks & Spencer last year, has wielded the axe at the firm’s London HQ, cutting a quarter of positions, and has so far closed 13 under-performing stores.
Recruitment: Sainsbury’s estimates that it recruits around 50,000 people a year and, in May, launched a drive to hire 10,000 over-50s by the end of the year. It hires some 120 graduates a year – mostly on the retail side, but some within HQ – working in finance, HR, training and trading.
The company uses all the traditional recruitment channels, such as in-store advertisements, posters, find-a-friend initiatives, local and national newspapers and the internet. “We spend a lot of time recruiting for attitude. You can give people the skills to do the job, but we want the right people,” explains HR director Imelda Walsh.
Retention: Back in 2002, staff turnover was running at 35 per cent. This time around, Walsh declines to quote an exact figure, but admits it is higher than she would like, partly because of the demographics of the Sainbury’s workforce, many of whom are relatively young.
In May, the chain announced a cull of 350 jobs at its banking arm, and there have also been many changes within the top 200 personnel of the business.
The company has “the full plethora” of flexible working policies, including generous maternity, paternity and adoptive leave, all of which are posted on the internal intranet, says Walsh. More than 60 per cent of Sainsbury’s staff are female, and 68 per cent work part-time. Workers with laptops can access the intranet from home.
Training and development: Training and development sits within the HR function, although there is an arm within the retail division that deals with more specialised, technical training. While there is online training available, the company has pulled back somewhat from this approach in recent years, concentrating on more coaching and face-to-face training.
In February, Sainsbury’s linked up with retail union Usdaw to launch an in-store learning partnership, targeting IT, literacy and numeracy. There has also been a particular emphasis on leadership development, says Walsh.
Performance management: Performance management is embedded within the organisation rather than seen as something to be carried out in isolation, explains Walsh. “We had a big drive to put a very simple, straightforward performance management process in store so that colleagues know where they stand,” she says.
There are extensive buddying and mentoring systems in place, she adds. All managers have a year-end performance review, but appraisals are often carried out more frequently. There is regular communication with staff through the intranet, the popular monthly company newsletter and employee surveys.
“In the ‘bad old days’, people were not told why things were being done, but now we give them feedback,” says Walsh. In March, Sainsbury’s revealed it was offering bonuses to its 1,100 managers to get sales back on track and, in January, chairman Philip Hampton said the chain planned to link pay more closely to performance and provide greater incentives to junior managers.
HR fact file: Sainsbury’s
Sainsbury’s employs 140 HR staff at its London HQ and a further 865 HR and personnel staff located in its stores and depots, giving a ratio of one HR employee to every 152 employees.
The HR starting salary varies, but graduate salaries within the group start at about 21,700. HR director Imelda Walsh, who joined the company in 2001 from drinks firm Diageo, is not on the board of the Plc but is on the operating board, and reports directly to CEO Justin King.
Beyond the day-to-day challenges of operating in a highly competitive, high-profile environment, the main HR challenge for the foreseeable future, explains Walsh, will be locating, managing and recruiting talent, both at the top and further down.
“Our focus is very much on what we are doing with our top 1,000 leaders, supermarket managers and their grade equivalent or above. We are putting them through a leadership program that involves some self-examination, looking at style and behaviours, how you put behaviours into practice, and feeding that back into the program,” she says.
The program starts at the end of June and will be completed by early November, after which the next phase will be rolled out. Reward strategies have also been a key issue, with a new employee share plan being put into place last July.
This article first appeared in Personnel Today magazine. www.personneltoday.com.
