For evidence look at Uber, which attracted a record 5 million drivers in 2022.1 But there is one category where the problem remains stubbornly unsolved: retail. This is despite retailers’ best efforts to look after their employees by offering pay increases and improved benefits.
The breadth of Marsh McLennan’s capabilities gives us a comprehensive view of the challenges facing the retail industry as well as how companies can attract and retain talent in a competitive market. Our expertise across risk, strategy and people, investments in proprietary research and industry-leading retail practice areas enable us to quickly coalesce insights and market knowledge to help our clients act decisively.
Recruitment, retention and productivity are grounded in how strongly employees find meaning from their employment. We found a 27 percentage-point difference in retention and a 37-point gap in revenue growth between companies that provide that meaning and those that do not. Unsurprisingly, companies with experienced staff who feel a bond with their employer perform more strongly. Yet only 28% of companies are delivering that meaning, and retail on average underperforms other industries. While retail employees do recommend the products they sell, they are not inspired by what their organization stands for and do not believe their friends or family would be impressed by their job. They feel unsupported in their career growth and constrained by the lack of flexibility in the way that they work. Just as importantly, they do not understand how their role influences the company’s mission or feel that they have the tools or support to deliver it.
With greater turnover comes a less experienced workforce that has resulted in higher workers’ compensation claims, in contrast to country wide declines of 5% to 10% per year.2 The labor market also remains tight, resulting in shallow labor pools that, in part, have resulted in pay compression. But increasing the total wage bill to buy employees’ loyalty is not the answer. Why? There just is not financial headroom as retail faces a range of challenges beyond labor — from supply chain disruption to investing in digital transformation and rising environmental, social and governance expectations.
If we look to the travel and hospitality category, employees rate their compensation on par with retail. However, they perceive much greater meaning from their work, which means the value ratio of their employment is consistent with other industries, enabling travel businesses to better compete for talent. This is the opportunity in retail: Build stronger meaning in the employee value proposition with prospects and employees.
Here is how:
- Create inspiration in the company’s mission and its employees’ personal roles
- Rebalance compensation and enable career growth
- Adapt to the evolving expectations in day-to-day work
- Optimize recruiting activities
- Better manage your risk profile
Reliance on compensation benchmarks alone can result in a race to the middle because what everyone else is doing is unlikely to be right for your organization. It is critical to actively engage and listen to what keeps your employees up at night: inflation, health and safety concerns, the ability to care for dependents, and saving for retirement. These persistent fears make employees anxious, hindering their ability to be fully present at work. With better engagement, total rewards can be realigned to ensure dollars are spent in the areas that matter most. Segmenting a workforce into personas with individualized offerings can help.
We have found particular benefit from reward programs that are directed to those needs most relevant to employees and demonstrate differentiation from competitors. For one global retailer, the waste identified was redeployed to address pay compression that was a key pain point for experienced staff. There was also a benefit from the process being open and transparent, with increased trust in how compensation was determined, which led to a decrease in turnover. It is true that the most valuable employees are typically those with personal drive. They care not only about the present, but how employers can help them on their career journey, and the skills and responsibilities that they can master. Painting a bright future and providing substance on the pathways creates meaning through anticipation.
Adapt to evolving expectations
For many retailers, consistency has been a prime imperative for delivering the customer experience. However, many employees find that this consistency is a straitjacket they are no longer prepared to suffer. There are two primary dimensions to consider. The first is flexible working. The gig workforce doesn’t always want fixed hours at a fixed location. That presents a challenge in retail but it is not necessarily insurmountable. Chick-fil-A has successfully instituted job-sharing through three-day blocks of shifts lasting 13–14 hours.3
Secondly, people want to feel that they can bring their whole self to work and not have to fit in with a homogenous corporate culture. Recognizing and celebrating diversity, whether LGBTQ, ethnicity or being a working parent, creates greater belonging and helps people be their authentic selves — something that aids productivity and is desired by customers. Successful corporate cultures benefit from working according to principles rather than rules. You can’t manage a thousand touchpoints with a manual. Both Southwest and Delta are principles-based, enabling their employees’ freedom to meet customer demands during exigent circumstances — for example, ordering pizzas for stranded passengers. That they can do this within a heavily regulated and safety-first industry demonstrates that this can be achieved in almost any industry.
Optimize recruiting activities
Better manage your risk profile
 “Uber attracts record number of drivers as cost of living bites,” August 2, 2022. Available at https://www.bbc.com/news/business-62396648
 Marsh, FINPRO Detailed Market Update, Q2 2022
 QSR, October 19, 2022. https://www.qsrmagazine.com/exclusives/chick-fil-operator-finds-magic-three-day-workweek
 Mercer. Rise of the Relatable Organization: Global Talent Trends Study, 2022.
 Mercer Pay for Skills survey 2022