Be Generous with Staff, It’s a Great Investment

I hope my boss is reading this. You see, it turns out that paying your workers well and spoiling them with benefits such as in-house massages, free breakfast, lunch, dinner and a free gym rewards you with happier, more contented employees.

Okay, that's not actually what a recent Harvard Business Review study by M.I.T. professor Zeynep Ton actually found, but there's no doubt that treating your employees well – even if it costs you money – pays dividends in return.

Ton researched four low-cost retailers: Costco, Trader Joe's, the QuikTrip convenience-store chain and Mercadona, a Spanish supermarket chain. As well as being low-cost, what these four chains have in common is that they have much higher labor costs than other similar chains. This, says James Surowiecki, writing in the New Yorker, is because they have more full-time workers, more salespeople out on the floor and – perhaps most importantly – they invest more in training their staff.

According to the research, while these businesses are obvious better places for employees to work at, the stores are actually more profitable than most of their competitors, with higher sales both per employee and per square foot of sales space.

In his article, Surowiecki quotes another study, published by the Wharton School in which Marshall Fisher, Jayanth Krishnan and Serguei Netessine examined sales information from a retailer with more than 500 stores and discovered that every dollar in additional payroll added between $4 and $28 in new sales.

A benefit of having more and better-trained staff is that they will actually be able to help the clients who walk in the door.

"The big challenge for any retailer is to make sure that the people coming into the store actually buy stuff, and research suggests that not scrimping on payroll is crucial," explains Surowiecki.

One of the biggest problems retailers are constantly fighting against is something called "phantom stock-out," which is when a product is listed as being in the store but it can't be found.

With a well-trained staff, phantom stock-out is less likely to occur. Not only will staff be more likely to know where wayward stock is (or even prevent it from wandering off in the first place), they will also be much more likely to care.

While the phantom stock-out problem is unlikely to be an issue for jewelry retailers, the subject of undertrained staff is certainly pertinent.

As IDEX Online research analyst Ken Gassman has said on more than one occasion, jewelers only get one or at the most two chances to make a good impression. With people making fewer visits to jewelry stores, retailers have to make the most of every opportunity to make a sale.

Nothing will sell your store – and your inventory – more than a fulfilled, knowledgeable and helpful sales team.

Investing in your staff may cost you money, but done correctly, it will bring you dividends in return. As Surowiecki says, "In retail, stinting on employees doesn't actually save you money. It just gets you less for less."