Ross Stores, Inc.: Employee Retention

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Introduction

The given human resource analysis will primarily focus on Ross Stores’ California-based branch, which is currently facing a major issue of employee retention. The problem is amplified by the fact that the COVID-19 pandemic imposed a certain set of restrictions and employee mandates, which made the issue more profound. It is important to note that the high employee turnover rate is a systematic problem, which affects the entirety of the company at all of its branches, which is why the topic is of major interest for assessment and solutions recommendation.

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Background

Ross Stores, Inc. is among the largest American clothes retailer, which offers its products at a discount price, which is, in most cases, significantly lower than equivalent alternatives in the same market. The company primarily uses its size and purchasing power as leverage to acquire clothes in a higher volume, which lowers the overall price per unit. Another approach utilized by Ross Stores, Inc. is manifested in the fact that the company skips over many intermediary re-sellers, and thus, it mainly negotiates and works with the manufacturers themselves (“Form 10-K,” 2021). By having such direct access to suppliers and cutting the “middle man,” the company can acquire clothing products at a low price and ensure that they are coming from appealing brands and have relevant styles. The stores avoid the use of excessive and unnecessary decorations, such as mannequins, which allows the company to lower its price even further, which gives Ross Stores a high degree of competitive advantage when it comes to prices.

Moreover, the company has a long history of working in the clothing retail business. Ross Stores, Inc. was founded in 1982 with a clear vision and goal of gaining competitiveness through price only (“Form 10-K,” 2021). The company is not interested in so-called “fancy” experiences and customer relations. It openly communicates to its customers that the lack of these add-ons is among the major contributing factors to the pricing element. The company’s current CEO, as well as Vice Chairman, is Barbara Rentler, and the branch of interest is located at 711 W Redondo Beach Blvd, Gardena, CA 90247, the United States, with a General Manager of the branch Harvey Goodman (“Ross Stores,” 2021). The organizational structure is comprised of the CEO residing at the top, who oversees Michael J. Hartshorn, Group President, and COO, who, in turn, oversees a wide range of aspects of the business, which comprises the central group (“Ross Stores,” 2021). The branches operate under strict guidance and control of the central group and COO (“Ross Stores,” 2021). It is important to note that each branch is led by a General Manager, who oversees store managers and shop assistants.

Problem

One of the main problems of Ross Stores is the fact that there is a high employee turnover rate at lower levels of the organizational structure, where store managers and shop assistants are more likely to leave after a short period of time. To assess the issue in a comprehensive manner, a short and concise on-site interview was conducted in the branch with the use of close and open-ended questions. The interview itself was comprised of four questions, which included:

  1. How long have you been working here?
  2. Do you plan to stay or leave? For how long?
  3. What is the reason for the stay or leave?
  4. What could the company do to reverse low retention?

The interview was conducted on three shop assistants, two cashiers, and a store manager, which revealed that the workload was too high for the amount of wages, and the organizational culture is considered to be highly centered around a customer with no to little support for employees. In other words, the workplace was dynamic and required a substantial amount of labor input compared to smaller stores, but the pay was not significant enough to ensure that the employees were retained. The average age of the interviewees was 27, with an expected tenure of a little over one year, and the median pay was around $24 000. The majority of interviewees stated that they were experiencing some degree of burnout due to the intensity of workload, which remained substantial even during the COVID-19 pandemic.

Underlying Causes

One should be aware that employee retention is a major issue in many retail businesses. In regards to Ross Stores, the employee retention issue is due to two major underlying causes, which are excessive workload and compensation. A study suggests that “employee compensation moderated the relationship between types of employee participation and employee retention” (Khalid & Nawab, 2018, p. 1). In other words, there is a direct link between employee retention rates and compensation, where the latter is a critical determinant of the former. It should be noted that current employees are willing to remain in their low-paying positions for longer if the company reduces the workload and establishes a proper work-life balance with a shift of the organizational culture from a high focus on customers towards employee support. One of the key reasons is rooted in the fact that the pandemic limited the number of alternative options, which is why the employees were more reluctant to give up the position they have and the associated benefits.

Therefore, the current job market environment is benefitting the company by providing more incentives to the workers. However, one can expect that the company needs to change the given approach since the restrictions will be lifted, and the economy will eventually recover, in which case, the retention rate will worsen as more vacancies will become available. Therefore, proper measures need to be undertaken by Ross Stores to avoid future issues in regard to employee shortages. Historically, the issue began with the company’s strategy to focus solely on price domination in the market, where it strived to cut losses in every aspect of operations since the negotiations could not be the only source of price reductions. By lowering the compensation rate and increasing the workload, Ross Stores were able to lower the prices even further. However, it eventually came at the cost of a retention problem, which severely disrupts the workflow and makes it challenging for stores to constantly train new workers.

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The recommended solutions are comprised of two major propositions, where the first one focuses on workload decrease and reduction of the company’s customer-centeredness, and the second one focuses on the compensational increase. Although both solutions can be viable in the given context, the first one is more preferred one due to the key reasons and pieces of evidence, which will be discussed in the next section. The plausibility of the first option is due to the fact that the given solution will drastically reduce the workload, which will significantly reduce the burnout experienced by the employees. In addition, it will improve the overall work-life balance of the workers, which will incentivize them to stay with the company for longer periods. Since the company is highly focused on price reduction by any means necessary, this paradigm of Ross Stores should change from a high degree of customer-centeredness towards employee support. It is important to note that the given solution will not affect the prices of the products since the labor volume will be transferred towards to customers themselves rather than new employees.

The first option mainly addresses the workload problem at the company, where employees are forced to work at a higher intensity and perform a wide range of difficult functions, which require more people to do to ensure work-life balance. Since the company cannot afford to hire more employees, the labor volume needs to be transferred towards customers themselves. For example, cashier jobs should be automated and focused on self-service checkouts. This will significantly reduce the workload from the workers, who are forced to perform cashier’s tasks due to the shortages during a high flow of customers. In addition, employees spend a great deal of time reallocating misplaced products in accordance with their sections, which can also be changed in favor of the workers. It is important to note that customers are incentivized to shop at Ross Stores due to low prices, and thus, the company needs to communicate that such a low price comes with expectations that buyers will not receive a high-quality service. Therefore, customers need to be asked through signs not to misplace the products and make it socially unacceptable to do so at the store. This will allow workers to reorder the items only a few times per day in bulk.

The second option is focused on compensation increase, which might hurt either the company’s profitability or increase the prices of products. This alternative is not as appealing as the first one since the low prices are the key strategic measure, which provides a competitive advantage to Ross Stores. However, this does not emphasize the increase of wages across the board but rather seeks to implement a compensational increase based on one’s work period at the store. The option revolves around the notion that an employee will receive a compensation increase or pay raise annually, which will incentivize workers to stay for longer. It will incur some costs to the company but will not reward the workers, who stay with the company for a short duration. The proposed model focuses on a 10% pay raise for each consecutive year, as demonstrated in Figure 1.

Proposed Compensation Plan
Figure 1. Proposed Compensation Plan

Reasons Behind the Solutions

As it was stated in the previous section, option one, which focuses on work-life balance adjustments, is more preferred compared to the second option, which seeks to increase the overall yearly compensation. The main reason is evidenced by the fact that “researchers are not unanimous about the impact of pay on retention. For some, satisfaction with pay strongly correlates with the employee’s decision to stay in the organization. For others, pay does not have a direct influence on retention” (Kossivi et al., 2016, p. 263). In other words, the second option does not guarantee that the employee will stay for longer periods since compensation does not directly correlate with worker retention rates. However, in regards to workload and work-life balance, it is stated that “work-life balance is becoming gradually more central for employees and tends to affect employees’ decision to stay in the organization. Nowadays, employees long for flexible work schedules which allow them to take care of both their personal and professional life” (Kossivi et al., 2016, p. 263). Therefore, a modern worker tends to be more interested in the workload rather than compensation, even if the latter is still relevant.

It is important to point out that employee retention is one of the urgent tasks of personnel policy in many modern companies, such as Ross Stores, whose success is largely related to the quality of the hired personnel. The line management of an average company can influence the main reasons for voluntary layoffs of employees, which makes the direction of staff retention extremely promising from the point of view of the development of HR management. The growing demand for personnel retention practices at the present stage of labor market development is associated with several factors.

First of all, companies are affected by the increased competition for the best employees in the labor market. The shortage of specialists in the labor market makes them much more expensive to hire, despite the fact that even in the case of finding a specialist available on the market, hiring is usually more expensive than measures to retain an employee leaving the company. Staff turnover, in the absence of control from the employer, can “eat up” a significant part of the company’s budget. Thus, one of the main reasons for employers’ interest in the practice of retention of personnel is the saving of resources, carried out through a controlled decrease in staff turnover.

The dismissal of an employee turns out to be especially critical in cases when he is a key specialist for the company. The increasing complexity of the tasks solved by the business and the technologies used in this, the complication of the structure of companies further increases both the role of key specialists in the success of the enterprise and the average number of such specialists. The growing degree of division of labor narrows the range of tasks solved by employees and teams, making highly specialized specialists more in demand, who are more difficult to replace. At the same time, the labor market continues to experience an influx of new generations of job seekers whose work values differ from those of their older colleagues. For example, younger professionals are more mobile and less tied to their current place of work than older employees, and therefore they may be inclined to change more jobs during their careers.

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In addition, younger applicants, such as Ross Stores, may have different factors when deciding whether to pursue a career in their current job or leave than older colleagues. They may pay more attention to professional development in the company, tend to have a greater interest in work responsibilities and value recognition and self-worth, value a suitable work environment, and have the opportunity to work flexible hours. All this forces employers to pay additional attention to young employees if she intends to keep them in the state.

Action Plan

The action plan is centered around adopting both options but utilizing option one before the second option. The store will firstly need to design a plan to effectively communicate with the customer about expected changes, where the traditional cashiers will be replaced with self-service options. A minimal number of the cashier will still be active, such as two or three, but the majority of payment procedures will be comprised of self-service alternatives. The next step is focused on ensuring that the instructions on self-service are comprehensible and effortless for even for customers with the lowest computer literacy. The third step involves setting up visible signs and announcements in regards to a displacement of products. Customers need to be strongly encouraged to put the items in their corresponding section, which needs to reach the point where customers themselves held other customers accountable for misplacement through social pressure and judgment. The message needs to be conveyed in regards to the fact that if a customer displaced an item in a wrong section, then it is an instance of disrespectful behavior for other customers, who will struggle to find the products in their sections.

The fourth step is the redesign of sections, where they need to become more generalized. In other words, there needs to be a minimal number of sections with an allowance of some degree of disorder. The fifth step is centered on the reduction of the employee workload directly, where they are demanded to reorder the misplaced items only thrice a day at specific times. This will ensure that they will be able to perform other important tasks in between these procedures. As soon as these measures were put in place, the human resource managers need to evaluate whether or not the retention rate reached the acceptable or desirable range. If not, the sixth step focuses on introducing a new compensation plan, where employees are rewarded with a 10% pay raise each consecutive year until year six. The compensational increase alongside workload decrease should ensure that employees will stay with the company for a significantly longer period of time.

Conclusion

In conclusion, Ross Stores Company struggles with the major issue of low employee retention rates or high turnover rates. The interview revealed that most employees do not plan to stay for more than a year due to two primary reasons, which are excessive workload and low compensation. The solutions emphasize the prioritization of work-life balance adjustments due to evidence indicating that compensation is not always correlated with retention. Therefore, the proposed action plan is to systematically transfer the workload from employees to customers through self-service alternatives. If the given measure does not work to the required extent, the company needs to integrate compensation raise, which incentivizes longer stay or employee retention through annual payment increase for 10% up to six years. This will ensure that workers will be motivated to stay with the company for longer due to higher wages in later years, which will be worth the cost since these workers will be more experienced and accustomed to such work dynamics.

References

Form 10-K. (2021). Web.

Khalid, K., & Nawab, S. (2018). Employee participation and employee retention in view of compensation. SAGE Open, 8(4), 1-17. Web.

Kossivi, B., Xu, M., & Kalgora, B. (2016). Study on determining factors of employee retention. Open Journal of Social Sciences, 4(5), 261-268. Web.

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Ross Stores. (2021). Web.

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BusinessEssay. 2022. "Ross Stores, Inc.: Employee Retention." July 1, 2022. https://business-essay.com/ross-stores-inc-employee-retention/.

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