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Improving Store Performance at Caribou Coffee
After establishing their first coffee house in 1992, Caribou Coffee Company cofounders
John and Kim Puckett quickly grew the company. Headquartered in Minneapolis,
Minnesota, Caribou Coffee Company is now the nation’s second largest specialty coffee
company with almost 500 companyowned stores and over 6,000 employees.1 The
company also sells its coffee, equipment, and other goods through the Caribou Coffee
Web site and various retail partners.
Caribou’s leaders logically assumed that customer service was the reason customers
returned to their stores. This made sense, particularly given the company’s emphasis on
the customer service skills of all of its employees, including district managers who were
responsible for eight to fourteen locations. But the fact that store success varied more
across district managers than within a single district manager’s stores created a puzzle: If
there was an acrosstheboard focus on customer service, why was the performance of
each district manager’s stores so similar, but the performance of each district manager
different? Did the higherperforming district managers communicate more effectively to
customers and associates? Were they better at developing employees? What exactly
accounted for the difference?2
Imagine that Caribou Coffee approaches you for ideas as to what its highestperforming
district managers must be doing or offering to consistently outperform the others. After
reading this chapter, you should have some good ideas.
People’s efforts, talents, knowledge, and skills matter to organizations. If you don’t believe
this is true, then fire all your organization’s employees and replace them with cheaper labor.
Few successful organizations would accept this challenge because they understand that
their people are the key to their performance and survival. A competitive advantage is
something that a company can do differently from its rivals that allows it to perform better,
survive, and succeed in its industry. Sometimes an organization’s competitive advantage is
defined by its technology. Other times, innovative product lines, lowcost products, or
excellent customer service drive competitive advantage. In each case, the company’s
employees create, enhance, or implement the company’s competitive advantage.
How do people make a difference? At companies like Facebook and Google, key technology
is devised, implemented, and updated by the people who create and use it. Employees at
Apple Computer, Pfizer, and 3M create and sell new and innovative product lines.
Employees identify and implement the manufacturing system improvements that create low
cost, highquality automobiles at Hyundai. Finally, the service at Starbucks is all about
employee–customer interactions and experiences. In each of these cases, employees
influence and implement the key drivers of the success of the business. Depending on the
business, it may be true that the decisions made by marketing, finance, R&D, or some other
department are the most impactful for a company. But all business decisions are made by
employees. Hiring and retaining only mediocre talent is likely to result in mediocre decisions
and performance. Moreover, bad hires can be very costly to organizations in terms of
revenue or productivity losses, legal issues, and lowered employee morale and client
relationships.3
Effective staffing is the cornerstone of successful human resource management—it lays the
foundation for an organization’s future performance and survival. Why is it so important?
Staffing is important because its outcomes determine who will work for and represent a
company, and what its employees will be willing and able to do. As a result, staffing
influences the success of future training, performance management, and compensation
programs as well as the organization’s ability to execute its business strategy. Perhaps no
other single activity has the potential to have as great an impact on employees’ capabilities,
behaviors, and performance as identifying and obtaining the talent that the organization will
ultimately use to produce its products or services. For some jobs, the performance difference
between an average and an exceptional performer can be quite high. For example, because
Google knows that an exceptional technologist’s performance is as much as 300 times
higher than that of an average one, it is willing to invest heavily in sourcing, recruiting, and
hiring top technical talent.4 Many successful companies give employee recruitment,
retention, and motivation the same highlevel attention as their other core business
functions, such as marketing, finance, and research and development. Research has
5
confirmed that staffing practices are positively related to both profitability and profit growth.5
Effective staffing can also enhance the performance of an organization’s shares in the stock
market. A survey by a large consulting
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firm found that a strong staffing function led to greater shareholder return. In particular,
companies that had a clear idea of whom they wanted to hire and that judged applicants
against clear criteria outperformed companies with weaker staffing functions.6
By collaborating with hiring managers and influencing the flow of talent into, through, and out
of an organization, staffing professionals play an important strategic role in organizations.
Effective staffing requires a partnership between hiring managers and staffing professionals
in the human resource management department. Staffing professionals bring expertise to the
workforce planning and staffing processes, including evaluating what a job requires;
identifying what competencies, skills, personalities, and so forth, are required for job
success; and assessing those characteristics in job applicants. As the expert in the job itself,
the hiring manager provides input throughout the process and typically makes the final hiring
decision after the staffing specialist generates and screens a much larger pool of applicants.
In addition to promoting the goals of their firms, staffing professionals promote the goals of
society by helping match people with jobs and organizations in which they are able to be
successful and happy.
This chapter begins with an explanation of the context in which staffing operates, followed by
a definition of strategic staffing. We then discuss how strategic staffing is different from less
strategic ways of looking at staffing, what strategic staffing entails, and why it matters. We
then describe the importance of integrating staffing with the other areas of human resource
management (i.e., training, compensation, performance management, career development,
and succession management). Finally, we explain our plan for the rest of the book and
describe some of the core ideas that we will present in each chapter. After reading this
chapter, you should understand why a company’s staffing practices must be consistent with
its business strategy and with the other areas of human resource management if they are to
support the larger goals of the organization.
The Staffing Context
There are almost 6 million employers in the United States,7 employing anywhere from one to
hundreds of thousands of people. Over 143 million jobs existed in the United States in May
of 2013.8 Millions of employees are hired or separated every month, making staffing a
multibilliondollar business.9
Many forces in an organization’s environment influence its staffing activities. For example, as
globalization expands, companies are increasingly searching the world for talent. This has
resulted in greater competition for top talent and has made it more difficult for firms to hire
the best workers. Global competition for a firm’s products and services also influences
staffing because the increased competition can lower the company’s profit margins and
leave fewer resources available for its staffing activities.
Technological changes have also dramatically influenced the ways in which firms hire and
manage their employee relationships. Technology has made it easier for firms to track and
develop their employees’ skills as well as recruit and hire new employees. The Internet and
mobile technologies have changed the way organizations recruit and hire, and changed the
ways many people now look for jobs. Similarly, database software systems have greatly
facilitated the staffing evaluation process, making it easier to evaluate a staffing system and
address any underperforming parts.
Many different legal and societal forces shape firms’ staffing activities, too. For example,
firms face antidiscrimination laws and laws that hold them responsible for the damaging
actions of their employees if they fail to exercise reasonable care in hiring them. Applicants
responding negatively to a firm’s recruiting or selection methods, employees demanding
greater worklife balance, or customers no longer buying the products of a firm that lays off
domestic workers and hires cheaper labor abroad can influence a firm’s future staffing
choices as well.
Together these forces drive the way organizations identify, attract, assess, and integrate
talent into the workforce. Talent management
is the implementation of integrated
strategies or systems designed to increase workplace productivity by developing improved
processes for attracting, developing, retaining, and utilizing people with the required skills
and aptitude to meet current and future business needs.10 As one expert put it, “The ability
to execute business strategy is rooted in the ability to attract, retain, and develop key talent.
Successful talent management creates the most enduring competitive advantage. No
company can afford to be unprepared for both the best and worst of times.”11 This book
addresses the role that staffing can play in the talent management process.
Talent Management
attracting, developing, retaining, and utilizing people with the required skills and
aptitudes to meet current and future business needs
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Defining Strategic Staffing
Strategic staffing
is the process of staffing an organization in futureoriented, goal
directed ways that support the business strategy of the organization and enhance its
effectiveness.12 This involves the movement of people into, through, and out of the
organization.
Strategic Staffing
the process of staffing an organization in futureoriented, goaldirected ways
that support the business strategy of the organization and enhance its
effectiveness
This definition differs from the way companies often staff themselves. For example, too many
organizations still fill a job opening by putting the same job announcement they have been
using for years in one or two recruiting sources, such as a job board or newspaper, and
make a hiring decision based on a gut feeling they get during an interview. In other words,
they don’t put sufficient thought or planning into hiring in the way that best helps the firm
execute its business strategy with an eye toward the future.13 The focus of strategic staffing
is the integration of staffing practices with business strategy and with the other areas of
human resource management to enhance organizational performance.
How Strategic Staffing Differs from Traditional Staffing
A strategy
is a longterm plan of action to achieve a particular goal. Traditional staffing
tends to focus on quickly and conveniently filling an opening rather than on aligning the
staffing effort with the longterm strategic needs of the organization. By contrast, strategic
staffing entails both short and longterm planning. The process involves acquiring,
deploying, and retaining the right number of employees with the appropriate talents to
effectively execute this strategy, focusing on maximizing return on investment rather than
simply minimizing costs. When done strategically, staffing can enable a company to acquire
a sustainable competitive advantage that allows it to successfully fulfill its mission and reach
its goals. To illustrate what we mean by strategic staffing and how it differs from “less
strategic” ways of thinking about staffing, let’s consider how two hypothetical organizations
fill job openings. The first company, Treds, has a lessstrategic staffing process.
Strategy
a longterm plan of action to achieve a particular goal
As the store manager of Treds, a popular shoe store in a local shopping mall, Ron knows
he cannot afford to be understaffed during the upcoming holiday season. As soon as his
assistant manager, Sandy, tells him she is quitting, Ron reaches into his file drawer and
pulls out the job description (description of the job requirements) and person specification
(description of the qualifications and competencies required of a person performing the
job description) he used to hire her two years earlier. He quickly scans it, decides that it
would be all right to use it again without making any changes, and forwards it to his
regional manager along with a job requisition to get permission to hire a replacement.
When Lee, who is in Treds’s human resource department, receives the approved job
requisition and job description from Ron’s boss, she checks how the company typically
finds assistant managers. She sees that when it last hired an assistant manager, the firm
posted an ad in the local paper. Lee can’t tell from the company’s records how many
people had applied after seeing the ad. However, she decides that if it worked before, it
should work again. So, she places the same “help wanted” ad in the store’s local paper.
After two weeks, seven people have responded to the recruitment ad and submitted their
résumés. Three of them lack the previous retail experience Lee sees as a minimum
qualification for the position. After reading the other four résumés, Lee sets up telephone
interviews with all four of them. She never gets back to the three applicants who lack
retail experience to let them know that they are not being considered further.
After interviewing the four candidates over the phone about how interested they are in
the job and confirming they have appropriate education and experience, Lee decides that
three of them merit an interview and schedules them to meet with Ron at the store. At
that point, Lee does not let the rejected candidate know that she is no longer being
considered for the position.
Ron asks the three candidates individually about their work history and what they are
looking for from the job and decides to hire Alex. Alex seems eager to start as soon as
possible. Although he doesn’t have a lot of retail management experience, Ron hopes he
will be able to learn quickly on the job even though Treds doesn’t have a formal training
program. Alex receives a job offer contingent upon his passing a drug test and
background check. After the background report and drug tests come back favorably, Alex
accepts the job offer.
Ron sends Alex a copy of Treds’s policy manual and schedules, and he reports to work
the following Monday. The other finalists are not informed that the position has been filled
until they call Ron to follow up.
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The second company, Soles, illustrates a better strategic staffing process.
Amy, the manager of popular shoe retailer Soles, has to replace her departing assistant
manager, Ken, who has worked with her for the past two years. To be prepared for the
upcoming holiday season, Amy would like to replace Ken as quickly as possible. She
sets aside some time in her busy day to think about what she needs in an assistant
manager.
Amy goes to her computer and reviews the job description she used when hiring Ken two
years ago. “It is a good description of the job,” she thinks, “but it seems like something is
missing.” Amy thinks about how the store’s competitive landscape has changed over the
past few years. When she first started working at Soles four years ago, there was only
one other shoe retailer in the mall in which it is located. Now there are five, and two of
them offer lower prices on shoes that compete with some of Soles’s key product lines.
Amy knows that her company can’t lower its prices, but she feels that if her store offers
excellent customer service, her customers will be willing to pay higher prices for her
store’s shoes. Also, Soles is planning to move all store transactions to tablets rather than
the fixed register stations, so having an assistant manager with technological skills would
also be useful.
Amy calls her human resource representative, Mike, to get some assistance in analyzing
what her new assistant manager should be able to do. After performing a job analysis
and determining what the job requires, Amy sends a revised job description to her
regional manager along with a job requisition to get permission to hire a replacement.
After receiving hiring approval, Mike gives some thought to the qualifications and
competencies Amy listed for the position. He tries to figure out where people with those
qualifications might be so that he can find a way to let them know about the job
opportunity. Mike realizes that the company’s salary is competitive with the other stores
in the mall but not different enough to attract applicants. He thinks about the other
aspects of the job that could appeal to a talented potential recruit. The company has
good benefits, a good performance assessment and training program, and tries to
promote from within. Although he probably won’t be able to hire a very experienced
assistant manager in light of the salary he can offer, the opportunity should appeal to
someone with at least some experience—someone who would like to advance through
Soles’s managerial ranks.
Mike reviews the data about how the company has been most successful in hiring past
assistant managers. He then brainstorms with Amy about where they might find qualified
and interested people. He also decides to visit some of the other stores in the mall to
evaluate their employees and see if any of them might be suited for the job. While at the
stores, he pays particular attention to how the assistant managers there interact with
customers and evaluates the strength of their customer service skills. In addition, Mike
posts a job advertisement on the job board of a local college that offers a degree in
fashion design. The ad emphasizes that Soles is searching for someone with managerial
experience, fashion knowledge, technological skills, and excellent customer service
skills.
Within two weeks, Mike has recruited five promising mall employees to apply for the
position and received 15 applications from the college’s job board. He screens the
résumés for retail and managerial experience, and identifies three mall employees and
seven candidates from the college who appear to be promising candidates. He
immediately sets up phone meetings with all ten of them, and asks them each a series of
questions designed to assess their knowledge of retail management and their customer
service orientation. He then evaluates their answers and invites five of them to take a
written test that assesses their management skills and intellectual curiosity (which the
company has identified as being related to better customer interactions, service
performance, and continuous learning on the job). The five applicants who are not being
considered further are sent a letter thanking them for their interest in the position and
explaining that they are not being considered further.
During the testing phase, the five candidates are given instructions and asked to perform
several timed tasks using the Internet. Mike then shows them around the company’s
regional headquarters and answers their questions about the company and the job
opportunity. He schedules the three top scorers to meet with Amy at the store, and calls
the other two to let them know that they are no longer being considered for the position.
Amy goes online to the company’s hiring resource center and downloads a series of
questions the company has developed to assess the competencies needed for the job
and some questions the company uses to assess customer service skills. She completes
the brief online training refresher module on conducting and scoring the interviews, and
meets with the three candidates. She finds all three impressive but feels that Jose is
most qualified for the position. After passing a drug test and background check as well as
some additional screening, Jose accepts the job.
Before Jose works in the store, he reviews the company’s policies online and receives a
copy of the store’s policy manual. He is introduced to the assistant managers at several
other Soles locations, given their contact information, and encouraged to call them if he
has any questions about the job. Amy meets with Jose to review the company’s
performance expectations and answer any questions he has. She also schedules him to
work with her for a few shifts to help him quickly learn his new job.
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Mike contacts the other two finalists to let them know that although they did not get the
job, he feels that they would be very competitive for other assistant manager positions.
He then asks if they would be interested in being considered for other job opportunities
that come up in the next few months. Mike knows that the turnover of assistant managers
is typically 20 percent a year. Consequently, he expects the company to have three more
openings in nearby stores within a month or two. The two finalists say yes, giving Mike
two very strong candidates for his next openings.
Mike then ensures that the data on each of the job applicants is successfully entered into
Soles’s staffing evaluation database, including the recruiting source that produced them,
and whether they were hired or not. He knows that this will be useful for future recruiting
purposes.
Which company is likely to perform better as a result of its staffing process? Good strategic
staffing systems incorporate the following:
Longerterm planning
Alignment with the firm’s business strategy
Alignment with the other areas of human resources
Alignment with the labor market
Targeted recruiting
Sound candidate assessment on factors related to job success and longerterm potential
The evaluation of staffing outcomes against preidentified goals
Clearly, this better describes Soles’s staffing process.
Figure 11
A Flowchart of the Staffing Process
Both companies would say they engage in the staffing process as mapped in Figure 11 .
Both planned, decided where to advertise the job opening, recruited applicants, and selected
who should receive a job offer, but clearly they did so in very different ways. Mike’s decision
to seek out local college students was aligned with his need to hire people with fashion
knowledge and a willingness to learn, and who likely have retail experience. Getting back to
rejected applicants
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to let them know that they are no longer being considered helps keep them feeling positive
about the company so they will be willing to shop at Soles and apply for jobs with it again in
the future.
Figure 11
illustrates the general staffing process and identifies whether the applicant,
human resource department, or hiring manager is responsible for each stage. The staffing
process begins when a hiring manager determines there is a need for a position, which could
be due to turnover or the creation of a new job. If necessary, the human resource department
conducts a job analysis, and the hiring manager gets a job requisition approved that
authorizes him or her to fill the position. Human resource personnel then recruit appropriate
applicants and advertise the job opportunity. Applicants apply for the job, and the human
resource department screens them to identify those to consider further. By further assessing
the remaining candidates, the department screens out applicants who are a poor fit for the
job and identifies the finalists for the position. The hiring manager subsequently interviews
them and determines who should receive the job offer. The firm then makes a job offer
contingent upon the candidate passing any background check, drug test, or other tests. If
that candidate turns down the offer or fails to pass the assessment, another candidate
receives a contingent job offer until someone is hired. The organization begins socializing the
new employee to familiarize him or her with the job and the organization and to help the new
employee become productive as quickly as possible.
Companies also differ in how proactively they manage their existing workforce. Software
company SAS developed an employee retention program that crunches data on the skills,
profiles, studies, and friendships of employees who have quit in the past five years and then
finds current employees with similar patterns. Another SAS program identifies the workers
most likely to experience accidents.14
Our goal in this book is to help you understand how to design and better strategically
execute the staffing process in ways that will lead to higherquality staffing decisions and
enhanced organizational performance. We will not only describe the strategic staffing
process, but also discuss how to make it more effective in helping a firm meet its goals.
When we use the term staffing in this book we are referring to strategic staffing.
The Components of Strategic Staffing
There are seven staffing activities that, if done well strategically, create a staffing system that
supports business strategy and organizational performance. The seven activities are
planning, sourcing, recruiting, selecting, acquiring, deploying, and retaining talent. Table 1
1
summarizes how each of the seven is important strategically. We next discuss each of
these seven activities in more detail.
Table 11 Seven Components of Strategic Staffing
Workforce Planning
Workforce planning
is the process of predicting an organization’s future employment
needs and assessing its current employees and the labor market to meet those needs. This
means that the firm’s managers and HR personnel have to evaluate the company’s current
lines of business, new businesses it will be getting into, lines of business it will be leaving,
and the gaps that exist
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between the current skills of its workforce and the skills the workforce will need in the future.
For example, if a manufacturing business is planning to expand, then it will likely need to hire
more people in areas like sales and production. If the company is planning to automate
some of its production activities, then it will likely need fewer employees, but the employees
it already has may need new skills related to the new technologies.
Workforce Planning
the process of predicting an organization’s future employment needs and the
availability of current employees and external hires to meet those employment
needs and execute the organization’s business strategy
Workforce planning usually involves the joint efforts of both the hiring manager and a staffing
specialist. The staffing specialist looks at the organization’s forecasted business activities
and determines the number and types of people needed by the organization. The staffing
specialist then uses the organization’s business strategy to specify further the competencies
and talents the organization will need to execute its business strategy. To plan for expected
job openings, the staffing specialist assesses both the organization’s current employees and
the external labor market of potential new hires to gauge the availability of desired talent.
The specialist then secures the resources needed to engage in an appropriate staffing effort.
After working with the hiring manager to identify the talent profiles most appropriate for an
open position, the staffing specialist develops recruitment and selection strategies to obtain
the desired talent.
Without first identifying the competencies and behaviors the firm needs to execute its
business strategy, it is difficult, if not impossible, to develop effective recruiting, staffing, and
retention plans to meet those needs. Identifying and securing necessary resources,
delegating responsibilities, and creating a timeline are also important outcomes of the
planning stage. Planning activities can be shortterm and focus on an immediate hiring need,
or longterm and focus on the organization’s needs in the future. Workforce plans are more
strategic if they better address both the firm’s short and longterm needs. The plans can
also address how a firm will address demographic issues, such as an aging workforce and
diversity issues.
Sourcing and Recruiting Talent
Sourcing
is a component of recruiting that focuses on locating qualified individuals and
labor markets from which to recruit. For example, a sourcing specialist responsible for
identifying potential applicants for pharmaceutical sales representative positions may learn
that experienced nurses make excellent pharmaceutical salespeople because of their ability
to communicate with physicians, and persuade them to prescribe the firm’s drugs. The
sourcing specialist then identifies where nurses can be found and how best to reach them,
perhaps by placing recruiting advertisements in nursing publications.
Sourcing
locating qualified individuals and labor markets from which to recruit
Recruiting
refers to all organizational practices and decisions that affect either the
number or types of individuals willing to apply for and accept job offers.15 Recruiting is how
firms of all sizes generate a sufficiently large group of applicants from which to select
qualified individuals for available jobs.16 Sourcing focuses on identifying desirable people
and finding ways to reach them; recruiting converts these people into actual applicants.
Many organizations consider sourcing to require different skills than recruiting. Consequently,
they hire both sourcing specialists and recruiting specialists. Because people who don’t
apply can’t be hired, sourcing and recruiting are critical to an effective staffing effort.
Recruiting
all organizational practices and decisions that affect either the number or types
of individuals willing to apply for and accept job offers
Recruiting practices include evaluating which recruiting sources generate greater proportions
of highperforming employees who do well in their jobs17 and improve the firm’s
performance.18 A firm’s recruiters, their behavior, the messages they send, and the sources
from which they recruit affect whether people choose to become or remain applicants of the
firm and accept its job offers.19 The primary goal of recruiting is to get the right people
interested in working for an organization or in a specific job, persuade them to apply for it,
and then ultimately accept the job offer if it’s extended.
If recruiting is done poorly, few people will apply for a job with the company, and more of
those who do apply will drop out of the hiring process. In other words, organizations that
disrespect job candidates or who fail to meet their informationgathering needs during the
recruiting process will be less able to hire them. As a result, more of the company’s job offers
will be rejected, and the people who end up being hired might not be as committed to the job
or the company as they would if a better recruiting job had been done. Moreover, applicants
with a bad recruiting experience are likely to tell others about it, making it harder for the
organization to recruit people in the future.
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Because they are unlikely to apply for future jobs with the company, the company is likely to
lose the opportunity to hire unhappy current job applicants for future jobs as well.
Both organizations and individuals use a screening process when forming an employment
relationship. Applicants can select themselves out of consideration for a job at any time. It is
thus important that recruitment activities continue during the candidate assessment and
selection process to maintain candidates’ interest in the job and organization.
Another component of recruiting is employer branding, or creating a favorable image in
desired applicants’ minds about the organization being a good place for them to work.
For example, Royal Philips Electronics tells potential employees that the company gives
them an opportunity to work in an environment where “you can touch lives every day.”20
When potential applicants are considering whether to apply to a particular organization, they
evaluate factors including whether the organization is a place they would like to work.
Because most applicants do not know very much about what different organizations are like
as employers, many companies proactively craft employer brands for themselves through
marketing and advertising. For example, Federated Department Stores created an
employment brand and recruitment Web site called Retailology.com. Starbucks has
employed a “Program Manager for Employer Branding,” whose job it is to promote the coffee
chain as a great place to work.
Selecting Talent
The selection
process involves putting applicants through activities such as skills tests
and employment interviews to evaluate their capabilities and qualifications so that the
organization can choose whom to hire. The methods an organization uses to assess and
select job candidates will determine how well the firm’s new hires, and thus the company as
a whole, will perform.21
Selection
assessing job candidates and deciding whom to hire
Of course, the effectiveness of the selection process depends in part on recruitment. If a
recruiting effort generates 1,000 applicants but only a few of them are qualified, this bogs
down the selection process.
Targeted recruiting practices that prescreen applicants can result in fewer but higher quality
applicants than can general recruiting practices. For example, if a pharmaceutical sales
position requires a certain amount of medical knowledge that nurses with certain credentials
have, then the recruiting effort might prescreen applicants by locating nurses with the
required credentials. Prescreening saves the organization both time and money because it
does not have to sift through as many underqualified applicants during the selection process.
In contrast, if recruitment efforts fail to generate qualified applicants, then it is impossible for
any selection system to identify them. It is not surprising that the effectiveness of various
selection practices, such as interviews and skill testing, vary dramatically with a firm’s
recruitment practices.22 Historically, organizations have tried to maximize the quality of their
new hires by focusing on recruiting a large number of applicants, then relying on various
applicant assessment methods to identify the highest quality candidates. However, it is
important to note that there is no guarantee that the appropriate qualifications will be present
in any applicant pool, regardless of its size.
The goal of strategic recruiting, therefore, is to attract a greater percentage of applicants who
are likely to meet minimum hiring requirements and reduce the burden on the selection
system. It is also very possible that the hiring gains will come with a reduced administrative
burden and lower cost per hire, even if the initial cost of the recruiting system is higher.
When we examine staffing and retention from these perspectives, it is easy to see why many
companies make the search for the right talent their top priority. As a manager of one high
technology company stated, “The quality of our talent is as important as our technologies.
23
The quality of our talent is how we win in our business.”23 The same is true for most
nontechnologyoriented businesses as well.
Acquiring Talent
Acquiring talent involves putting together job offers that appeal to chosen candidates and
persuading job offer recipients to accept those job offers. Although many job offers are
presented on a takeitorleaveit basis, organizations sometimes negotiate job offer terms
with the candidates they want to hire. Job offers can include salary, health care, retirement
contributions, vacation time, relocation expenses, housing allowances, and other benefits.
The employment contract,
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or written offer to the candidate, then formalizes the outcome of the negotiations. In addition
to specifying the job’s compensation, such as salary, bonus, longterm accounting, and
stockbased compensation, the employment contract addresses other aspects of the
relationship between the employee and the firm—for example, retirement or severance
payments, procedures governing conflict resolution, and restrictions on the employee’s ability
to engage in other activities, such as doing similar work for other firms.
Although the terms of an employment contract help to align a new hire’s behavior with the
firm’s business strategy, many companies do not have comprehensive explicit (written)
employment agreements or they have an explicit agreement that covers only limited aspects
of their relationships. A case in point: in 2005, less than half of S&P 500 firms had an explicit
written employment contract with their CEOs.24 In lieu of an explicit agreement, these firms
and their CEOs rely on implicit contracts through which the CEO is employed “at will.” We
will discuss employment contracts in greater detail in Chapters 3
and 11 .
Deploying Talent
Deployment
involves assigning talent to appropriate jobs and roles in the organization.
The deployment of new talent and the redeployment of existing employees as needed are
both relevant to optimally leveraging an organization’s talent. For example, assigning a
technically capable programmer who dislikes interacting with people to a sales position
would be a talent deployment mistake.
Deployment
assigning talent to appropriate jobs and roles in the organization
Socialization is the process of familiarizing newly hired and promoted employees with their
jobs, work groups, and the organization as a whole. It is an important step in terms of getting
these people up to speed quickly.25 Some organizations simply give new hires a manual of
company policies and show them to their desks. Instead, it is critical to take the time to help
them form appropriate expectations about the company’s corporate culture, suggest ways for
them to adjust and perform well in their new jobs, provide them with the emotional support
they need to improve their satisfaction and job success, and increase their commitment to
the firm.26
Over time, firms can develop employees’ skills and capabilities, resulting in a broader set of
deployment options. Through succession management and career development, employees
can acquire new skills and be prepared to assume different and higherlevel positions in the
organization. Internal talent development sometimes enables faster transitions and higher
performance than does external hiring because existing employees are familiar with the
organization’s culture, customers, and how work gets done most efficiently (i.e., they
understand how the firm’s internal systems work and the strengths and weaknesses of
people in key positions).
Retaining Talent
Succession management and career development are also effective tools for retaining high
performing employees. It can be frustrating to locate and hire the right talent only to watch
these people leave after a short time. Turnover is expensive, especially when it is the best
performers who are leaving. Although the turnover of poor performers can be beneficial, the
departure of key employees can be devastating. Losing excellent employees to a competitor
is an even greater loss. Retaining successful employees also means that the organization
spends less time and fewer resources filling job vacancies in the future.
Matchmaking Process
Strategic staffing is a matchmaking process that involves much more than simply generating
applications for an open position. Recruiting and selection are interdependent, twoway
processes in which both employers and recruits try to look appealing to the other while
learning as much as they can about their potential fit. Although applicants choose
organizations as much as organizations choose applicants, too often organizations focus
exclusively on selection at the expense of effective recruitment. Because applicants can drop
out of the hiring process at any time, recruitment does not end when the employment
application is submitted. The applicant is no longer a recruit only when either side is no
longer interested in pursuing an employment relationship. Recruitment continues throughout
the selection and acquisition process until the
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person is no longer a viable job candidate, or until a job offer is accepted and the person
reports for work. Some firms even try to continuously “recruit” employees to maintain their
attractiveness as an employer and enhance retention.
The Goals of Strategic Staffing
Identifying Staffing Goals
Creating hiring goals that are clearly linked to organizational strategies and objectives guides
the strategic staffing process. Process goals relate to the hiring process itself, including how
many of what quality applicants apply, attracting appropriate numbers of diverse applicants,
and meeting hiring timeline goals, such as completing interviews within two weeks and
making job offers within one week of the final interview. Outcome goals apply to the product
of the hiring effort and include the number and quality of people hired, the financial return on
the staffing investment, and whether the staffing effort improved organizational effectiveness.
Table 12
presents a sampling of the many possible staffing goals.
Table 12 Examples of Staffing Goals27
Not all these goals will be relevant in every hiring situation. Different goals are likely to take
priority at different times. It is also common for staffing goals to conflict. For example, it can
be challenging to hire top performers who will stay with the organization for many years while
simultaneously filling jobs quickly and minimizing staffing costs.
Firms that do not staff strategically are often focused on goals such as the time it takes to fill
an opening, the number of hires a recruiter produces in a period of time, and the cost per
hire. Although these can be useful goals for improving the efficiency of the staffing process,
they are not necessarily aligned with improving the strategic performance of the staffing
system. For example, if executing the firm’s strategy requires hiring toptier talent, the
company’s recruiting goals should emphasize the quality of applicants versus hiring speed.
For some positions, hiring top talent that will stay with the organization for a long time might
be critical (perhaps if the positions are in management, longterm research and development
projects, or sales). There may be other positions for which average talent and moderate
turnover is acceptable.
The key objectives of the staffing effort28 can change over time and be different for different
positions, too. Because, over time, jobs change and different technologies emerge, the
people best able to do a job as it exists today may be less able to do the job in a few years.
And because different organizations pursue different business strategies, each
organization’s staffing goals are likely to be different as well. Furthermore, differences usually
exist in a single organization’s staffing goals across positions and over time because
positions change, and different positions require different talents.
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Each organization needs to identify what its staffing goals are for any position, recognizing
that its goals may change over time as the organization changes its strategy or faces
changes in its labor or product markets. These goals should be based on the priorities of the
organization as well as the needs of the hiring managers. Table 13
contains some key
questions managers and human resource personnel need to ask themselves before setting
strategic staffing goals.
Table 13 Questions to Ask When Setting Staffing Goals
Believe it or not, planning the “churn” of employees can also be an organizational goal. In
some cases, particularly when technology is changing rapidly, organizations prefer a steady
supply of new hires whose skills are as current as possible rather than continually retraining
their existing employees. If the skill sets of employees who have been with the company for
several years become inferior to those of new hires, planning for regular churn is a better
strategic choice. For example, a small software development firm that does not have a lot of
money to invest in training might plan to replace most of its programmers every two to four
years and offer twoyear contracts to its workers. Other organizations, like SAS, the world’s
largest privately held software company, value long employee tenure with the company and
prefer to invest in ongoing employee development. If building and maintaining customer
relationships is important, if unique organizational knowledge is critical for getting the firm’s
work done, or if the company plans to develop its future leaders from within, then a more
appropriate staffing goal may be a reduction in turnover.
The goals of the firm’s staffing effort should also be consistent with the goals of the firm’s
other stakeholders, including the individual hiring managers to whom new hires will report.
Each work group and supervisor differs with regard to the type of person wanted to fill a job.
Identifying these differences is important. One of the key roles of the recruiter is to partner
with hiring managers to assess their underlying needs in this regard. For example, if a firm’s
Web site development function is being outsourced, then hiring someone with Web site
development skills might not be what the hiring manager really needs—even if an employee
with these skills has left recently. As we have said, jobs change, and the talent mixes of work
groups change. Because hiring managers don’t always recognize changing talent needs or
know what they need in a new hire, they should see recruiters as partners in this process.
The ultimate goal for a staffing system is to hire people who can perform well, contribute to
the execution of the company’s business strategy, and increase profits. Doing so as quickly
as possible and experiencing a good return on the time and resources invested in the
staffing effort are also important. Staffing goals should be identified in the early stages of
staffing planning, and the staffing system should be evaluated to ensure that it is meeting
these goals. (Evaluating the staffing system is discussed in the next section.)
Many resources exist to help staffing professionals stay current and informed. This chapter’s
Develop Your Skills feature lists several Internet staffing resources.
Evaluating the Staffing System
Linking the goals of a staffing effort directly to the evaluation criteria the firm will use in
assessing the staffing system is key to its success. For example, if filling positions quickly is
an important goal, then the time it takes to fill each position should be tracked and evaluated
for each
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recruiting source. However, it should be recognized that filling positions quickly may require
the recruiter to make a tradeoff against the quality of the talent pool that will be quickly
accessible. If recruiting highquality applicants is an important goal, then the quality of
recruits from different recruiting sources should also be tracked and evaluated. Because a
firm’s staffing goals should be closely aligned with the organization’s business strategy, it is
important to evaluate the staffing system to be sure these goals are being met.
Integrating the Functional Areas of Human Resource Management
In addition to laying the foundation for a firm’s strategic execution, staffing impacts the
effectiveness of the other human resource management practices within the firm. Because
the various functional areas of human resource management (e.g., staffing, training,
performance management, and compensation) interact with each other,29 getting enough
people with the right qualifications and competencies to apply for jobs with the organization
in the first place will impact these functions. That is, the firm’s ability to train, motivate, and
retain its employees will be affected. Therefore, it is critical for all human resource functional
areas to be aligned with each other.30
When Robert Eckert became CEO of toy giant Mattel, he developed a staffing and workforce
management strategy that supported the company’s new strategic objectives of improving
productivity, globalizing and extending the firm’s brand name, and creating new brands. His
goal was to change Mattel’s culture to motivate employees to work together, give them more
discipline, and improve their skills as well as their internal mobility and retention. Eckert did
this by creating employee development programs that would generate a more skilled and
competitive workforce, establishing metrics to understand how the workforce was
performing, and developing a systematic succession strategy that would enable the
company to retain the valuable talent it developed.31 “The institutionalization of people
development is what I would love my legacy to be,” Eckert said, “so that nobody necessarily
remembers who I am, but that there is a people development machine that lives on
forever.”32 Today, Mattel’s staffing, performance measurement, and training programs
support each other and reinforce the firm’s corporate goals, too.
Develop Your Skills Internet Staffing Resources
The Equal Employment Opportunity Commission
(www.eeoc.gov)—provides information about the laws enforced by the EEOC and
compliance guidance
Electronic Recruiting Exchange
(www.ere.net)—has information and articles related to recruiting and employer branding
Human Resource Planning Society
(http://hrps.org)—provides information, publications, and resources on staffing and
talent management
O*Net Center
(http://online.onetcenter.org)—a government site that provides labor and occupational
market information useful for doing a job analysis
Corporate Executive Board’s Recruiting Leadership Council
(www.recruitingroundtable.com)—provides information, best practices, tools, metrics,
and networking for recruiting executives
Society for Human Resource Management
(www.shrm.org)—provides articles and other resources on staffing including Staffing
Management magazine articles
Staffing.org
(www.staffing.org)—has information and resources about staffing processes, practices,
tools, and metrics
Workforce Management
(http://workforce.com)—contains articles and resources on staffing and legal issues
pertaining to staffing
World at Work
(www.worldatwork.org)—a notforprofit professional association focusing on attracting,
motivating, and retaining employees
If even a single functional area reinforces goals that are different from the other functional
areas, executing the company’s strategy will be much more difficult. Let’s now look at the
other HR functions and how they are affected by the firm’s staffing system.
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Training
Strategic staffing ensures that new hires are ready and able to benefit from the
organization’s training and development programs. Training is often expensive; therefore,
one of the first things to consider in terms of developing a staffing strategy is to decide
whether new hires should already possess certain competencies at the time they are hired or
whether the firm will help them develop those competencies via training. If the staffing
function fails to hire candidates with appropriate qualifications, training them may be an
organization’s only option. Even if the firm chooses to train its new hires, they need to
possess at least the minimum qualifications and motivation needed to succeed in the training
or the effort is likely to be futile.33 It is also important to identify how long employees tend to
stay with the company. Training might not be the right choice if employees tend to leave the
organization before it recoups the cost of training them. For example, some retailers have
turnover rates approaching 200 percent. If a retailer wants to invest significant time and
resources training its employees, it should focus on identifying and hiring employees who are
likely to remain with the organization to recoup its training investment.
Compensation
The level of pay an organization is willing and able to invest in salaries can both determine
and be determined by its ability to hire people with the necessary qualifications. If an
organization is willing to pay premium wages, its staffing effort can focus on identifying and
attracting the most qualified candidates. If an organization would like to pay lower wages, but
is unable to hire the candidates it would like at its preferred salary levels, then it may be
forced to raise its salaries to be competitive in the labor market or to make investments in
training and development. When the labor supply is tight, the firm might need to increase its
salaries just to be able to hire candidates with minimum skill levels and qualifications. For
example, professors in engineering and business are able to command higher wages in
today’s market because there is a shortage of people with the qualifications they have. If
higher pay is not an option, recruiting from nontraditional sources might allow the
organization to overcome its compensation challenges. For example, Grocery chain
ShopRite has hired hundreds of welfare recipients who went through a 16week program to
acquire the skills required for different jobs in its stores.34 If hiring from nontraditional labor
pools is unsuccessful, automating the job, increasing the training the organization provides
its employees, or reducing the required qualifications of new hires may be the only
alternatives.
The success of incentive pay programs can also be influenced by hiring outcomes. An
organization that wishes to motivate its employees to be more productive by using a payfor
performance or merit pay system will not be able to fully leverage its programs if the skills of
the workforce are lacking. Performance incentives are only effective if the individuals have
the potential to perform well in the first place. Ensuring that new hires have the potential to
succeed is one of the primary goals of staffing.
Consider an organization that has developed a comprehensive merit pay compensation
system. The organization pays employees an abovemarket base salary, plus up to a 20
percent bonus if they meet or exceed their performance goals. But suppose the labor market
is tight, so the organization hires several new employees who do not have the skills or
experience to perform at the expected levels. In this case, their performance levels will not
be consistent with their abovemarket base compensation. They also will earn no bonuses,
which will tend to cause them to further underperform. To avoid this situation, organizations
need to assess the availability of their soughtafter competencies in the labor market and use
recruitment and effective selection practices to ensure that new hires have the requisite
skills, background, and motivation so the firm’s compensation system works as it’s intended.
It should be noted, too, that paying top dollar to hire the highest quality candidates is not
always the best strategy if the company doesn’t really need top talent or if the performance
difference between average and star performers in a job is not that great. In other words,
sometimes the greater productivity of the most talented applicants is not enough to offset
their higher salaries. For example, does every employee in a research unit really need a
PhD?
Performance Management
Performance management involves setting goals, appraising and evaluating past and current
performance, and providing suggestions for improvement. Without this information,
employees will be unable to adjust their behavior. Staffing influences the effectiveness of a
performance
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management system by providing the raw talent that the system will manage. Even the best
performance management system cannot replace important capabilities that employees
must have to do their jobs well.
Conversely, performance management systems affect a staffing system’s effectiveness.
Without performance goals, employees will not know what aspects of their jobs to focus on
nor the performance levels expected of them. As a result, they will tend to underperform, and
some will quit or need to be replaced, potentially bogging down the staffing system. Even if
highly talented employees are hired, they won’t perform at their best if they get no or
inaccurate performance feedback. If they perceive that the feedback they’ve been given
about their performance is unfair, they will not be motivated to contribute as much as they
could.
Career Development and Succession Management
The future success of any organization depends on its next generation of leaders. An
organization is likely to flounder and perhaps even go out of business if it is lacking qualified
successors to manage the business after the inevitable departure of its current leaders.
When Yahoo!’s chief technology officer Farzad Nazem announced that he was leaving the
company, there was immediate investor concern that the company might not be able to
retain key talent.35 A. G. Lafley was asked to come out of retirement to resume his position
as CEO at P&G when his replacement unexpectedly retired without a successor.36
Succession management and career development activities can help to ensure that an
organization has people ready to assume leadership positions when they become available.
Staffing practices can influence and be influenced by an organization’s career development
activities and the career advancement opportunities that exist in the company. An
organization unable to offer employees opportunities for challenging work and career
advancement is likely to have a low job offer acceptance rate. In addition, highpotential new
hires who do actually go to work for the company are likely to quit sooner as a result of their
being overqualified and underchallenged. This might prompt staffing personnel to recruit less
qualified individuals who are less likely to quit but who may also be lower performers.
Obviously, this is an even larger problem if the people being hired for current jobs are
intended to be the employees upon whom the firm focuses its succession efforts. So, if the
firm’s current hiring efforts fail to produce employees with the potential for promotion, the
organization’s future leadership capabilities are likely to be compromised. Thus,
organizations that rely on internal recruiting and promoting as part of their succession plans
need to consider the longterm potential of candidates they hire from outside of the firm as
well as their ability to perform the jobs they’re currently applying for.
The Organization of This Book
This book is broken into four sections. Section 1, “The Staffing Context,” contains Chapters
1
through 4 . In Chapter 2 , “Business and Staffing Strategies,” we discuss how the
organization’s business strategy and competitive advantage influence the organization’s
human resource strategy and staffing strategy. We next discuss how to design a firm’s
staffing strategy to reinforce its business strategy. Chapter 3 , “The Legal Context,”
describes the legal environment in which staffing must operate. Laws and regulations play an
important role in determining how an organization recruits, hires, promotes, and terminates
employees. Barriers to legally defensible recruiting and hiring are also discussed. Chapter
4 , “Strategic Job Analysis and Competency Modeling,” covers job analysis, job rewards
analysis, and competency modeling. To identify the best person to hire, the job and its role in
the execution of the business strategy must first be understood.
Section 2, “Planning, Sourcing, and Recruiting,” explains how job applicants are identified,
attracted, and recruited. Planning is the first step in the strategic staffing process. It involves
estimating the numbers and types of employees the company will need based on its strategy,
what the hiring timeline is, and what the firm’s staffing budget will allow. Because people who
never apply for a position cannot become employees, sourcing and recruiting qualified and
interested applicants are the next critical steps in the strategic staffing process. Chapter
5 , “Forecasting and Planning,” describes how organizations translate business forecasts
into future labor demand estimates. Labor supply forecasts are then compared with labor
demand estimates to identify
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where the organization needs to focus attention to ensure it has the right talent in the right
place at the right time. Techniques for forecasting labor supply and demand are presented in
this chapter. We also discuss issues regarding the planning of a recruiting and hiring
initiative. Chapter 6 , “Sourcing: Identifying Recruits,” discusses applicant sourcing, or the
identification and targeting of recruits. Chapter 7 , “Recruiting,” focuses on getting the
people identified through sourcing to apply to the organization and accept job offers if
extended.
Section 3, “Selecting,” covers the assessment of job candidates and the evaluation of their fit
with the job and organization. Chapter 8 , “Measurement,” describes some of the issues
regarding candidate assessment. We also present basic staffingrelated statistical concepts
in an easytounderstand way. Chapter 9 , “Assessing External Candidates,” discusses
methods of assessing the qualifications of people who do not currently work for the company.
Chapter 10 , “Assessing Internal Candidates,” covers the methods used to assess the
qualifications of current employees being considered for other positions in the firm, including
career planning and performance appraisal.
Strategic staffing involves the movement of employees into and through an organization.
Section 4, “Managing the Staffing System,” covers choosing whom to hire, negotiating the
employment contract, and socializing new employees. Chapter 11 , “Choosing and Hiring
Candidates,” describes the process of deciding which job candidate(s) should receive job
offers and subsequently negotiating those offers. Persuading joboffer recipients to join the
company and negotiating hiring agreements with them is an important part of talent
acquisition. If the right people apply to an organization but ultimately turn down job offers, the
staffing effort cannot be considered effective. Chapter 12 , “Managing Workforce Flow,”
covers socializing new hires, different causes and types of turnover, and methods of
retaining valued talent. It also discusses terminations, downsizings, and layoffs. In Chapter
13 , “Staffing System Evaluation and Technology,” we describe the ways in which many
organizations are leveraging technology to enhance their staffing systems, the importance of
evaluating a staffing system’s effectiveness, the staffing system evaluation process, and
specific staffing system metrics.
Improving Store Performance at Caribou Coffee37
Caribou Coffee wanted to know what accounted for the differences in average store
performance for its district managers. It assumed that customer service had a lot to do
with it, but wanted to objectively evaluate what its best performing district managers did
so that it would know for sure and could use this information to improve the future staffing
of its district manager positions.
Caribou discovered that its district managers’ skills did vary. Some were really customer
focused, as it expected. But the sales figures of those stores were not always the best.
Caribou discovered that the most important district manager competency was his or her
ability to effectively staff the store manager position. When a district manager took the
time to find the best replacement for a store manager instead of automatically promoting
the shift supervisor with the most tenure, the results had a strong impact on revenue.
Caribou’s ability to show its district managers concrete evidence that hiring the right store
managers positively impacts sales has been critical in focusing district managers on the
careful staffing of its store manager positions. Not only have sales increased in the
previously underperforming stores, the district managers appreciated the information and
assistance as well in improving their own performance.
Summary
Strategic staffing is a complex process of planning, acquiring, deploying, and retaining talent
that enables the organization to meet its hiring objectives and to execute its business
strategy. This process supports the movement of talent into, through, and out of the
organization in a way that enables the organization to compete successfully in its
marketplace. Because an organization’s people are central to its development of a
competitive advantage and the execution of its business strategy, strategic recruitment and
staffing activities are a cornerstone of organizational effectiveness.
A strategic staffing effort focuses on first understanding the organization’s mission and
objectives as well as its business
Chern’s Company History and Organization
Siblings Ryan and Ann Chern founded Chern’s, an upscale men’s and women’s department
store, 20 years ago after they graduated with their MBAs. The pair had planned to launch
their own company for years, and refined their business model after each spent a great deal
of time learning about the retail industry by working in different retail organizations. The
product mix and highquality products Chern’s sells made it rapidly successful, and the
company developed a loyal following. The firm quickly expanded its product line and began
opening additional locations 15 years ago. Ryan and Ann have turned their basic idea of
providing customers with the best service, selection, quality, and value into a thriving
business. The two are now copresidents of Chern’s: Ryan serves as the company’s chief
executive officer; Ann serves as the company’s chief operating officer.
Chern’s pursues an aggressive growth strategy. Currently the company has 140 stores in 28
states on the East Coast and in the Midwest. Chern’s employs an average of 19,000 full and
parttime employees. Providing superior customer service has been the company’s main
business strategy and has successfully differentiated it from its competitors. Although the
company’s products are expensive, the high product quality and excellent customer service
have made the company successful. Because customers’ tastes can differ from one store to
the next, the company tries to be as decentralized as possible. Therefore, it gives its store
managers a considerable amount of discretion in terms of how they run their stores.
Likewise, each manager runs his or her own department as a small business and is
rewarded according to the department’s and the store’s overall success.
Because customer service lies at the heart of the company’s business strategy, it is a core
part of the corporate culture of Chern’s. Ann and Ryan believe that customer service is the
essence of selling and that because the firm’s sales associates are in direct contact with
customers, they are the core drivers of the company’s performance. Both department
managers and assistant department managers support the sales associates. Besides giving
the sales staff their full support, the department managers at Chern’s are, in turn, supported
by their store managers, assistant department managers, buyers, and merchandising
managers. Figure A1
illustrates these relationships.
Figure A1 The Sales Support Relationships among Chern’s Staff Members
Core values are an essential part of the Chern’s brand and are the foundation of its culture.
The company’s family ownership contributes to its desire to make every employee and
customer feel valued and cared for. The firm is known for its strong and unique culture,
which it feels is due to its belief that the best approach to business is to hire good people. As
such, Chern’s tries to identify and select the right people, train them, and give them the tools
and autonomy they need to succeed. Successful employees are rewarded with above
market base salaries and generous bonuses.
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The management philosophy at Chern’s is based on empowerment. Chern’s believes that by
hiring well it can trust its employees to use their own judgment. Consequently, the firm gives
them a considerable amount of freedom in terms of how they do their jobs. By striving to
create a fair and positive environment and giving each employee the tools and autonomy he
or she needs to succeed, the company feels it has created an environment in which its sales
associates can truly excel. In fact, last year, 42 Chern’s sales associates sold at least
$1,000,000 in merchandise—a company record.
Because Chern’s has a strong reputation for customer service, quality, and selection, it
enjoys very positive brand recognition among its targeted customers. It is consistently
named one of the top three retailers in regional customer surveys and has been listed
among Fortune magazine’s top 100 best companies to work for. Last year the company
ranked number 72 on Fortune’s list, down from 44 the previous year. It was the second
highest retailer on the list, behind Nordstrom’s. It also ranked as having the best customer
service among retailers for the past three years in customer surveys developed by the
National Retail Federation.
In addition to focusing on customer service, selection, quality, and value, Chern’s has
invested heavily in informationtechnology tools to improve its inventory management and
help its sales associates make efficient transactions with customers. The company recently
implemented a Perpetual Inventory System to help its buyers react more quickly to the
feedback given to them by its sales associates and to track inventory to quickly adjust each
store’s product mix and clothing sizes available. The technology has helped the company
increase its efficiency and lower its costs as well as add value for its customers.
Chern’s Financial Performance
Chern’s has enjoyed a strong financial performance over the last few years. Over the past
five years, the company’s share price has increased 134 percent and the company’s
revenues have grown at an annualized rate of 9 percent. Revenues and net income have
grown as all of the firm’s stores have reported sales increases every year over the past three
years. Growing revenues and income have provided the company with the financial base
and stability it needs for further expansion. The fiveyear growth strategy at Chern’s is to
open 15 new stores a year and to continue to grow at an annual rate of 9 percent. Figure A
2
shows the company’s revenue, gross profit, and net income trends for the last three
years.
Figure A2 ThreeYear Revenue, Gross Profit, and Net Income Trends for Chern’s
The company’s good financial performance has translated into strong operating cash flow,
giving it the option of reinvesting in its business, buying back shares, or passing some of its
earnings to investors in the form of dividends. Figure A3
shows the operating cash flow
trend at Chern’s over the past three years.
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Chern’s has funded its expansion using its earnings rather than by taking on debt. The
company believes that its conservative debt policies and strong cash flow help create
shareholder value by enabling it to expand into new markets.
Figure A3 ThreeYear Cash Flow Trend for Chern’s
Chern’s Human Resources
Chern’s averages 1 store manager, 8 department managers, 8 assistant department
managers, and approximately 100 fulltime and 25 parttime sales associates per store. Full
time employees receive a generous benefits package, two weeks paid vacation, and are
eligible for bonuses. Parttime employees are considered members of the core workforce
and receive prorated benefits and bonuses. Because it feels that they would not reinforce its
culture, Chern’s does not currently utilize temporary or contingent workers of any kind.
Turnover among its fulltime sales associates has been relatively stable, averaging 20
percent over the past three years. Turnover among the company’s parttime sales associates
has also been relatively low compared to similar retail operations, averaging 15 percent over
the past three years. The parttime sales associates are used to increase the number of
sales associates on the floor during peak periods.
The human resources department at Chern’s generally does a good job supporting the
company’s business strategy. The company’s compensation, performance management, and
training are all designed to get sales associates up to speed and selling quickly. The base
pay they earn is 20 percent above the market average, and Chern’s matches in their 401(k)
plans up to 10 percent of their base pay. Twenty percent of a sales associate’s bonus is tied
to the person’s customer service performance as rated by his or her department manager, 40
percent is based on individual sales performance in relation to that person’s sales target, and
40 percent is based on overall store sales. New employees have a reduced sales target for
their first year. Sales associates can earn up to 150 percent of their base pay in bonuses
based on both sales and customer satisfaction ratings. Top performers at Chern’s earn well
above the market average in pay.
Semiannual performance evaluations assess sales associates’ initiative, customer service
behaviors, coworker support behaviors, and leadership. Raises to an associate’s base salary
include a costofliving adjustment based on inflation, and from 0 to 10 percent based on the
department manager’s perception of the sales associate’s performance, adherence to
company values, and leadership contributions. Sales associates are also given 10 personal
days, including sick days, and generous health and dental benefits. If a sales associate
refers a candidate to Chern’s, and the person is hired, the company gives the employee a
$1,000 referral bonus after the new hire passes the sixmonth mark with strong performance.
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Chern’s largely focuses its training and development activities on its new hires. New hires
undergo a twoday orientation. Each then receives onthejob training from his or her
department manager and shadows another sales associate for one week. Employees
receive additional training only if they fail to reach their sales quotas two months in a row.
Sales associates who fail to reach their quotas four months in a row are given a warning.
Those who fail to meet their quotas five months in a row are terminated.
Sales associates can use the store’s technology to identify how they are performing relative
to their quotas. Chern’s expects its employees to be relatively “tech savvy” and be willing and
able to quickly learn its systems. Customer information, including information about their
previous purchases and fashion preferences, is stored in the company’s computer for fast
retrieval. Chern’s also uses technology to give its buyers feedback about its customers’
preferences and purchasing trends. The company’s sales associates are also required to
record information about customers’ inquiries and unfilled requests for particular types of
clothing. This is critical because it helps each department better track its inventory and
quickly adjust its product mix and sizes to meet the changing demands of its customers.
Sales associates can also use the store’s computers to check inventory at other Chern’s
locations to better assist clients in locating desired products.
The Competition Chern’s Faces
Chern’s primary competitors include Nordstrom, Dillard’s, Barney’s, Nieman Marcus, and
Saks Fifth Avenue. Table A1
shows the previous and current year’s sales, net income,
and employee headcount for Chern’s relative to its competitors.
Table A1 OneYear Performance of Chern’s Relative to Its Competitors
At Chern’s, sales associates execute the company’s customer service strategy by building
longterm relationships with their clientele. Sales associates feel empowered, and their
business freedom is strongly supported by the corporation as long as the employees work
hard and do their best. Chern’s tries to hire sales associates with an entrepreneurial spirit, a
drive to be successful, and a desire to make money. The sales force’s accountability for
results and Chern’s high expectations of them means that Chern’s wants to hire only elite
sales associates.
Table 1-2 Examples of Staffing Goals
Process Goals
•
Attracting sufficient numbers of appropriately qualified applicants
•
Complying with the law and any organizational hiring policies
•
Fulfilling any affirmative action obligations
•
Meeting hiring timeline goals
•
Staffing efficiently
Outcome Goals
•
Hiring individuals who succeed in their jobs
•
Hiring individuals who will eventually be promoted
•
Reducing turnover rates among high performers
•
Hiring individuals for whom the other human resource functions will have the desired impact (e.g., who will benefit
from training, and who will be motivated by the firm’s compensation package)
•
Meeting stakeholder needs
•
Maximizing the financial return on the organization’s staffing investment
•
Enhancing the diversity of the organization
•
Enabling organizational flexibility
•
Enhancing the business’s strategy execution
Table 1-3 Questions to Ask When Setting Staffing Goals
•
Is it more important to fill the position quickly or fill it with someone who closely matches a particular talent profile?
•
What levels of which competencies, styles, values, and traits are really needed for job success and to execute the
business strategy?
•
What is the business’s strategy and what types of people will it need 1, 5, and 10 years from now?
•
What talents must new hires possess rather than be trained to develop?
•
What are the organization’s long-term talent needs? Is it important for the person hired to have the potential to assume
leadership roles in the future?
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