HRM IN RETAILING

It is really interesting that in Retail scenario Human Resource Management (HRM) is highly volatile and truly vulnerable. The reason is in any other scenario of manufacturing (of garments for e.g.,) or other industries the end user or consumer in particular and customer in general are not physically present with the people in the arena of action. In fact who are they or where are or how are they is not known to the people in the scenario.

Whereas in the Retail scenario the end user or consumer in particular & customer in general are present in front or with the people in the arena of action every minute of the work. In fact work in Retail scenario starts with and ends with the End user or Consumer or Customer. For this reason Human Resource Management (HRM) is highly volatile and truly vulnerable in this context.

The Retail Firms/Companies are service Organizations. The business performance of the Organization largely depends upon the human resources. Employee’s performance at the back end and at the front end operations are criteria for the success of the Organizations. Human Resource Management (HRM) therefore is the critical managerial function that affects every other function of the Organization.

The job of retail employees particularly at from end operations is critical and demand high level of involvement and commitment in job performance. They need to perform different roles while performing the job often simultaneously. The employee roles include:

• Service designer: The final package of the retail service will be decided by the employee on spot after assessing customer’s specific needs, desires and expectations. This means proper training of the retail personnel is required in need analysis of the customer.

• Performer: An employee of a Retail Organization is the performer of services. He/ She has to interact with uncontrollable elements (attending consumer complaints and grievances) and deliver quality performance, by influencing the customers to get involved in the process.

• Technician: The sales personnel should have the technical knowledge of various products offered for sale. In most cases in Retail, the manufacturers themselves take responsibility on the product training or in large multi-brand retail stores, the Companies appoint their own trained technical salesman.

• Associate: Employees of the Retail Organization and manufacturers, service consumers together. The expected role of an employee is to associate with the consumer and produce quality service. Further, some services may need group involvement. For example selling of Microwave, where the salesman makes effort to sell the best product, a trained technician will go to the customer’s home to offer a full demonstration of the products capability and application. Then it may be necessary for a service employee to associate with the group members for performing the service.

• Friend: A Retail employee has to play the role of a friend with consumers as well as co-employees in a team. Co-employees and customers look for help, cooperation, guidance and support from others on various issues. Every employee of the Retail Organization should respond to such needs positively.

• Empathizer: Empathy is the key quality parameter in retail services. The consumers feel comfortable and perceive better quality when contact employees are empathetic. Retail employees should have the patience and inclination to be empathetic towards customers.

• Assurer: Retail employees’ words and actions should reflect assurance to customers. As services are intangible, variable and perishable, customers seek assurance in every service process. For the consumer, contact employees are the representatives of the Retail Company. This is why a contact employee needs to perform the role of an assurer.

• Salesman: The performance of a retail employee builds a positive image for the Retail Company. The customers of the Store are likely to become consumers of other services offered by the Company. Contact employees will have an opportunity to interact closely and intimately with customers. Therefore, their role in influencing and persuading the customers to buy other services of the Company is vital.

• Marketing intelligence: One of the most prominent sources of marketing intelligence is contact employees. They are the right personnel to assess response of the customers on Company policies and quality specifications. The feedback from contact employees proves to be very valuable.

• Researcher: Innovation is the key to success in service business particularly in retailing. Employees of the retail companies are innovators in many respects. As an innovation they should be able to create a need or necessity in the end user or Consumer.

As variability is the key character of services, continuous improvements, whether minor or major, provide a competitive edge in the market. Employees, with their continuous involvement in work and interactive experience with varied customers, with a distinctive knowledge base, are capable of bringing innovation in work. There is a lot of scope to exploit the creativity of employees in retail business.

The performance in retail jobs also tests the emotional balance of the employees. The tolerance for errors in performance will be very less. The errors of the employee affect seriously the customer confidence on the retail outlet. Therefore, the function of human resources management is vital in displaying the performance strength of the Organization.

Introduction - HRM

Human Resource is the most complex and vulnerable among all the resources under the creation of nature. We can get best material, best machinery, and best method in the world but it is very difficult to get best Human Resource to run or use the other resources in an efficient and effective way. In this context of day to day complication, it becomes all the more important to manage the Human Resources. Human Resources have one unique feature; it is the only resource among all which appreciate with time if sufficient care is taken to impart skill and knowledge. Human Resources become an asset in the long run. It gives life to the structure and system of an Organization. In this unit, you will learn the definition, core elements and objectives of HRM, HRM in Retailing and HRM activities. You will further learn the roles of HR Manager and challenges of HRM in modern management.

HUMAN RESOURCE MANAGEMENT

HRM refers to people management in such a way that they are committed, integrated and contributing to the objectives of the Organization. It also makes sure that they stay with the Organization for fairly a long time (low attrition rate) though not wedded to the Organization. Let us see the process of defining HRM that leads us to two different definitions. The first definition of HRM is that it is the process of managing people in Organizations in a structured and thorough manner. This covers the fields of staffing (hiring people), retention of people, pay and perks setting and management, performance management, change management and taking care of exits from the Company to round off the activities. This is the traditional definition of HRM which leads some experts to define it as a modern version of the Personnel Management function.

The second definition of HRM encompasses the management of people in Organizations from a macro perspective i.e. managing people in the form of a collective relationship between management and employees. This approach focuses on the objectives and outcomes of the HRM function. What this means is that the HR function in contemporary Organizations is concerned with the notions of people enabling, people development and a focus on making the “employment relationship” fulfilling for both the management and employees. Changes are happening at a faster pace rather exponentially in the business influencing the environment within the Organization. The human resources of an Organization should be capable of adopting and/or adapting to the changes quickly. This necessitates the Organizations to ensure that they have the right people capable of facing the business challenges effectively.

Management of these resources therefore is an integral part of business success. The efficient and effective management of human resources results in;

● High productivity - increased profits – growth - increased market value

● Enhanced company image - customer satisfaction

● Healthy organizational climate and culture - effective communication

● Competitiveness and development orientation

Objectives of HRM

HRM objectives can be broadly categorized into four types as presented below.

• Organizational Objectives: The primary objective of HRM is to build the Organization with quality and committed human resource and ensure the achievement of Organizational objectives. In retail individual performances are very critical to the Store environment.

• Functional Objectives: HRM should ensure that the right person is assigned to the right job at the right time. It should facilitate quality performance by way of providing appropriate human resource policy framework. In retail proper induction programme ensures this objective.

• Personal Objectives: HRM aims to assist employees in achieving their personal goals because these goals enhance the individual’s contribution towards the achievement of Organizational goals through proper training and product knowledge. This is necessary to maintain, retain and motivate the employees in the Organization which will ultimately enhance employee performance and satisfaction.

• Societal Objectives: Organizations need to be ethically and socially responsible to the needs and challenges of the society. The HRM of an Organization should work for satisfying such societal objectives while minimizing the negative impact of such measures upon the Organization.

Elements of HRM

It is necessary to identify the core elements of HRM in order to understand the activities of HRM clearly. The five core elements are:

• People: Organizations mean people who staff and manage Organizations. Organizational performances depend upon the performance of people in the Organization. Specific to retail the people management are more complicated in view of long hours of working ( Though effectively its is 8 Hours, In retail people are expected to be in the store for 10 to 11 hours with 2.5 hours of breaks in between).

• Management: HRM involves application of management functions and principles for acquisitioning, developing, maintaining and remunerating employees in Organizations.

• Integration and Consistency: Decisions related to people must be integrated and consistent, in order to achieve Organizational effectiveness in the long run.

• Influence: Decisions must influence the effectiveness of Organization in providing quality products and services to customers and in achieving Organizational goals.

• Applicability: HRM principles are applicable to business as well as non business Organizations like education, health, recreation, etc.

WHAT IS TREND ANALYSIS?

Trend analysis is employed when it is required to analyze the trend of data shown in a series of financial statements of several successive years. The trend obtained by such an analysis is expressed as percentages. Trend percentage analysis moves in one direction either upward or downward progression or regression. This method involves the calculation of percentage relationship that each statement bears to the same item in the base year. The base year may be any one of the periods involved in the analysis but the earliest period is mostly taken as the base year. The trend percentage statement is an “analytical device for condensing the absolute rupee data” by comparative statements.

Merits of Trend Analysis:

• Trend percentages indicate the increase or decrease in an accounted item along with the magnitude of change in percentage, which is more effective than the absolute data.
• The trend percentages facilitate an efficient comparative study of the financial performance of a business enterprise over a period of time.

Demerits of Trend Analysis:

• Any one trend by itself is not very analytical and informative.
• If interpretation has to be done on percentages and ratios in isolation and not along with the absolute data from which the percentages have been derived, the inferences tend to be absurd and baseless.
• Comparability of trend percentages is unfavorably affected when the accounts have not been drawn on a consistent basis year after year and when the price level is not constant.
• During inflationary periods the data over a period of time becomes incomparable unless the absolute rupeee data is adjusted.
• There is always the danger of selecting the base year which may not be representative, normal and typical.
• Though the trend percentages provide significant information, undue importance and emphasis should not be laid down on the percentages when there is a small number in the base year. In such cases even a slight variation will be magnified by the percentage change.

Uses of Trend Analysis

• It indicates the increase or decrease in an accounted item along with the magnitude of change in percentage, which is more effective than absolute data.
• The trend percentage facilitates an effective comparative study of the financial performance of a business enterprise over a period of time

WHAT IS PREFERENCE SHARE CAPITAL?

Preference capital represents a hybrid form of financing – it takes some characteristics of equity and some attributes of debentures.

It resembles equity in the following ways:

1. (i)      Preference dividend is payable only out of distributed profits
2. (ii)  Preference dividend is not an obligatory payment (the payment of preference dividend is entirely within the discretion of the directors)

Preference capital is similar to debentures in several ways:

(i)          The dividend rate of preference capital is usually fixed

(ii)        The claim of preference shareholders is prior to the claim of equity shareholders

(iii)      Preference shareholders do not normally enjoy the right to vote

ADVANTAGE AND DISADVANTAGE OF PREFERENCE CAPITAL

Preference Capital has the following Advantages:

1) There is no legal obligation to pay preference dividend. A company does not face bankruptcy or legal action if it skips preference dividend.

2) There is no redemption liability in the case of perpetual preference shares. Even in the case of redeemable preference shares, financial distress may not be much because:

(i)                 Periodic sinking fund payments are not required

(ii)               Redemption can be delayed without significant penalties

3) Preference capital is generally regarded as part of net worth. Hence, it enhances the creditworthiness of the firm.

4) Preference shares do not, under normal circumstances, carry voting right. Hence, there is no dilution of control.

Preference Capital, however suffers from some serious shortcomings:

1) Compared to debt capital, it is an expensive source of financing because the dividend paid to preference shareholders is not, unlike debt interest, a tax-deductible expense.

2) Though there is no legal obligation to pay preference dividends, skipping them can adversely affect the image of the firm in the capital market.

3) Compared to equity shareholders, preference shareholders have a prior claim on the assets and earnings of the firm.

WHAT IS OPERATING CYCLE FOR WORKING CAPITAL?

The operating cycle is the length of time between the company’s outlay on raw materials, wages and other expenditures and the inflow of cash from the sale of the goods. In a manufacturing business, operating cycle is the average time that raw materials remain in stock less the period of credit taken from suppliers, plus the time taken for producing the goods, plus the time goods remain in finished inventory, plus the time taken by customers to pay for the goods.

Operating cycle concept is important for management of cash and management of working capital because the longer the operating cycle the more financial resources the company needs. Therefore, the management has to remain cautious that the operating cycle should not become too long. The stages of operating cycle could be depicted through the figure given:

The above figure would reveal that operating cycle is the time that elapses between the cash outlay and the cash realization by the sale of finished goods and realization of sundry debtors. Thus cash used in productive activity, often some times comes back from the operating cycle of the activity. The length of operating cycle of an enterprise is the sum of these four individual stages i.e. components of time.