Employee Input Increased Sales in Retail Chain

Determining which human resource management (HRM) policies improve company performance can be difficult due to measurement problems. Much of the research has involved broad surveys of various companies. This makes applying the results questionable, according to economists Derek Jones of Hamilton College (U.S.A.), Panu Kalmi of the Helsinki School of Economics (Finland), and Antti Kauhanen of the Helsinki Center of Economic Research. Only crude measures of performance are possible, and these are subject to bias from respondents who want to look good even when anonymous. Companies may value different factors of productivity. Within large firms, the use of specific HRM practices can vary widely between subunits—having a policy in place does not mean it is followed.

To overcome these problems, the economists performed a study within one large retail company in Finland. Individual stores were fairly similar in size and sold mostly the same products. Basic manager and employee tasks were consistent as well. The company gave the researchers access to sales data, providing objective performance measures. By surveying employees about the HRM policies, the researchers could better gauge how different policies were practiced at the store level. By measuring three times over two years, they could more safely state that certain factors caused better performance, instead of merely being correlated to it.

Two of the HRM practices had significant effects on net sales. One was opportunity for input, measured by answers to these two statements:

• "I can participate in the planning and development of my job."
• "I have the opportunity to affect the operations and goals of our department."

Also, net sales were higher in stores with higher percentages of employees who had "development talks" with their managers. According to the company policy manual, in these talks "an employee's job performance, training needs, and future prospects within the store are reviewed." Despite the policy, the percentages of employees actually provided talks ranged in 2003 from 35% to 93%.

Retail employment in Finland differs from some other parts of the world, the authors point out. Wage levels are controlled by national labor agreements and cover both union and non-union workers. Turnover is more a matter of other factors including unemployment rates in a store's area. In the studied chain, workers received no commissions or bonuses, but managers could, so the only way to substantially increase pay was to get promoted. These circumstances suggest non-monetary factors like positive HRM policies would be especially important in this kind of company.

Adding in the results for two other policies—sharing information and providing feedback—the researchers found that increasing the use of the measured HRM policies from the bottom 25% of all stores to 50%-75% of all stores increased net sales by 5.8%. The authors say their study provides evidence that policies meant to increase employee participation will improve measurable performance "even in settings where employee tasks are fairly simple and employees are relatively low skilled."

Source: Jones, D., P. Kalmi, and A. Kauhanen (2010), "How Does Employee Involvement Stack Up? The Effects of Human Resource Management Policies on Performance in a Retail Firm," Industrial Relations 49(1):1.