Stores Count Seconds to Trim Labor Costs

By VANESSA O'CONNELL

SHELBY TOWNSHIP, Mich. -- Daniel A. Gunther has good reason to keep his checkout line moving at the Meijer Inc. store north of Detroit. A clock starts ticking the instant he scans a customer's first item, and it doesn't shut off until his register spits out a receipt.

To assess his efficiency, the store's computer takes into account everything from the kinds of merchandise he's bagging to how his customers are paying. Each week, he gets scored. If he falls below 95% of the baseline score too many times, the 185-store megastore chain, based in Walker, Mich., is likely to bounce him to a lower-paying job, or fire him.

Fabrizio Costantini for the Wall Street Journal

Daniel Gunther, who works at a Meijer megastore north of Detroit, says he has been told 'get people in and out' of the checkout line to improve efficiency.

American retailers have come under tremendous financial pressure as beleaguered consumers curtail their spending. At least 14 major chains have sought bankruptcy protection over the past 12 months, and many others are struggling. With nearly all of them under the gun to cut costs and improve profit margins, "labor-waste elimination" systems like the one used by Meijer are sweeping the industry.

The brains behind Meijer's system is a consulting and software company known for decades as H.B. Maynard & Co., which last year became the Operations Workforce Optimization unit of Accenture Ltd. Borrowing from time-motion concepts first developed for U.S. steel mills and factory floors, it breaks down tasks such as working a cash register into quantifiable units and devises standard times to complete them, called "engineered labor standards." Then it writes software to help clients keep watch over their work forces.

The client list of OWO, as it is now known, has included more than five dozen retail chains, including Gap Inc., TJX Cos., Limited Brands Inc., Office Depot Inc., Nike Inc., and Toys "R" Us Inc. A host of other "work force management" companies also offer to help retailers improve worker productivity.

Cutting Down the Chatter

Interviews with cashiers at 16 Meijer stores suggest that its system has spurred many to hurry up -- and has dialed up stress levels along the way. Mr. Gunther, who is 22 years old, says he recently told a longtime customer that he couldn't chat with her anymore during checkout because he was being timed. "I was told to get people in and out," he says. Other cashiers say they avoid eye contact with shoppers and generally hurry along older or infirm customers who might take longer to unload carts and count money.

Reactions from customers at Michigan stores vary. "Sometimes you like to get in and get out right away," says Barb Bush, who shops at Meijer stores in DeWitt and Owosso and says she likes the current system. "A lot of [the cashiers] like to stop and chat, and I don't really have the time for it."

Linda Long, 58, who shops at the Okemos store weekly, says of the cashiers: "Everybody is under stress. They are not as friendly. I know elderly people have a hard time making change because you lose your ability to feel. They're so rushed at checkout that they don't want to come here."

Meijer spokesman Frank J. Guglielmi said in an email that "as the retail landscape became more crowded and competitive, Meijer has focused more intently on maximizing efficiencies." The engineered standards, he said, take into account all types of customers, including the elderly. The system, he said, has enabled Meijer to staff stores more efficiently, and has increased customer-service ratings. Meijer, a family-owned chain with more than 60,000 employees in five states, doesn't disclose its finances.

Mr. Guglielmi says Meijer "expects employees to be at 100% performance to the standards, but we do not begin any formal counseling process until the performance falls below 95%." If a cashier is "challenged in their position," he says, the company provides "training and counseling to help improve their performance. If this doesn't help them, there are various alternatives." He declined to elaborate.

Customers at several Michigan stores said managers appeared to be opening fewer checkout lines than before, relying on faster-moving cashiers and self-checkout systems to pick up the slack. "I do notice that the cashiers go a little faster, but it doesn't necessarily matter because there aren't that many cashiers," says Melissa Shoe, 20, a regular shopper at the Lansing store. Before Meijer installed its system a couple of years ago, OWO, then still known as H.B. Maynard, helped devise engineered labor standards for everything from greeting shoppers to scanning items too big to remove from a shopping cart. By calculating a standard time for each task, a retailer can more closely monitor worker performance and figure out how and where to reduce labor, the single biggest controllable expense in retail. OWO says its methods can often cut labor costs by 5% to 15%.

The approach is rooted in the time-motion theories of Frederick Taylor from the early 20th century, which were used to break down tasks into units to determine the maximum work a person could do. Harold B. Maynard, the company's founder, began his career in 1924 as a time-study engineer at Westinghouse, then formed his own company. For 70 years, that company worked primarily for manufacturers.

In 2000, after demand from manufacturing industries declined, the company shifted into retail. These days, about 80% of its $20 million in annual revenue comes from retail.

"As manufacturing gets shipped overseas, many people thought that would be the end of engineered standards," says John Lund, a professor of industrial engineering at an extension program for workers at the University of Wisconsin. "In fact, we are not seeing that at all. We are seeing a renaissance of engineered standards in the retail industry."

Hannaford Bros., a subsidiary of the Belgian Delhaize Group, says OWO helped it reduce labor costs at more than 150 supermarkets in New York and New England. Just adding presliced pickles to sandwiches, rather than having deli workers slice pickles themselves, saved Hannaford $60,000 in labor costs, according to Mike Farago, a former process-improvement specialist at Hannaford.

At Bob's Stores, a Northeastern clothing and footwear chain, the software revealed that shaving one extra second from the checkout process for each shopper would produce $15,000 in annual labor savings across its 34 stores, according to Kevin Campbell, assistant vice president for store operations. He says Bob's used the software to determine how many workers to schedule at any given time. The methods enabled it to lower its labor budget by 8%, he says.

Engineering Meets Service

Unlike factory workers, most retail clerks deal face-to-face with customers, which raises questions about how such labor standards can affect customer relations.

"If it is the type of job where you can lay out every element of the job, then you might get more output per hour" using such a system, says Barry Hirsch, a labor professor in the economics department at Georgia State University. "But if it is a job that requires things that can't be quantified -- special effort for a customer, or just being friendly -- then delineating things too carefully for how employees behave can decrease productivity, because you're just so focused on working to precise guidelines."

OWO says retailers can, and should, adjust time standards to take into account customer service and other variables such as store layout or sales volume, which can affect how long it takes employees to perform certain tasks. In a study late last year for a large clothing chain, for example, OWO determined that for every customer buying something in a high-traffic urban store, 2.63 items were "disturbed" and required straightening or reorganizing. That compared to 1.98 items in quieter suburban stores.

Meijer says it pioneered supercenters in the early 1960s. Each store stocks around 150,000 products, including groceries, apparel, sporting goods, home furnishings and pet supplies.

In recent years, it has faced mounting competition from discount supercenters owned by Wal-Mart Stores Inc., which often offered lower prices on general merchandise. Meijer adopted the new labor standards for cashiers to boost productivity. It added fingerprint readers to cash registers so cashiers can sign in for work directly at their registers, not at a time clock, "saving minutes of wasted time," says Roy Smith Jr., the former director of Meijer's Benton Harbor, Mich., store. The chain also installed a system to monitor how many cases per hour stock workers were loading onto shelves.

In the late 1990s, the typical high-traffic Meijer store employed about 700 workers and nearly 50 managers, says Mr. Smith, who worked at nine Meijer stores over 15 years before quitting in September. Between late 2003 and late 2007, he says, Meijer's "selling, general and administrative" expenses, which includes labor, fell about 4%. The company spokesman declined to comment on those numbers, but said that most Meijer stores now employ between 250 and 400 workers.

In spring 2007, Meijer began disciplining cashiers who couldn't keep up with its baseline standards, according to Mr. Smith and several longtime cashiers. Hitting the baseline was "like a C-minus" grade, says Mr. Smith. Those who fell below 95% of the baseline -- a score of 95 -- faced penalties or weeding out. Meijer posted weekly "cashier productivity" notices in employee-only areas.

Store managers used the scores to decide whether new cashiers still in the 90-day probationary period should be transferred, or fired. Longtime employees also were scrutinized. In a given week, up to one-fifth of the scores posted were below 95, current and former cashiers say.

Before the scoring system, "nobody knew who was good," says Mr. Smith. Afterwards, managers knew "this person isn't as strong as that person. It becomes really obvious, and you're able to put a number to that." Cashiers were counseled for as many as seven weeks on improving performance; those who didn't lost their jobs, he says.

Employees with scores below 95 are told: "Get your percentage up, and we'll have a manager watch you to see what you should do differently," says Nastassia Gauna, who worked as a cashier at the Adrian, Mich., Meijer store before quitting, she says, in August.

The X Factors

The computer scores, Ms. Gauna says, don't "take into consideration the many things that can go wrong at a register to kill your time" -- a customer who doesn't have enough cash and is "digging through a purse," a credit card that doesn't swipe through the charge, or an item with no price or item number on it. Some customers ask for cigarettes located in another part of the store, and the cashier has to get them. Others forget items and retreat to the aisles to find them.

Buying Time

Operations Workforce Optimization, a unit of Accenture, breaks down tasks into quantifiable units, devises standard times to complete them, then writes software to help clients keep watch over their workforces. Here are some ways it trimmed time from common tasks at an unnamed grocery retailer.

Produce

• Bananas, a top-selling item, are stocked by grasping inverted bunches by the tips. Flipping the box over prior to stocking allows the employee to grasp multiple bunches at once by the stems.

Projected savings: $100,000 per year*

Bakery

• Some breads and rolls are packaged in plastic bags and closed with twist ties. Innoseal or bag clips reduce the manual motions required.

Projected savings: $200,000 per year*

• During packaging of some goods, employees are walking to the work rather than bringing the work to them, often traveling several steps for each tray rather than bringing the rack to the workstation.

Projected savings: $20,000 per year*

(* Savings generally vary according to the number of stores in a chain.)

"Recovering" Items

At clothing retailers, OWO defines "recovery" as collecting an item that has been left behind or disturbed by a shopper. Tasks vary, depending on the scenario -- re-hanging a garment that's on the ground versus one that's not on the ground -- and the store. Handling an item and looking for a tag should take about 1.8 seconds. Buttoning or zipping a garment should take about 2.4 seconds.

To help a large clothing chain figure out efficient staffing, OWO's analysis found that in high-traffic stores, for every 100 customers purchasing something, 50 pieces of clothing need to get rehung and replaced back out on the sales floor. It takes more than 11 seconds per shopper to recover an item.

In low-traffic (often suburban) stores, 15 items need to be returned to the floor, for every 100 customers who buy something, and it takes about six seconds per shopper to recover an item.

This kind of behavior, of course, tends to tick off other shoppers waiting in line, but some of them sympathize with the cashiers. "I am 84, and I get behind some old person and I can't stand it," says one shopper at the Owosso store. "They go into their purse and they are counting out a penny, and I am thinking that poor clerk, and people are lining up. But it's not the clerk's fault."

Kristine E. Barry, a cashier at the DeWitt store, says she began to see cashiers hurry along elderly customers by telling them to put their items on the belt more quickly because they were being timed. "When you have a situation where you are dealing with an elderly customer who's not as speedy, you're under pressure," says Ms. Barry, who has been a Meijer cashier for 22 years.

Jacqueline Sue Hanning, 25, took a job as a cashier in the Adrian, Mich., store for $7.15 an hour, in July 2007. She says she was "written up" three or four times last spring for scores below 95. She was told she would have to move to another department, at lower pay, if her score didn't improve, she says. "Make sure you're just scanning, grabbing, bagging," she recalls being told. She quit after nearly one year on the job.

Two shoppers interviewed in front of the Okemos store said they were told by cashiers that they were being timed. "There was one particular cashier that was in so much of a hurry," recalls Ms. Long, the regular customer at that store. "And he was saying, 'When you're afraid you're going to lose your job, you're going to make more mistakes.' "

The United Food and Commercial Workers Union, which covers about 27,000 Meijer employees in Michigan, including 3,000 cashiers, has filed a grievance against the company in connection with the cashier-performance system, saying it has found flaws in it. The union says the matter is headed for arbitration. The Meijer spokesman declined to comment.

Ms. Barry, the DeWitt cashier, who says her weekly score usually hits or exceeds the baseline, admits to using a few tricks to improve her times. She makes heavy use of the register's "suspend button," which stops the clock. The system detects when remote scanning guns are used, automatically allowing slightly more time to scan big items that stay in the cart. Ms. Barry sometimes uses the remote scanner for nonbulky merchandise.

"It is pretty much survival," she says. "You have to learn the tricks of the trade."