There is perhaps no greater challenge for co-ops in today’s low-growth environment than dealing with downward pressure on prices and margins, and upward pressure on wages and benefits. Productivity is how we solve for the need for both. NCG has taken several of the most effective strategies to increase productivity or control personnel expenses and combined them to create a simple productivity formula:

• Fewer, better paid workers,
• Working more hours,
• Working when we need them,
• Getting more done,
• Held accountable for results,
• Rewarded for success

The steps in the productivity formula are interrelated and meant to be cumulative in effect. Executed with strong leadership, the formula represents a transformative approach to productivity that leads to more than just short-term gains — it changes employee culture overall and can even strengthen the relationship between staff and the co-op. Well-compensated employees and a staff culture that embraces productivity and accountability helps attract and retain strong talent.

Fewer, better paid workers.  The productivity formula starts with wages in order to get employee buy-in for difficult changes that will make the business sustainable. You cannot expect employees to do more, or accept any cultural change for that matter, if they don’t feel adequately compensated. Co-ops that use a livable wage tool should update their calculations to account for dramatic increases in costs of living. We strongly recommend co-ops use the recently updated NCG/CDSCC Livable Wage and Benefits tool found on the NCG website. In every case where this comprehensive tool has been used, it calculated a higher starting wage than a co-op was paying.

Working more hours.  Many competitors manage increasing personnel costs by limiting the number of employees eligible for benefits. We propose maximizing the impact of employees earning benefits — ideally our best employees — by ensuring they work as close to 40 hours per week as possible. The cost of benefits is the same per employee, so the math is simple: three, 40-hour-per-week employees cost the co-op less in insurance premiums than four, 30-hour-per-week employees. Having difficult conversations with employees who may feel entitled to benefits and may not want to work more hours requires real courageous leadership. Explain the challenge and frame this strategy as part of a solution to pay for wage increases.

Working when we need it.  Co-ops want to meet employee needs regarding scheduling, but that can impact our ability to operate as productive grocery stores. “Working when we need it” means:

• Our best employees work our busiest hours (lunches, evenings and weekends).
• Our managers work regular evening and weekend shifts, too.
• There are no permanent, set schedules. They are always subject to change (with proper notice) to meet the needs of the business.
• We schedule work and not people.

This difficult change takes a long time to implement; courageous leadership and perseverance will be required to win over detractors. The key to successfully scheduling work and not people is effective cross-training, with an expectation that all employees are trained in at least two departments in addition to the one to which they were originally hired.

Getting more done.  This refers to measuring key metrics (we recommend “wages as a percent of sales” and “sales per labor hour”), and setting goals. Identify where you are now and start setting goals for continual, achievable improvements. For this step to be effective, it must be implemented in tandem with the next two.

Held accountable for results.  It isn’t enough to measure performance and set goals for improvement: To make gains in productivity, a co-op must hold staff accountable for results. And employees are much more comfortable buying into the concept of accountability if they understand it as a system for ensuring equity — that all employees are treated the same way. Teach employees the “rules” so that they fully understand expectations, and make sure they feel empowered, as accountability coupled with empowerment leads to high performance.

Rewarded for success.  An effective gainshare program, whereby employees share in the profit by driving productivity, can make all the difference between temporary gains and a cultural shift that embraces continual improvement. It also helps deter staff entitlement and is crucial to retaining strong talent in a competitive market where high turnover is the norm. It is essential that gainsharing is not seen as automatic. Employees who need to stretch to reach productivity goals are much more likely to identify system and process inefficiencies and offer solutions.

Success in implementing the productivity formula requires strong leadership, including comfort and familiarity with change management, transparency, and top-down participation with leadership at all levels of the organization. Once they feel appreciated and adequately compensated, and experience a culture that embraces equity, transparency and accountability, employees will be the ones to uncover the day-to-day opportunities to make continued productivity gains.

Photo courtesy of Ukiah Natural Foods Co-op.