To furlough or not to furlough?

Discussion
Photo: @Yuliasis via Twenty20
Nov 24, 2020
Tom Ryan

A wide majority of retailers underwent furloughs to preserve cash early in the pandemic as their stores faced mandatory closures even as others deemed essential stayed open and reaped the sales benefits.

Williams-Sonoma chose to continue paying associates rather than issue furloughs even as it closed its stores. The decision created a bond with staff resulting in an even stronger customer service attitude than existed before.

“You take care of your people and they do amazing things for you,” Laura Alber, president and CEO of Williams-Sonoma, said on her firm’s third-quarter conference call.

“I’ve never seen anything as powerful as that decision for our store associates,” she said. “You go into our stores now, it’s such a different experience than so many other places in the malls because of that relationship with them [associates] and how close we are with supporting each other.”

At Shoe Carnival, CEO Cliff Sifford said on his company’s third-quarter call, “We believe our continued strong performance in an incredibly volatile operating environment is the direct result of us putting our employees first and making a decision not to implement furloughs during the mandated shutdown.”

The move, he believes, enabled Shoe Carnival to “get our team members back to the store faster than nearly all our competitors” and allowed his buying team to quickly restock comfort footwear styles. Store associates were also “busy and engaged” inside closed locations, fulfilling a significant hike in online orders.

In the restaurant space, Bloomin Brands, the parent of Outback Steakhouse, Carrabba’s Italian Grill and Bonefish Grill, likewise found the decision not to furlough or lay off employees supported a quick reopening. Healthy retention and turnover levels also resulted from the move. David Deno, CEO, said on his firm’s third-quarter call, “As the in-restaurant dining came back, we were prepared and ready to go, and our team has been very grateful for what we’ve done.”

Other non-essential retailers reportedly avoiding furloughs amid mandated closures included Lululemon, Nike, Apple, Lego, Tiffany and Zara.

Many retail employees that were furloughed continued receiving insurance benefits from their companies plus an extra $600 weekly in unemployment through July as part of the CARES act.

DISCUSSION QUESTIONS: What lessons should retailers take from the use of furloughs early in the pandemic, should lockdowns return? What would be your decision tree in determining whether or not to furlough large numbers of employees?

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Braintrust
"What’s the lesson? Employees are your most important asset. You live or die by that motto. Simple."
"We should not be debating do we save the economy or the people when we have the resource and capability to do both."
"If the retailers can afford it, do what’s right for the staff. Not all companies can afford to do that, however. Simple economics."

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20 Comments on "To furlough or not to furlough?"


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Bob Phibbs
BrainTrust

What’s the lesson? Employees are your most important asset. You live or die by that motto. Simple. Retail is a game of being brilliant on the basics. How you treat employees is how they’ll treat your customers. If associates are disposable, so are your customers. Hence so much turmoil in retail. Look inward C-level execs and stop touting “digital transformation.” Retail has always been about people. Always.

Gary Sankary
BrainTrust

Here here!

Ricardo Belmar
BrainTrust

I just can’t hit “like” on these comments enough times to express how spot on you are, Bob! 100 percent on point. If only more retail execs could see what’s right in front of them!

Sterling Hawkins
BrainTrust

Employees are the most important asset! They’re the front line and we need to support them. I don’t think it’s at odds with digital transformation — done right, digital transformation should create a better overall experience for employees and customers.

Bob Phibbs
BrainTrust

Let’s be honest, many retailers are cutting staff, pushing online into the stores, and making self-serve the goal when you unpack much of digital transformation speak.

Ralph Jacobson
BrainTrust

If the retailers can afford it, do what’s right for the staff. Not all companies can afford to do that, however. Simple economics. It’s tough to stay in business when the government restricts your opportunity.

Chuck Ehredt
BrainTrust

A brand cannot build loyal customers if their employees are not also loyal – loyalty leads to enthusiasm for the work and solutions that can be delivered to customers.

I applaud Williams-Sonoma for doing the right thing for their employees when the business environment was largely outside anyone´s control. Customers notice this too and will reward brands that have deep values. It is not more complicated than that.

A brand is driven by values that resonate with all stakeholders, or by their financial statements – and this is visible across the panorama of businesses competing to grow. And the past 30 years has seen the majority of brands led by the wrong factors simply disappear from the landscape.

Ray Riley
BrainTrust

There were dozens and dozens of instances where retailers immediately and inhumanely laid off teams as of March 15-16; the onset of the shutdowns. Regardless of the balance sheet realities for any of these companies, the ability to deal with the situation in an empathic manner was lost, in addition to team member good will.

Bob Amster
BrainTrust

Heretofore it has been difficult for retailers – many of which were not doing so well to begin – to make that kind of financial investment in their own people (and indirectly, in their own companies). We see much more of that attitude on the part of top management during this pandemic which has had so many unintended consequences for the good. If you are going to expose your customers to your employees, those associates have to be happy to work in your company because it reflects in their general attitudes.

Cathy Hotka
BrainTrust

When associates were merely folding clothes or stocking shelves, heavy turnover was the norm. Now that the store is far more important investing in associates becomes far more important. If you can afford to keep them, do!

Michael Terpkosh
BrainTrust

Retailers need to learn the lesson that maintaining great employees is well worth the investment. Great employees create the great retail atmosphere customers expect and reward with loyalty. Loyalty meaning repeat sales. It is no secret that the cost to recruit, hire, and train new employees can be far more expensive than doing whatever a retailer can to maintain your current employees. Business difficulty will always pass, loss of great employees is forever.

Di Di Chan
BrainTrust

It is a big mistake to frame the pandemic situation as a choice between either the economy or the community’s health and safety. We are living in one of the wealthiest and most advanced nations in the world. We should not be debating do we save the economy or the people when we have the resource and capability to do both. When we go through a GLOBAL pandemic, this warrants an emergency response to take care of each other and get through the crisis first. There are enough case studies worldwide where business and political leaders have worked together to keep both the economy and the people healthy. We likewise can and should do both by focusing on how we can contain the virus while keeping our economy thriving – instead of trying to choose which one is more important.

Tom Ryan
Staff

Not to give the stores furloughing a full pass but it was an incredibly uncertain time with lots of unknowns at the start of the pandemic. Stores and customers have learned a lot about how to operate with a social-distancing selling floor and even how to make more money outside the store. That will certainly help stores stay open in some capacity should more restrictions arrive and probably reduce the need for furloughs.

The extra $600-weekly bonus to the unemployment checks also played a role. I’ve heard several independents that faced a challenge rehiring staff because they were making better money on unemployment than they could be working the store. We’ll have to see if some fiscal stimulus arrives again.

Ricardo Belmar
BrainTrust

Brand loyalty isn’t just for customers, it’s an emotional bond for employees, too. It took a pandemic for many retailers to finally realize and acknowledge that their store associates are not only the face of their brand and the frontline of their customer experience but one of their most valuable assets in customer acquisition and driving sales and conversions with a great customer experience. It’s simple – treat your employees well, build brand loyalty internally, and those employees will reflect that brand loyalty externally to your customers. The sales start flowing from there!

Ken Lonyai
BrainTrust

Standing ovation to Laura Alber for saying “you take care of your people and they do amazing things for you,” and the other exceptional companies that stood behind their colleagues and sacrificed profits and cash reserves in doing so.

Contrast those efforts with Walmart which has been growing pre-pandemic and especially during the pandemic, yet over 14,500 employees need Supplemental Nutrition Assistance Program (SNAP) support while during the pandemic (eight months), the Waltons gained another $63 billion in earnings.

https://childrenshealthdefense.org/defender/report-details-how-taxpayers-subsidize-cruel-low-wages-paid-by-corporate-giants/

Cynthia Holcomb
BrainTrust

The much-touted “customer service” narrative spoken constantly and consistently by retailers over and over again is a curious narrative given human associates are responsible for the final leg of good or bad customer service. Years of treating retail associates as cogs in a wheel — in fact, normalizing associate turnover for decades — is why much in-store retail “customer service” features associates avoiding eye contact with customers and/or ignoring customers. Yet, the C-suite is always thinking of new and costly ways to improve customers’ retail store shopping experience.

Looks like Williams Sonoma and a few others figured it out! Treat retail associates as humans and in turn, your associates will authentically treat your customers like humans.

Mel Kleiman
BrainTrust

It always boils down to doing what’s right. Not easy, but right. In this case, there are two major concerns and two questions that need to be answered. The first is what do we need to do to make sure the business survives. If you furlough your employees, but your business does not survive, that is a short-term fix with long-term consequences. If you can figure how to furlough your employees and keep the business alive, it is a win-win for everyone.

Craig Sundstrom
Guest

If we assume the furlough decisions were made out of necessity — i.e. conserving cash (and implicitly not going out of business) — then I think the main issue was how they were communicated. (And my memory of this is that performance on that front ranged from great to awful).

I also recall that many companies initially tried to minimize the financial impact on employees by preserving everything but actual pay, but that commitment began to wane as the shutdowns dragged on (and on and on…). Unfortunately, uncertainty continues to rule: just because something worked — or didn’t work — in the spring, doesn’t mean the same would be true now … conditions are fluid.

Natalie Walkley
BrainTrust

It is certainly inspiring to see brands keep their associates at the heart of their operations. We saw many retailers get creative for how to keep their team “working” even if stores were closed to foot traffic—many deciding to use their stores as micro fulfillment centers and store associates to “pick, pack, ship” orders. This was a win-win-win: for the brand, associates, and consumers.

Rachelle King
BrainTrust

This is never an easy decision. However, furlough decisions are often made from the viewpoint of fiduciary responsibilities that are sometimes near-sighted in perspective. What we can learn from those companies that did not furlough is that coming from a position of empathy, living your mantra that employees are in fact your most valuable resources and keeping the long game in mind, might be a better alternative to furlough and allow you to bounce back faster. Even more, demonstrating that your employees matter builds loyalty and inspires goodwill. It is true what they say, if you are good to your employees, they will be good to you. Companies just need to decide how much loyal, happy employees are worth.

wpDiscuz
Braintrust
"What’s the lesson? Employees are your most important asset. You live or die by that motto. Simple."
"We should not be debating do we save the economy or the people when we have the resource and capability to do both."
"If the retailers can afford it, do what’s right for the staff. Not all companies can afford to do that, however. Simple economics."

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