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IT No. 1 priority for retailer spending

BY HBSDEALER Staff

Retail executives have more cash, are adding employees and enjoying stronger revenue, but they remain quite guarded longer term, not seeing a complete economic recovery until 2014 or later, according to the 2012 Retail Outlook Survey by audit, tax, and advisory firm KPMG LLP.

In the recent survey, 77% of retail executives indicate that their companies have significant cash on the balance sheet — up from 72% in KPMG’s 2011 survey — and 56% say their companies’ cash positions have increased from last year.

In addition, 64% say revenues are up from prior year (compared to 47% percent in 2011), and 52% say they have increased the number of U.S. employees. Interestingly, 22% indicate that their company’s headcount has returned to pre-recession levels — compared with just 18% in 2011.

Despite the positive sentiments in the report, caution remains the watchword of the day.

"The retail sector has experienced some positive momentum in the past year, but executive leaders aren’t about to throw caution to the wind," said Mark Larson, KPMG global retail leader. "In this year’s survey, executives have pushed back their estimated timeline for economic recovery to 2014 or later, with concerns that decreased consumer confidence and continued high national unemployment are hindering a full retail recovery."

While waiting for the recovery to take the hold, 58% plan to increase capital spending over the next year. The highest priority investment area is information technology — including data analytics and digital marketing channels — cited by 51% of the executives in the KPMG survey. Other significant areas of investment for retailers are new products or services (43%), geographic expansion (33%), and advertising and marketing (24%).

When asked about digital marketing channels, retail executives in the 2012 KPMG retail survey indicate that online shopping (59%), social media platforms (58%), and email campaigns (49%) are having the most significant impact on their businesses. Additionally, executive indicate that the incorporation of mobile technology is also having a significant impact, specifically mobile shopping (36%), mobile promotions (28%), and mobile payments (21%).

Executives also say that the use of data analytics is playing a larger role in their strategic decision making — including areas such as customer insight, brand and product management, pricing decisions and market expansion.

"With consumer behavior, spending and demographic profiles changing rapidly," Larson said, "a key to success will be investing in technology to harness the vast amount of data that resides in a company. That data can drive the insights that will allow retailers to interact with consumers more effectively and capture more ‘wallet-share.’ It may also reveal information on new markets, new strategies and new operating models that will ultimately generate growth and profitability."

Lack of customer demand, pricing pressures and labor costs were ranked as the most significant barriers to revenue growth, according to the survey. The most significant barriers to profit margins: discounting practices, input costs and decreased sales volumes.

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Study finds employee theft on the rise

BY Brae Canlen

A report by Jack L. Hayes International, a loss prevention and inventory shrinkage control consulting firm, found that both shoplifting and stealing by employees are increasing, although the latter is growing at a faster clip. An annual survey of large retailers found that shoplifter apprehensions and recovery dollars rose 5.8% in 2011, while the same measurements applied to dishonest employees increased 11.4%.

“It should also be noted that shoplifter apprehensions and recovery dollars have increased eight of the past 10 years," said Mark Doyle, president of the Wesley Chapel, Fla.-based firm.

Broken down even further, shoplifter apprehensions rose 6.0% and dishonest employee apprehensions rose 3.3%; the recovery dollars from these apprehensions was up 13.9% for shoplifters and 5.6% for dishonest employees.

The 24th Annual Retail Theft Survey involved participants from 24 large retail companies with 18,518 stores and more than $589 billion in retail sales last year. On a per-company basis, one in every 36 employees was apprehended for theft from their employer in 2011 (based on more than 2.8 million employees). On a per-case average, dishonest employees steal approximately 5.9 times the amount stolen by shoplifters ($665.77 versus $113.30).

For more survey results, visit hayesinternational.com.

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Incentive compensation tips and pitfalls shared

BY Stephen Miller

Orlando, Fla. — Incentive compensation should directly communicate an organization’s objectives to employees, so why do so many plans fall short of success? In presentations at the 2012 WorldatWork Total Rewards Conference here May 21 to 23, 21012, compensation specialists shared lessons on the effective use of incentive pay programs and warned of errors to avoid.

“First, determine the business strategy and objectives that incentives are intended to drive,” advised Jason Adwin, senior consultant at Sibson Consulting. “The role of incentives is to motivate and engage employees in order to drive intended business results, and reward and differentiate employees fairly for the value they create,” he noted. “Some employees are going to give above and beyond, with or without incentives. But the program, by sharing their success stories and modeling their behavior, motivates the others.”

“Know what you provide vs. the market and use it to your advantage” for recruiting talent and ensuring engagement among employees, recommended Elyse Lyons, senior consultant at Sibson Consulting, who co-presented with Adwin.

Confusing metrics

According to Lyons, incentives don’t work when they become an entitlement, leaving employees disappointed if incentive levels decreases from one year to the next.

Another pitfall: confusing metrics with no clear line of sight, requiring multiple Excel spreadsheets to explain and track. “Employees should be able to figure out the incentive plan on a paper napkin,” Lyons argued.

Also beware of plans that demotivate high performers through insufficient differentiation, and misaligned efforts that result when teams have conflicting incentives. “One sign of misalignment is when c-suite executives earn incentives and middle management doesn’t,” Adwin noted, adding, “When individual, department and organizational incentives align, employees can see how their actions help the organization to succeed.”

Everyday excellence

Another common mistake, Adwin pointed out, is requiring effort beyond everyday job responsibilities to earn incentive pay. Instead, incentives should reward excellent performance within an employee’s normal job duties if that performance is an outsized contribution to the organization’s success.

Bonus amounts that don’t seem large can change behavior for the better, Lyons noted. She related how when the former Continental Airlines wanted to improve its poor on-time departure record, the airline began offering a flat bonus of $65 a month to members of crews with the best on-time departures. As a result, pilots started helping flight attendants clean up plane cabins to ensure timely departures.

“Train your managers to explain that, when incentives are not earned, ‘the performance of our business would not allow us to give the incentive you wanted,’ ” said Adwin.

During another session, Carrie Ward, director of consulting services at SalesGlobe, suggested informing employees’ spouses about incentive pay programs so they can encourage their spouses to strive for those higher rewards. “Send incentive program information to home addresses,” she recommended.

Stephen Miller, CEBS, is an online editor/manager for SHRM.

Have HR-related questions and concerns? Get access to essential forms, policies and guides, plus a live call center, at ToolkitHR.com, powered by HCN and the Society for Human Resource Management (SHRM).

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