Canadian HR Reporter

CANADIAN HR REPORTER November 14, 2016 NEWS 9 Credit: Mike Blake (Reuters) A Walmart department manager helps stock shelves in San Diego, Calif. The chain has seen gains after raising wages in the U.S. way — an HR thing, cost issue. My advice would be to look at it a lot more strategically and understand what compensation investment can do for your business." About time It's a wonder Walmart was able to last this long without paying em- ployees more, said John Williams, partner at J.C. Williams Group, a retail consulting firm in Toronto, who predicts more retail outlets will follow suit. "They have to," he said. "It makes good business sense if you couple it with training. It's about changing behaviour to have a positive impact on a company and how their customers are treated." "Competitively, it's very smart. ere's a huge battle out there for competent people. Retail is not a career of first choice, so when you're out there trying to attract people… You have to invest in the right people and make sure that their behaviour meets the stan- dard that you've set. en you will be greatly rewarded with a highly productive store." Employee turnover is the "larg- est hidden cost" in the retail in- dustry, according to Williams, and losing an entry level em- ployee costs a company $3,500, on average. So Walmart's com- mitment to employee training and development shouldn't be overlooked. "It's sort of a one-two punch, and I think it's a great thing they're doing," he said. "When you train someone, it means you're not going to let them go or fire them." Efficiency wages e idea of efficiency wages isn't new, said David Green, professor at the Vancouver School of Eco- nomics at the University of British Columbia. But the fact that Walmart is adopting the strategy is newswor- thy since the retail giant is a major player. "It changes the norm in the market, to some degree," said Green. "It's not proven yet, so my guess is other firms are going to hold back and watch. I don't know that Walmart will prove to be a huge trendsetter, though it may have some spillover effects." e idea is that higher wages can actually promote more pro- ductivity, he said. "So, instead of causality run- ning from productivity to wages, it can actually run in the opposite direction as well." Opposing business models can co-exist in the same market, said Green. For instance, Walmart has traditionally lowered its costs by paying low wages, though it also faces the additional costs and headaches caused by high em- ployee turnover and poor cus- tomer loyalty. Wholesale giant Costco, on the other hand, pays higher wages, re- sulting in employee stability and customer retention, he said. And Lee Valley Tools is a Ca- nadian business that successfully implements the efficiency wages approach, according to Green. "ere are already employers who really go into it saying: 'If I pay better and treat my employ- ees better, I get all these benefits.'" Efficiency wages can be imple- mented for several reasons, he said. Higher-than-average wages allow employers to enjoy the "pick of the litter," spur social ob- ligations amongst employees to work harder and be loyal longer, and downgrade the percentage of workers who shirk their duties. "All of these potentially apply in the Walmart situation," he said. e bump in wages could alter everything Walmart was previ- ously about, said Green. "It means overhauling every- thing," he said. "It means all these middle managers who are used to think- ing in terms of getting the cost down by cutting wages… that has to pervade the whole structure. You have to be willing to bear costs and you have to be willing to make it true throughout the institution." Wage bump 'could alter everything' WALMART < pg. 1 Employee turnover is the "largest hidden cost" in retail.

• Cover