Its raining incentives for retail staff

As attrition rates reach unprecedented levels in the retail sector, companies are fighting back with a mix of measures including salary hikes, incentive-based targets, connecting emotionally with staff and even selling them the "American Dream".

Take for instance, Shopper's Stop, which has an attrition rate of 48 per cent a year among the front-end employees.

The company resorted to the first obvious weapon - hiking the salary by 25 per cent. This, of course, had an impact on the bottom line, but it does seem worth it, as replacing employees is a problem.

"Every new associate needs training and inputs. As attrition increases, the number of new associates increases and this affects service standards," said Govind Shrikhande, chief executive officer, Shopper's Stop Ltd.

Vishal Retail is having to cope with a 35 per cent attrition rate for its front-end employees across its 52 stores every year. While the company will provide Esops to lock in high-level managers, it is looking at incentive-based strategies for retaining lower level employees at its stores.

"We might create sales divisions within stores. Incentives will be provided to the divisions that cross the set target of sales," said Ram Chandra Agarwal, chairman and managing director, Vishal Retail.

Pantaloon Retail already follows a team incentive model, and its employees are able to increase their salaries by 30 per cent to 40 per cent. It has a much lower annual attrition rate of 8.36 per cent for its 14,000 plus front-line staff. Pantaloon Retail credits it to the "emotional connect" that it has with its employees.

"Besides the five week product and operations related training that the staff has to go through, we make our new employees go through a Gurukul process. This is a self-discovery programme emphasising on employees' eating habits, hygiene, interpersonal skills, teamwork and building interaction with the other gender," said Sanjay Jog, head-human resources, Pantaloon Retail.

Fast food chain McDonalds has a high attrition rate of 83 per cent and it seeks to retain the staff by selling them the "American Dream"-the possibility of the front-line staff rising to become managers, operation consultants (that manage around five outlets) and possibly even CEOs one day.

While listed retailers like Shopper's Stop and Pantaloon Retail offer stock options to senior managers as a retention tool, this is something that unlisted companies cannot do. In any case, the trend in offering stock options, leaves out lower level staff.

The problem of attrition is expected to only get worse as organised retail is projected to leapfrog from $12 billion now to $239 billion by 2015.