How to keep staff? More perks, of course

The Globe and Mail interviews ORCHANGO’s Edmond Mellina for an article in the Report on Business section of the national newspaper.

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Source: The Globe and Mail

Report on Business | WEEKEND WORKOUT: KEEPING EMPLOYEES HAPPY

HOW TO KEEP STAFF? MORE PERKS, OF COURSE

ROMA LUCIW AND JOHN PARTRIDGE With files from Virginia Galt | February 23, 2008

Getting concerned about the high costs of groceries? Maybe you should start moonlighting at Loblaw Cos. Ltd. Canada’s largest grocer said this week it plans to start offering employees a 10-per-cent discount on store purchases. The move is a rarity in the supermarket business, which is notorious for its low margins, but is widespread among other retailers fighting to hang on to staff in a tight job market.

Companies provide employee discounts to attract and retain talented workers, bolster satisfaction and inspire loyalty. The idea is simple: happy employees are more productive and tend to stick around.

Loblaw’s decision, which it estimates will cost around $40-million a year, is part of an effort to stanch high staff turnover that is costing the grocer double that amount in extra hiring and training costs. Chief operating officer Dalton Philips believes the lower grocery bills will improve loyalty, morale and camaraderie among Loblaw workers. “You’re not going to let down one of your colleagues by having a crappy department if you know they’re going to be shopping there,” he said this week.

WHO ELSE DOES IT?

One of the more generous staff discount programs out there is at trendy, touchy-feely yoga-wear phenom Lululemon Athletica Inc. of Vancouver. It gives employees a 60-per-cent discount on its high-end garments – and two free weekly yoga lessons. Starbucks employees, or “partners” as the world’s biggest and most expensive chain of coffee shops likes to call them, get free beverages during their shifts, as well as one freebie before and/or after their shifts, along with one pound of coffee or one box of tea each week.

Some of the most attractive employee discounts are to be found in the financial services business.

At Toronto-Dominion Bank, for instance, employees can get fixed-rate mortgages at 1.5 percentage points below the posted rate, and can prepay without penalty. They can also can get 0.5 percentage points off prime rate, to a minimum of 5 per cent for unsecured lines.

The list goes on to embrace – among other things – a TD Visa card with interest rates as low as 5 per cent, a free chequing account and a self-directed RSP account at TD Waterhouse on which the annual management fee is waived.

WORKERS GET ABOARD

Workers at Fairmont Hotels & Resorts are entitled to a vacation, with their family, at any Fairmont hotel in the world. They get steep discounts on rooms rates, as well as on food and drinks, during their stay. Mike Taylor, a Fairmont public relations manager who has been with the company for 10 years, said he, his wife and two daughters, age 4 and 8, stayed at the Fairmont hotel in Scottsdale, Ariz., last August. “The hotel has the longest resort waterslides in Arizona. The kids absolutely loved it.”

As an employee, Mr. Taylor says the trip was valuable because it allows him to convey his personal experience to customers. It also left him feeling good about where he works: “It’s definitely a class act here.”

HOW VALUABLE IS IT?

Although a cheap family vacation is an attractive perk and an important morale-builder, experts agree that staff discounts are just one part of the overall attraction and retention equation.

“Rarely is an employee discount plan ever a reason for leaving or joining a company, but it’s a very important ‘nice to have,’ ” said retail consultant John Williams of J.C. Williams Group in Toronto.

“If I were Holt Renfrew or Harry Rosen or Lululemon even, I would want my people wearing my merchandise,” he said in a telephone interview. “You want people to be ambassadors of your company and your products.” In terms of the Loblaw staff discount, Mr. Williams noted that food is a big part of family budgets, “so 10 per cent is quite meaningful over one or more years.”

Edmond Mellina, president of consulting and training company ORCHANGO., said discounts like the one being introduced by Loblaw are only effective if all of its rivals are not already doing the same thing. “Do you want to catch up, or do you want to stand out,” he said.

HOW IT CAN WORK

Chrysler Canada Inc.’s recent decision to extend its employee discounts to Air Canada workers has generated increased vehicles sales, Chrysler officials said. The auto maker sold about 250 vehicles to Air Canada employees in December and another 200 or so in January.

The two companies are united through Cerberus Capital Management LP, which owns about 80 per cent of Chrysler Canada’s parent Chrysler LLC and a chunk of the preferred shares of ACE Aviation Holdings Inc., which is the parent of Air Canada.

“Going out and targeting customers to their large rank-and-file employees and making them feel special is kind of the new frontier out there,” Chrysler Canada president Reid Bigland said last week.

HOW IT CAN BACKFIRE

Sears Canada Inc. department store chain is moving in the opposite direction.

Included in a list of belt-tightening measures it adopted earlier this year was a change in employee discounts on merchandise. At present, hourly employees get a 15-per-cent discount on all goods, while salaried employees get 25 per cent. But effective this fall, they will all be getting 10 per cent off big-ticket appliance and furniture purchases, and 20 per cent off clothing and home decor.

Mr. Mellina said companies that tamper with staff discounts risk enraging their workers. “After all, nobody likes it when someone gives us something and then takes it back.” A company in that situation could try to appease angry staff and save morale by providing a replacement perk, chosen in part by the workers, as well as clearly communicating the change, Mr. Mellina said.

However, Sears spokesman Vincent Power argued it was a matter of balancing out the discounts rather than reducing them. Sears has about 37,000 hourly employees, who will see their clothing and home décor discount climb, he noted, although the company’s 4,000 salaried employees, indeed, see a reduction.

THE UPSIDE

“It’s beneficial in the sense that in my day-to-day job, I can convey some actual personal experiences and relate these to my customers,” said Mike Taylor, a Fairmont manager who used the company’s employee travel program for a family holiday to Arizona last year.

THE DOWNSIDE

“It needs to be different from what everyone else in your field is offering or it does not really differentiate the employer,” said Edmond Mellina, president of consulting and training company ORCHANGO.