Staffing stores is our most challenging issue as we plan our expansion across North America," exclaimed Nkere Udofia, vice-chairman of Montreal-based Blinds To Go (BTG). "There are locations now where we've got physical store buildings built that are sitting unstaffed. How are we going to recruit and develop enough people to meet our growth objectives? What changes should our company make?" It was August 2, 2000 and Udofia knew that if Blinds To Go was to continue to grow 50 per cent in sales and add 50 stores per year, the issue of staffing would be front and centre.

THE DEVELOPMENT OF THE BLINDS TO GO RETAIL CONCEPT

This retail fabricator of window dressings began as a one-man operation. Growing up in the Cte-des-Neiges district in Montreal, Canada, David Shiller, the patriarch of the Shiller family, started in business in 1954. Stephen Shiller, his son, joined the business in the mid-1970s, convincing his father to focus on selling blinds. Called "Au Bon March," as it was known in Quebec, the Shillers began to create the production system that allowed them to cut the normal six- to eight-week delivery time frame for custom blinds to 48 hours. The customer response was overwhelming and the business took off.

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Stephen Shiller exclaimed:

We gave them food, kept them busy while they waited for their blinds to be ready. The factory was literally next to the store and we offered our one-hour delivery guarantee, which kept our customers happy. Our St. Leonard store, the prototype for the current Blinds To Go stores, opened in 1991. Prior to that, people used to drive for up to 100 miles to come to our stores.

At that point, in early 1994, we realized what a hot concept we had on our hands our sales were higher for each consecutive store opened, and none of our competitors could replicate our model. They were either manufacturers or retailers: none were both. None could hope to deliver the 48-hour turnaround we promised, had our unique sales model, which is 100 per cent commission-based, or had our attention to customer needs.

By June 2000, Blinds To Go operated 120 corporate-owned stores across North America (80 U.S. stores, 40 Canadian stores), generating in excess of US$1.0 million in sales per store (having a staff of between six to 20 people per store). Blinds To Go expected to add an average of 50 new stores per year for the next five years, 80 per cent of which was targeted to be U.S. expansion stores.

RETAIL OPERATIONS

It was senior management's belief that quality of staff was even more important than store location, the surrounding customer demographics or advertising. Stephen Shiller, president, tested this belief with the East Mississauga, Ontario store.

In 1999, the East Mississauga store had experienced declining sales and high employee turnover. Analysing the demographic data surrounding the store left management with the impression that the store was a victim of poor location and cannibalization from another BTG store 10 miles away. However, Stephen Shiller, suspected that the real problem was in the quality of the store's staff. Stephen Shiller commented:

We let the store continue on its downward sales trend as we trained a management team for this store. Although I was quite sure that the quality of people was at fault, I was determined to use this as a lesson to show the rest of the company how important it was to have first-class talent. After six months of waiting, we put in an 'A' management team and trained staff. In one week, we doubled

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our sales and we tripled our sales in one month. That was a lesson we must never forget.

There were four staff roles in the stores the sales associate, the selling supervisor, the assistant store manager and the store manager. The sales associates were the most junior employees and their job was to follow a set plan to help walk- in customers purchase a set of blinds. If they proved to be consistent sales performers, they would be promoted to selling supervisors or assistant store managers. Selling supervisors were assistant managers in training and usually had been one of the best sales associates. Assistant managers were in charge of the store when the store manager was not scheduled to work. The store manager was directly responsible for overall store operations, including closing sales, motivating and developing staff, and handling customer service issues such as repairs and returns.

Generally, a very good sales associate was promoted to selling supervisor six to nine months after hiring date. To become a store manager generally took another six to 18 months. However, because of the enormous variation in personal potential, these progression targets were by no means fixed.

The BTG selling process involved a very high level of interaction with the customer, which set a very high level of service expectation. At the retail stores, the emphasis on customer satisfaction and sale closure led to a higher volume of orders relative to their retail competition. Outlined in the Blinds To Go University Manual (training program for new sales staff) were the following four operating guidelines:

Service and Satisfy every Customer

Never Lose a Sale

Make the Customer Feel Special

Bring the Manager into Every Sale to Give the Customer "Old Fashion Service"

Salespeople were expected to bond with a customer through a personal greeting, then ask open-ended questions about their product needs. The purpose of the next few minutes of interchange between associate and customer was to understand the customer's primary concerns and work towards a sale by resolving those issues. Next, associates emphasized to the customer the quality of the product, large selection and warranties. At this point, the associate would listen to any customer objections, and try to address them. The associate would price the product(s), then introduce the customer to the store manager. After walking the store manager through the order, the associate would deduct any relevant coupons, then attempt to close the sale.

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All employees of BTG, even up to the president, prided themselves on being able to sell blinds to customers. During store visits, it was not uncommon to see senior management helping out the staff in dealing with an overflow of customers.

COMPENSATION OF RETAIL STAFF

The commission-based structure fostered a high-energy, sales hungry culture at Blinds To Go. Todd Martin, the director of retail planning and operations explained:

We know people come to us because they need blinds. An example of our culture in action is a manager who is unhappy with closing eight of 10 sales, because with the tools at his disposal, he should be able to close all 10. Even if the customer is just looking because they want to buy a house in six months, we can take their worries away from them. He should be able to sell to 10 out of 10 customers.

Todd Martin also believed there was a healthy competitive environment among sales associates. He offered:

In the store, there are no rules on grabbing customers in my two years here, I've never seen a problem with staff fighting for customers.

As BTG grew from a one-store operation, the Shillers kept a commission pay structure for its salesforce, believing that it best motivated performance. From experience, they knew that a suitable salesperson could, with the commission structure, make more money at BTG than at a comparable retail outlet. The focus had been on hiring energetic, personable people who loved the thrill of a sale.

A CHANGE IN COMPENSATION RESULTS IN SALES DECLINE

In 1996, the Shillers decided to change the compensation system from full commission to salary. This change was the result of a recommendation from a newly hired vice-president of store operation who had been the vice-president of a major U.S. clothing retailer. Her intention was to attract more recruits for Blinds To Go's expansion phase by standardizing store operations and compensation. At that time, there were already 15 stores and expansion was underway. Based on her prior experience at the U.S. retailer, she led the change from full commission to paying sales associates a wage of Cdn$8 per hour. This was intended to make sales associates less entrepreneurial and more customer-service focused. Store manager compensation was also revised to reflect a higher base salary component

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relative to commissions. A more casual uniform was mandated in place of the business casual attire that was being worn at stores. In an attempt to differentiate the roles of sales associates and store management, it was decided that the store manager would no longer be involved in the sale. Though skeptical of this recommendation, the Shillers reluctantly agreed to proceed as suggested, rolling out these changes in 1996.

Sales declined between 10 per cent to 30 per cent in both new and existing stores from 1996 to 1997. Overall staff turnover increased to more than 40 per cent from a pre-1995 figure of 15 per cent. This problem was further exacerbated by the fact that rapid store expansion into Toronto, Philadelphia and Detroit had required the deployment of skilled store staff, thinning the ranks of existing stores. The Shillers attributed this decline in performance primarily to the change in the compensation structure.

BTG REVERTS TO COMMISSION-BASED COMPENSATION

Unsatisfied with this turn of events, a change was made in the leadership of the stores' team. A variation of the commission-based compensation plan was brought back in May 1998 (see Exhibit 1). Udofia explained why he believed that commission was key to the sales culture of Blinds To Go:

When we made the 1996 change, the base salary of $8/hour made it much easier to staff the store, but we were attracting a lower caliber of people our best commission-based people did not like it and left. Having learned our lesson, we went back to our roots, brought back the old culture and experienced a sales turnaround. But, we've never 100 per cent recovered from it and are still playing catch-up today.

Since the return to commission-based compensation in 1998, store sales improved across the board, and within a few months, stores were posting between 10 per cent to 30 per cent increases in sales from the previous year (see Exhibit 2).

This dramatic turnaround was accomplished with the aid of several other initiatives. First, all U.S. district sales managers (DSMs) were brought to Toronto to see top-performing stores, thus establishing a performance benchmark. Next, a BTG employee stock option plan for store employees (all full-time sales associates were made partners and given shares in the company) was implemented along with a sales award and recognition program. Also, weekly development conference calls between senior management and the district sales managers and training managers were set up for the purpose of constant updates and to facilitate group

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learning. Finally, a manager/assistant training program was tested in the U.S. in early 1998. 1

The 1998 shift back to commission caused another huge turnover in BTG stores. This was unfortunate, because, from a staffing perspective, BTG had still not fully recovered from the previous compensation change. The need for additional staff was further aggravated due to BTG's continued push for growth and the tight U.S and Canadian labor markets (four per cent unemployment) in which it operated.

Another concern was that a commission-based compensation structure would not work in the U.S. Martin explained:

The U.S. folks seemed uncomfortable with 100 per cent commission. They seem to prefer a straight wage or salary. Thus, we have not figured out our compensation system, but for now, it's largely commission based. We know that for the people who are good, they will figure out what they need and go get it. Commission for us is like an insurance policy on our hires the better you are the more you make. If you don't like servicing the customers, you leave.

Along with the reversion to the proven BTG compensation structure, Blinds To Go emphasized the practice of promoting their managers from within. Senior management believed that sales managers had to be properly motivated and provided them with a combination of store sales commission and opportunities for rapid advancement in the growing organization. However, being a top salesperson did not necessarily guarantee promotion, as Blinds To Go also looked at a matrix of sales, drive, presence, and people skills. Martin explained: "So even with the top salespeople, they have to be solid in their other attributes to be chosen for management. If the person is driven, he or she will ask for what it takes to be promoted."

ATTRACTING QUALITY RETAIL SALES CANDIDATES

BTG was looking for people who possessed certain sales-driven qualities. Martin explained:

We look for people who have the gift of the gab,' no ego, are honest, like sales, are driven and hungry for an opportunity, and have good leadership and good people skills. People have to possess these core values. We're partners we want other people who want to be our partners. We pay for performance. You bet on

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yourself. You get rewarded because you're performing. Entry-level sales associates get 1,000 stock options after 90-days. At another successful retailer start-up that has since gone public, their people only received 500 options each.

Having recognized that quality of staff was paramount, BTG devoted resources to ensure that it hired the right people as it was estimated that 80 per cent of their expansion needs would be for new U.S. stores. BTG store staff was very diverse. In terms of gender, it was a 50/50 split between men and women. Among associates, high school was the most common education level, followed by college students, then college graduates. In Ontario, Canada, 20 per cent of the associates were recent immigrants who had college or professional qualifications. The average age of associates was distributed over a typical bell curve between the ages of 18 to 50.

Over the last few years, BTG had tried several recruiting methods to varying degrees of success. There were several formal and informal programs that worked to entice qualified personnel to apply to BTG.

Employee Referral

Having current staff refer friends and family to BTG seemed to be the most effective way to attract a candidate already briefed on the BTG concept. A recent addition to create an incentive to refer was the "BMW" contest where staff could win the use of a BMW car for a year if they referred 10 eventual hires that stayed for at least three months. Employee referrals alone did not currently satisfy BTG's hiring needs.

Internet Sourcing

BTG used the Internet in two ways: BTG solicited rsums at its blindstogo.com site; DSMs and recruiters actively searched online job sites like Monster.com and other job sites to contact potential candidates.

DSM Compensation Readjustment

To put more emphasis on staffing in early 2000, DSMs' incentive bonus was changed from a sales target to new staff quota target. Historically, district sales managers had received an incentive bonus based on sales. Thus, a large part of the DSM's role had evolved to include recruiting responsibilities the DSM now had to hire 10 new sales associates a month.

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BTG Retail Recruiters

Professional recruiters were hired in early February 1998 and had been paid annual salaries ranging from $30,000 to $60,000. Recruiters generate leads through cold calls (in-person and via telephone), networking referrals, colleges, job fairs, the Internet, and employment centres. Even though they were given some training and recruiting objectives, the initial recruiters had averaged around four hires per month (against the company objective of four hires a week). "Overall, the performance was sub-optimal," lamented Martin. "By paying them a base salary, we divorced performance from pay and they became administrators." For recruiters, a switch was made in early 2000 to a mix of salary and commission. "They will still need to average four hires a week but we've increased our training and the 'per hire' commission will focus them on results," Martin concluded.

Newspaper Advertising

BTG used weekly newspaper advertising for nine months starting in mid-1998. Although this method generated a sufficient number of candidate leads, senior management believed that this medium did not generate the quality of candidates that it needed newspaper advertising attracted people who did not possess the skills and core values that BTG was looking for.

Store Generated Leads

Each BTG had a "help wanted" sign on its window, and walk-in traffic, along with customer referrals, resulted in some sales associates becoming hired. Overall, this was very successful only in stores located in densely populated areas with foot traffic.

THE HIRING PROCESS AT BLINDS TO GO

Once potential candidates were persuaded to apply, a store visit was arranged. The purpose of this visit was to acquaint the potential candidates with the BTG environment and for them to get an overview of the job of a sales associate. Subsequently, the DSM administered a telephone interview. If the candidates were selected to proceed beyond this screen, two additional face-to-face interviews awaited them one with the DSM and another with the store manager. BTG hired associates against these six criteria:

1. "Gift for Gab"

2. Outgoing personality

3. Energetic and motivated

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4. Honest

5. Likes sales or dealing with people

6. Positive

If the candidate was selected to be a sales associate, then references were checked and offers extended.

THE RESULTS OF HIRING PROCEDURES

Before collecting data, it was the impression of senior management at BTG that the most effective method of attracting quality candidates was employee referral, followed by Internet sourcing, and then DSM recruitment. To confirm their suspicions, BTG tracked the yield of different hiring methods for June and July 2000 and as of the end of July, had these results to show:

Recruiting Method

June

9

July

0

Total (2 mth)

9

Cold Call (Recruiters)

Walk-ins

31

9

16

3

47

Internet

12

Employee Referral

39

8

20

8

59

DSM hires (Direct/Rehires/College)

96

47

16

143

Total

Martin explained that the highest ratio of leads to hire was in the employee referrals. This was partially attributed to the fact that referrals generally pursued employment with BTG, excited by the opportunity that a friend or family member who was a BTG employee had recounted. Cold calling was thought to have the lowest close rate because the recruiter had to first educate, then convince potential recruits. But cold calling was thought to be time-efficient if the recruiter was good. Recruiters were focused on non-store sources (cold calling, Internet, schools, etc), store sources (store walk-ins and employee referrals) were handled by the DSM. Recruiters were now paid $20,000 a year with a bonus of $150 to $500 for each successful hire, defined as a hire who stayed at least three months.

STAFF TURNOVER

BTG also began tracking staff turnover and had created a turnover list from existing data. A large percentage of staff voluntary turnover occurred in their first four months. The higher turnover after eight months was partly due to termination because of sales underperformance. Also, sales associates who were not progressing as fast as their peers would inevitably be dissatisfied, leaving for other jobs.

Number of staff leaving and length of stay (numbers from June and July 2000)

Length of Stay

1 to 4 months

5 to 8 months

8+ months

Total

29

12

13

BLINDS TO GO FUTURE NEEDS

BTG needed these additional staff to proceed with its expansion plan of 50 stores per year and to fill current store requirements.

Position

Current complement

Extra personnel needed for expansion (per year)

Sales Associate

1,000

500

Selling Supervisor

150

50

Asst. Store Manager

150

50

Store Manager

150

50

Udofia had one more pressing concern on his mind:

We're planning an initial public offering in the next one to two years. The key to our success is our ability to recruit and develop enough people to meet our growth objectives.

He wondered what strategy he should follow to meet the staffing challenge ahead. From the above case please answer the below questions...

1. Why is Blinds To Go having difficulty attracting and retaining retail staff?

2. Are the elements of the organizational design at the retail store level "aligned" to facilitate the retention of new employees? Why?

3. What recommendations would you give BTG to improve their staffing practices?

in APA format . 12 font and double spacing