SECTION A $[40$ MARKS$]$

Read the article below and answer ALL the questions that follow.

Valuing Employees: The Case of Shop Smart Wholesale

Shop Smart opened in $1996$ with one store in San Diego and grew from zero to $$3$ billion in sales within six years. It

currently operates over $825$ locations, boasts over $111$ million membership$-$card holders, and has annual sales over $$196$

billion globally. This makes them the fifth largest retailer worldwide. It is not an overstatement to say that Shop Smart

transformed the retail world. It credits its success to three key qualities:

$.$ A commitment to quality

$.$ An entrepreneurial spirit

$.$ A strong employee focus

While it$$s one thing for the company to say it has $$created a workplace culture that attracts positive, high$-$energy, talented

employees$,$ it$$s another to have others note such things. For example, $$People matter here$$ was written by a Shop Smart

employee and posted to Glassdoor.com, a website that allows current and former employees to anonymously post

complements and critiques about companies. Shop Smart is known as a desirable employer, in part because of its strong

Human Resource policies. For example, $50\%$ of US$-$based Shop Smart employees earn more than $$25$ per hour $($with a

minimum of $$16$ per hour$),$ compared to employees in other retail environments, where $$10\mathrm{.}50$ is closer to the average

hourly pay, and $65\%$ higher than their biggest competitor, Jodies$$ Market. Beyond that, Shop Smart is also described as

having a casual culture with strong job security, having managers who take employee development to heart, and

providing many opportunities to learn and grow. Finally, the company is known to take its mission statement seriously.

So$,$ why does Shop Smart make these huge investments in its nearly $300,000$ employees? Richard Garcia, former CEO

of Shop Smart, is quoted as saying, $$When employees are happy, they are your very best ambassadors.$$ Although HR at

Shop Smart is not directly run by its CEO, such a strong set of values at the executive level influences all HR practices at

Shop Smart. Beyond Shop Smart$$s stated appreciation of employees, Shop Smart engages in many HR practices that

indicate that the organisation values its employees. For example, they promote from within. They encourage and listen to

employee suggestions. They give managers authority to experiment with activities helpful to increasing sales and$/$or

reducing costs. The effectiveness of such practices is among the reasons that Garcia was named as one of the $100$ Most

Influential People in Business Ethics. As a founder and CEO, he made a big profit for the company while putting people

first, so it is$.$ hard to argue with his success. Although Shop Smart pays considerably more than the industry average,

including bonuses and other incentives, its revenues and stock price continue to grow. In fact, the value of Shop Smart

stock from $1996$ until Garcia$$s retirement in $2019$ increased by $4000\%.$ It seems to be an investment that pays off well for

the company. For example, estimates are that Shop Smart employees generated twice the revenue of Jodies$$ Market

employees$$ their turnover rate is $5\%$ after employees have worked at Shop Smart for one year, which is extremely low for

the retail industry$$ and their $$shrinkage$($an indicator of employee theft$)$ rate is one of the lowest in the industry.

A true test of the company$$s culture and HR practices rests on its ability to maintain its values even during changes in

leadership. Shop Smart has fared well in this dimension. The next CEO, Craig Petrovic, has continued this trend since

taking over in $2019.$ Petrovic first joined Shop Smart in $2005$ so he was not a newcomer to the organisation. Today, Shop

Smart is thriving, its stock price is at a record high, and Petrovic was named CEO of the Year in $2023$ by a leading news

organisation.

Source: Adapted from: Bauer, T$.,$ Erdogan, B$.,$ Caughlin, D$.$ and Truxillo, D$.(2023)$ Human Resource Management:

People, Data and Analytics. Thousand Oaks: Sage.

QUESTION $1(20$ Marks$)$

Critically discuss the extent to which Shop Smart$$s approach to human resource management is strategic.