ECR Shrink & OSA Group

1. ECR Shrink & OSA Group Employee Engagement Workshop Proposal

2. Background In September 2014, the team published a report on the significant role that engaged employees play in improving on shelf availability and lower shrink & waste. (See slides in appendix and download the full report from the website) On November 4th, the ECR team will organise a workshop in London to promote these findings and generate new thinking on how to action the insights. This document provides more detail on the event and the financial scenario’s.

3. Speakers • Professor Adrian Beck – University of Leicester • Professor Zeynep Ton – MIT Sloan / Harvard • Teaches MBA in operations management, supply chain management, service operations, sustainability and operations strategy. • Published author, recipient of Multiple awards • Author of the Good Jobs Strategy (see Appendix 2) • TBC – Managing Director, Aldi – the role of employee engagement in discount retailing

4. Proposition Event title: WHY RETAIL STAFF MATTER IN THE EFFECTIVE MANAGEMENT OF RETAIL LOSSES AND ON-SHELF AVAILABILITY The Idea: An interactive workshop to learn new ways your employees can transform the shopper experience and the bottom line - ONLY LIMITED SPACES AVAILABLE When: Tuesday 4th November 2014, Goodenough College, Mecklenburgh Square, London WC1N 2AB

5. Target Audience • Retailers • Human Resources, Loss Prevention, Store Operations, Customer Service, Senior Management • Solution Providers • Gallup, Checkpoint, Training organisations, Recruitment organisations • Investors / Academics

6. Agenda - Morning 09.30 Coffee and Registration 10.00 Introductions & Workshop Expectations - John Fonteijn/Colin Peacock What can you expect to learn over the day? What would have to be true for you to say “wow! that was a most excellent day and superb investment of my precious time!” 10.15 Employee Engagement – Making the Link to Increased Sales and Lower Losses - Professor Adrian Beck How much will on-shelf availability improve and retail losses reduce if employee engagement increases? What are the key management, interventions that can improve employee engagement? How can these insights be turned into practical short and long term retailer actions? 11.00 Questions & Answer Session with Professor Beck – Employee Engagement and Retail Losses 11.15 Refreshment Break 11.45 The Good Jobs Strategy: Professor Zeynep Ton What do Bad Retail Jobs Look like? How do you deliver Good Retail Jobs in Low Cost Retailing? What are the benefits of Good Retail Jobs? Zeynep will share real world learnings and business results from four “good jobs” retailers: Costco, Mercadona, Trader Joes and QuikTrip 12.30 - Question & Answer Session with Zeynep Ton - The Good Jobs Strategy 12.45 - Lunch

7. Agenda - Afternoon 13.30 Employee Engagement Best Practice, George Gabriel, Living Wage Foundation and TBC Retailer Speaker What is the Living Wage Foundation? What the benefits of the Living Wage? Hear from one major retailer on how the Living Wage is improving their organisation and their business results 14.15 - Question & Answer Session with Living Wage Professor Beck - Employee Engagement and Retail Losses 14.30 - Coffee and tea 14.45 -So what? What can I do next? An Interactive Round Table Session facilitated by Professor Adrian Beck What were the new ideas your table heard today? What were the practical lessons that you could reapply? What would have to be true in your organisation to make these ideas come to life? 15.45- Workshop Feedback John Fonteijn/Colin Peacock Did we deliver what you expected? Did we meet your expectations? What are your next steps? 16.00 - Close

8. Pricing • £390 (€490) includes: • Full day content & takeaway hard copies • Refreshments & Lunch • Bookings Payments online by card or bank transfer via dedicated website http://s541599729.initial-website.co.uk/

9. Marketing

10. Finances Committed Costs of Running Event – circa £14,000 (venue hire, website, salaries of organisers, etc) Requires 37 delegates to break even – need your feedback and support please Note: 50% of any surplus generated will be re-invested in further ECR research – the other 50% is the incentive for the agency organising the event.

11. Appendix 1 Employee Engagement Research

12. Employee Engagement Study How improving employee engagement can transform retail profits through improved availability and lower losses Photo courtesy of James Lee: https://www.flickr.com/photos/124961070@N02/14485059353

13. Contents Research Objectives & Methodology Key Findings Indicated Actions

14. Research Objectives • Do Stores with Lower Employee Engagement have: • Higher Out of Stocks • Higher Waste? • Higher Shrink? • Higher Cash Losses? • If yes, to what extent can lower employee engagement explain any difference in out of stocks, known loss [waste], unknown loss [shrink] and cash loss? • What would be the impact in terms of savings and profit improvement if retailers could improve employee engagement in the quartile of stores with the lowest employee engagement? • What are the actions retailers could take to deliver improved employee engagement? • How can retailers get started?

15. Methodology • Analysis the completed employee engagement questionnaires of over 200,000 store associates working in 1,570 stores for 3 European Grocery retailers with combined sales of over €35BN and a 4% share of the total European Grocery Retailer Market. • Consolidate the 110 unique questions into 4 logical categories: • Management • Contribution • Environment • Organisation • Apply statistical methods to identify the “power” of employee engagement in explaining any variation in out of stocks, known loss, unknown loss and cash losses

16. Example

17. Findings • Do Stores with Lower Employee Engagement have: • Higher Out of Stocks? - YES • Higher Waste? - YES • Higher Shrink? - YES • Higher Cash Losses? - YES

18. Out of Stocks Twice as High

19. Waste Twice as High

20. Shrink Three Times as High

21. Cash Loss Seven Times Higher

22. Findings • Yesusing regression analysis, the research has found that employee engagement can be a very powerful explanation of the variance in loss, especially out of stocks, where 42% of the variance can be explained by the employee engagement score

23. Correlation causation

24. Out of Stocks 8.9% 42% 4.8%

25. Waste 3.3% 17.8% 1.5%

26. Shrink 1.6% 19% 0.5%

27. Findings • Good news! If retailers could improve employee engagement in the quartile of stores with the lowest employee engagement they could increase profits by €380MM

28. €380MM savings

29. Findings • More good news: There is much that the retailers could do to deliver improved employee engagement

30. Possible Actions The team responsible for profit improvement / loss prevention to share these findings with the leaders of the Human Resources / Personnel functions and together build awareness from the C Level and down on the significance of employee engagement – where relevant, execute their own lower quartile improvement plan. Leverage “role model” store managers to share their “habits” to inspire the others via interactive and dynamic training programmes Reward good performance, even if it is only in the form of a regular “thank you” – create simple tools & techniques to facilitate this behaviour change Embed these learnings in existing or new store manager training programmes

31. Possible Actions • Retailers to analyse the existing employee engagement data available for their store associates to establish the statistical significance of employee engagement in explaining variation of losses – develop size of prize model – what if…. • Retailers to review Store Management promotion/selection process and capacity to deliver employee engagement – identify training / mentoring plans • Retailers to reflect on how their business: • Communicates change – full, part time and temporary staff want to know what is happening and why – “Tell Justin” campaigns • Creates opportunities for future development – career planning • Creates a feed back loop from all staff and store managers – employee engagement as a new metric for store managers?

32. Findings • FinallyHere are three immediate suggested actions that Retailer CEO’s could set for their organisations..

33. Three Immediate CEO Actions • Share these findings within your organisation and across functions, especially Human Resources, Profit Improvement / Loss Prevention and Store Operations. • Set the expectation that each function should brainstorm possible “solutions” to deliver short and longer term wins… • Set a time plan, key milestones and accountable individuals.

34. Summary Findings In the stores with the least engaged employees on-shelf availability, waste, shrink and cash losses can be 2-3 times higher than the average. The Store Manager is critical in improving the levels of employee engagement – simply saying “thank you” can make a big difference. By improving employee engagement in just the lowest quartile stores, the potential savings of €380MM for European Grocery retailers is significant. There are many possible actions retailers could take to act on these insights Retailer CEO’s could start by tasking their each function in their organisation to think differently about employee engagement and to request accountable individuals lead brainstorming events to generate actionable ideas.

35. Appendix 2

36. Speakers Almost one in four American working adults has a job that pays less than a living wage. Conven­tional wisdom says that’s how the world has to work. Bad jobs with low wages, minimal benefits, little training, and chaotic schedules are the only way companies can keep costs down and prices low. If companies were to offer better jobs, cus­tomers would have to pay more or companies would have to make less. But in The Good Jobs Strategy, Zeynep Ton, a professor at the MIT Sloan School of Management, makes the compelling case that even in low-cost settings, leaving employees behind—with bad jobs—is a choice, not a necessity. Drawing on more than a decade of research, Ton shows how operational excellence enables companies to of­fer the lowest prices to customers while ensuring good jobs for their employees and superior results for their investors. Ton describes the elements of the good jobs strategy in a variety of successful companies around the world, including Southwest Airlines, UPS, Toyota, Zappos, and In-N-Out Burger. She focuses on four model retailers—Costco, Merca­dona, Trader Joe’s, and QuikTrip—to demonstrate the good jobs strategy at work and reveals four choices that have transformed these compa­nies’ high investment in workers into lower costs, higher profits, and greater customer sat­isfaction. Full of surprising, counterintuitive insights, the book answers questions such as: How can offering fewer products increase customer sat­isfaction? Why would having more employees than you need reduce costs and boost profits? How can companies simultaneously standardize work and empower employees? The Good Jobs Strategy outlines an invaluable blueprint for any organization that wants to pur­sue a sustainable competitive strategy in which everyone—employees, customers, and investors—wins.