strategic staffing 4thedition by philips.. chern' s case study

APPENDIX Strategic Staffing at Chern's: A Case Study CHERN'S COMPANY HISTORY AND ORGANIZATION Siblings Ryan and Ann Chern founded Chern's, an upscale men's and women's department store, 20 years ago after they graduated with their MBAs. The pair had planned to launch their own company for years, and refined their business model after each spent a great deal of time learning about the retail industry by working in different retail organizations. The product mix and high-quality products Chern's sells made it rapidly successful, and the company developed a loyal following. The firm quickly expanded its product line and began opening additional loca- tions 15 years ago. Ryan and Ann have turned their basic idea of providing customers with the best service, selection, quality, and value into a thriving business. The two are now co-presidents of Chern's: Ryan serves as the company's chief executive officer; Ann serves as the company's chief operating officer. Chern's pursues an aggressive growth strategy. Currently the company has 140 stores in 28 states on the East Coast and in the Midwest. Chern's employs an average of 19,000 full- and part-time employees. Providing superior customer service has been the company's main business strategy and has successfully differentiated it from its competitors. Although the company's prod- ucts are expensive, the high product quality and excellent customer service have made the company successful. Because customers' tastes can differ from one store to the next, the company tries to be as decentralized as possible. Therefore, it gives its store managers a considerable amount of discre- tion in terms of how they run their stores. Likewise, each manager runs his or her own department as a small business and is rewarded according to the departments and the store's overall success. Because customer service lies at the heart of the company's business strategy, it is a core part of the corporate culture of Cherns. Ann and Ryan believe that customer service is the essence of selling and that because the firm's sales associates are in direct contact with customers, they are the core drivers of the company's performance. Both department managers and assistant depart- ment managers support the sales associates. Besides giving the sales staff their full support, the department managers at Chern's are, in turn, supported by their store managers, assistant depart- ment managers, buyers, and merchandising managers. Figure A-1 illustrates these relationships. Core values are an essential part of the Chern's brand and are the foundation of its culture. The company's family ownership contributes to its desire to make every employee and customer feel valued and cared for. The firm is known for its strong and unique culture, which it feels is due to its belief that the best approach to business is to hire good people. As such, Chern's tries to iden- tify and select the right people, train them, and give them the tools and autonomy they need to suc- ceed. Successful employees are rewarded with above-market base salaries and generous bonuses. Store Manager Buyers Merchandising Managers Assistant Department Managers Department Managers Sales Associates FIGURE A-1 The Sales Support Relationships among Chern's Staff Members The management philosophy at Chern's is based on empowerment. Chern's believes that by hiring well it can trust its employees to use their own judgment. Consequently, the firm gives them a considerable amount of freedom in terms of how they do their jobs. By striving to create a fair and positive environment and giving each employee the tools and autonomy he or she needs to succeed, the company feels it has created an environment in which its sales asso- ciates can truly excel. In fact, last year, 42 Chern's sales associates sold at least $1,000,000 in merchandisea company record. Because Chern's has a strong reputation for customer service, quality, and selection, it enjoys very positive brand recognition among its targeted customers. It is consistently named one of the top three retailers in regional customer surveys and has been listed among Fortune magazine's top 100 best companies to work for. Last year the company ranked number 72 on Fortune's list, down from 44 the previous year. It was the second-highest retailer on the list, behind Nordstrom's. It also ranked as having the best customer service among retailers for the past three years in customer surveys developed by the National Retail Federation. In addition to focusing on customer service, selection, quality, and value, Chern's has invested heavily in information-technology tools to improve its inventory management and help its sales associates make efficient transactions with customers. The company recently imple- mented a Perpetual Inventory System to help its buyers react more quickly to the feedback given to them by its sales associates and to track inventory to quickly adjust each store's product mix and clothing sizes available. The technology has helped the company increase its efficiency and lower its costs as well as add value for its customers. CHERN'S FINANCIAL PERFORMANCE Chern's has enjoyed a strong financial performance over the last few years. Over the past five years, the company's share price has increased 134 percent and the company's revenues have grown at an annualized rate of 9 percent. Revenues and net income have grown as all of the firm's stores have reported sales increases every year over the past three years. Growing rev- enues and income have provided the company with the financial base and stability it needs for further expansion. The five-year growth strategy at Chern's is to open 15 new stores a year and to continue to grow at an annual rate of 9 percent. Figure A-2 shows the company's revenue, gross profit, and net income trends for the last three years. The company's good financial performance has translated into strong operating cash flow, giving it the option of reinvesting in its business, buying back shares, or passing some of its earn- ings to investors in the form of dividends. Figure A3 shows the operating cash flow trend at Chern's over the past three years. 03 Years Ago 2 Years Ago Last Year 406 / 450 Net Income Gross Profit Total Revenue FIGURE A-2 Three-Year Revenue, Gross Profit, and Net Income Trends for Chern's Three Years Ago Two Years Ago Last Year FIGURE A-3 Three-Year Cash Flow Trend for Chern's Chern's has funded its expansion using its earnings rather than by taking on debt. The company believes that its conservative debt policies and strong cash flow help create shareholder value by enabling it to expand into new markets. CHERN'S HUMAN RESOURCES Chern's averages 1 store manager, 8 department managers, 8 assistant department managers, and approximately 100 full-time and 25 part-time sales associates per store. Full-time employees receive a generous benefits package, two weeks paid vacation, and are eligible for bonuses. Part- time employees are considered members of the core workforce and receive prorated benefits and bonuses. Because it feels that they would not reinforce its culture, Chern's does not currently utilize temporary or contingent workers of any kind. Turnover among its full-time sales associ- ates has been relatively stable, averaging 20 percent over the past three years. Turnover among the company's part-time sales associates has also been relatively low compared to similar retail operations, averaging 15 percent over the past three years. The part-time sales associates are used to increase the number of sales associates on the floor during peak periods. The human resources department at Chern's generally does a good job supporting the company's business strategy. The company's compensation, performance management, and training are all designed to get sales associates up to speed and selling quickly. The base pay they earn is 20 percent above the market average, and Chern's matches in their 401(k) plans up to 10 percent of their base pay. Twenty percent of a sales associate's bonus is tied to the person's customer service performance as rated by his or her department manager, 40 percent is based on individual sales performance in relation to that person's sales target, and 40 percent is based on overall store sales. New employees have a reduced sales target for their first year. Sales associ- ates can earn up to 150 percent of their base pay in bonuses based on both sales and customer satisfaction ratings. Top performers at Chern's earn well above the market average in pay. Semiannual performance evaluations assess sales associates' initiative, customer service behaviors, coworker support behaviors, and leadership. Raises to an associate's base salary include a cost-of-living adjustment based on inflation, and from 0 to 10 percent based on the department manager's perception of the sales associate's performance, adherence to company values, and leadership contributions. Sales associates are also given 10 personal days, includ- ing sick days, and generous health and dental benefits. If a sales associate refers a candidate to Chern's, and the person is hired, the company gives the employee a $1,000 referral bonus after the new hire passes the six-month mark with strong performance. Chern's largely focuses its training and development activities on its new hires. New hires undergo a two-day orientation. Each then receives on-the-job training from his or her department manager and shadows another sales associate for one week. Employees receive additional train- ing only if they fail to reach their sales quotas two months in a row. Sales associates who fail to reach their quotas four months in a row are given a warning. Those who fail to meet their quotas five months in a row are terminated. Sales associates can use the store's technology to identify how they are performing relative to their quotas. Chern's expects its employees to be relatively "tech savvy" and be willing and able to quickly learn its systems. Customer information, including information about their previ- ous purchases and fashion preferences, is stored in the company's computer for fast retrieval. Chern's also uses technology to give its buyers feedback about its customers' preferences and purchasing trends. The company's sales associates are also required to record information about customers' inquiries and unfilled requests for particular types of clothing. This is critical because it helps each department better track its inventory and quickly adjust its product mix and sizes to meet the changing demands of its customers. Sales associates can also use the store's computers to check inventory at other Cherns locations to better assist clients in locating desired products. THE COMPETITION CHERN'S FACES Chern's primary competitors include Nordstrom, Dillard's, Barney's, Nieman Marcus, and Saks Fifth Avenue. Table A-1 shows the previous and current year's sales, net income, and employee headcount for Chern's relative to its competitors. At Chern's, sales associates execute the company's customer service strategy by building long-term relationships with their clientele. Sales associates feel empowered, and their business freedom is strongly supported by the corporation as long as the employees work hard and do their best. Cherns tries to hire sales associates with an entrepreneurial spirit, a drive to be suc- cessful, and a desire to make money. The sales force's accountability for results and Chern's high expectations of them means that Chern's wants to hire only elite sales associates. TABLE A-1 One-Year Performance of Chern's Relative to Its Competitors Nieman Marcus Saks Fifth Avenue Chern's Nordstrom Dillard's Barney's 3,800 8,111 8,525 326 4,390 2,249 9.7 9.9 (.9) 2.3 6.9 8.2 193.4 672.5 242.2 24.2 247.8 164.2 9.0 6.9 .8 0.6) 6.0 6.4 Previous year's sales ($ millions) Current year's sales Growth (%) Previous year's net income ($ millions) Current year's income growth (%) Previous year's headcount (full and part time) Current year's headcount growth (%) 19,000 56,500 54,300 1,400 17,900 11,750 9 2.9 (1.2) .9 4.1 3.9 The levels of customer service excellence and sales skills required by Chern's employees are not the same for most other retail firms. High-end retailers, such as Neiman Marcus and Nordstrom, tend to compete more directly with Chern's for hires than do competitors such as Dillard's and Federated Department Stores, which focus less on customer service. The quality of Chern's sales force has enabled it to offer employees considerable upward mobility within the company, which is unusual for a retailer. Chern's fills 75 percent of its department manager and assistant department manager positions internally, whereas most of its competitors fill their man- agement positions externally; 80 percent of the current store managers at Chern's once worked as sales associates for the firm. Promotion from within is important to the company. Both Ryan and Ann strongly believe that internal hires reinforce the company's strong culture. In order to provide the highest-quality customer service and capture market share, Chern's knows it needs to hire the right sales associates. Although the company's strong culture and high quality initially attracted a sufficient number of talented sales associates who shared the firm's values, the competition for talented sales associates has been heating up. As a result, Chern's is finding it harder to staff and retain the level of sales talent it needs. The sales associates at Chern's are usually the top performers in the retail industry, so they are never easy to find. Because of the importance of hiring the right salespeople, and their expectation that staffing this important position will become more difficult in the future, Ann and Ryan have decided to launch a strategic analysis of how Chern's staffs its sales associate positions and have asked for your help. Chapter 8: Measurement, Chapter 9: Assessing External Candidates Remember to write your report so that the various measurements you learned about in these chapters will be understandable to the firm's store managers and department managers. These employees do not have a staffing or statistics background. Consequently, many of the concepts you discuss in the report will be unfamiliar to them. Be sure you thoroughly explain the concepts and their importance. This will be particularly important when completing the next part of the assignment, which spans Chapters 8 through 11. Chern's is in the middle of hiring two sales associates for its flagship store and has reduced the initial applicant pool to eight candidates. Because it is the company's flagship store, it is important that all sales associates who work at the store excel at customer service and embody the company's values, and they need the new people to get up to speed quickly. Although Chern's often invests in the training and development of new employees, in this case they would like the two new hires to arrive with the knowledge, skills, abilities, competencies, and other characteristics required to be immediately successful. They also would like the newly hired sales associates to be strong candidates for future management positions. Ryan and Ann ask you to become involved in the assessment and hiring process. Nearly 80 percent of Chern's sales associates are considered successful. However, Chern's would like the percentage to be at least 85 percent. Ryan and Ann feel that improving the company's assess- ment and selection system will help it accomplish this goal. Use this opportunity to help Chern's develop a new sales associate assessment and selection system. This is a pilot project to deter- mine how well you are able to improve Chern's staffing process. All eight candidates are already scheduled to participate in one structured and one unstruc- tured interview that you are asked to view and score (you may or may not choose to score and use the unstructured interviews). After deducting the costs of the initial applicant screening and the two scheduled interviews for each candidate from the initial budget, the store has $4,000 left to apply to this staffing initiative. It's up to you to decide how to spend the money. What other assessment methods should you use? (The costs of the two interviews are not to be included in your $4,000 budget.) The assignment for Chapter 8 is to read the case assignment spanning Chapters 8 through 11 and review the eight candidates' rsums at the end of the appendix. You then need to develop an assessment plan that does not exceed your $4,000 budget. Your goals in developing your sales associate assessment system are threefold: 1. Maximize the return on investment of your assessment system. 2. Maximize the job success of the new sales associates hired (in terms of their sales, turn- over, and levels of customer service). 3. Maximize the fit of the new sales associates hired (including their customer service orien- tation and leadership skills) with the company's culture. TABLE A-Z Potential Assessment Methods and Their Costs Assessment Method Scale of Assessment Cost Cognitive ability test (measures Typical scores range from 85 to $70 per candidate a candidate's ability to learn, 130 (mean and standard deviation process, and apply information for this sample are 112.5 and 8.02, rapidly; verbal, spatial, and respectively). mathematical abilities) Conscientiousness (measures Possible scores range from 1 to 6 $100 per candidate a candidate's persistence, (mean = 4.38, std. dev. = 1.06). dutifulness, order, attention to detail, and achievement motivation) Openness (measures a candidate's Possible scores range from 0 to 60 $30 per candidate openness to new ideas and (mean = 42.50, std. dev. = 7.07). situations and intellectual curiosity) Sales interest (measures a Possible scores range from 1 to 5 $50 per candidate candidate's interest in sales as (mean = 3.63, std. dev. = .92). a career; vocational interest inventory) Desire to avoid failure (measures Possible scores range from 1 to 4 $30 per candidate a candidate's need to avoid failure (mean = 2.88, std. dev. = .83). and desire to avoid taking risk) Technology skills test (measures Possible scores for this test range $70 per candidate a candidate's ability to become from 0 to 80 (mean = 58.13, std. proficient with the company's dev. = 7.99). various technology tools) Job knowledge test (measures Possible scores for this test range $150 per candidate a candidate's knowledge of from 0 to 50 (mean = 36.88, std. sales techniques, understanding dev. = 7.04). of effective customer service practices, and awareness of related issues in the retail industry) Simulation (measures a Possible scores for the simulation $250 per candidate candidate's leadership, sales, range from 0 to 70 (mean = 43.75, judgment, and customer service std. dev. = 10.61). skills using a work simulation) Integrity test (measures a Possible scores for this test range $70 per candidate candidate's trustworthiness, from 1 to 5 (mean = 3.50, std. dev. = integrity, and honesty) 0.93). Fashion knowledge test (measures Possible scores for this test range $50 per candidate a candidate's knowledge of fashion from 0 to 60 (mean = 38.75, std. trends, styles, and fabrics as they dev. = 8.76). apply to a variety of customers) Handwriting analysis (measures Possible scores for this analysis $150 per candidate a candidate's trustworthiness, range from 0 to 10 (mean = 5.38, personal drive, dependability, std. dev. = 3.38). sociability, and desire to achieve) Table A-7 summarizes the possible assessment methods you can use and their costs. Next is an overview of the steps you will need to take in completing the next parts of the assignment and the chapter in which each part is assigned. The work will be spread out over the next few chapters. 1. Develop a sales associate assessment and selection plan that does not exceed the remaining $4,000 budget. In your report, justify your proposed selection system using the determi- nants of the effectiveness of an assessment method identified in Chapter 8. These determi- nants include the following: a. Validityhow well the assessment method predicts relevant components of a person's job performance. Table 93 describes typical validities for various assessment tools across many different occupations. You can look at Table 93 and consider the results of your job analysis/competency model to determine which assessment is most likely to predict job performance at Chern's. b. Return on investmentthe extent to which the assessment method generates a finan- cial return that exceeds the cost associated with using it. c. Applicant reactionsthe extent to which applicants perceive the assessment methods to be job related and fair. d. Selection ratiothe extent to which the selection ratio is low. A low ratio means hiring only a few applicants, which allows an assessment method to have maximal impact in terms of improving the performance of the people hired. e. Usabilitythe extent to which people in the organization are willing and able to use the method consistently and correctly. f. Adverse impactthe extent to which an assessment method predicts job performance and other important hiring outcomes without discriminating against members of a pro- tected class. 2. Before viewing the interviews for the next part of the selection process, develop a scoring key for each structured interview question and create a formula to combine the three scores into an overall structured interview score (Chapter 8). The three structured interview ques- tions are as follows: a. A disgruntled customer is returning a damaged suit jacket he bought the previous week that he needed for an event that night. He is extremely upset. What do you do? b. A person walks into your store and mentions that she has just moved into the area and that this is the first time she has visited your store. What would you do to make her a customer now and a loyal customer in the future? c. You're working alone because two people called in sick. Suddenly, five customers walk into your department at once. What do you do? If you plan to use the unstructured interviews to assess candidates (optional), create a scoring key for the unstructured interview based on your expected determinants of suc- cess at Chern's. The scoring keys for both types of interviews should reflect the KSAOs or competencies assessed by the questions or interview, not the answers to the questions themselves. Then view the eight structured and eight unstructured interviews available on the book's Web site or if your instructor prefers, view them as a part of the class (Chapter 9). 3. Before or during your next class, submit your assessment plan to your instructor. Your instructor will then give you the candidates' scores on the assessments you choose to uti- lize (Chapter 9). If your instructor agrees, you can use a multiple hurdles, compensatory, or combined approach for your assessment plan. 4. Using your interview score results, candidate rsums, and scores on the assessment meth- ods you included in your assessment plan, determine which two candidates should receive an offer and submit this information along with the rationale for your choice to your instructor. Write a job offer letter to your top chosen candidate, who is currently consider- ing two other job offers from competitors (Chapter 11). At the end of the case, your instructor will give you feedback on the job success of your two new hires. For now you will work on step 1. Submit your assessment score request to the instructor by the deadline the instructor gives you to receive candidates' scores on the assessments you choose to utilize. Your instructor needs to know which scores you would like and which candidates you would like to assess. You can assess candidates in one round before making a hiring decision or in multiple rounds, depending on your assessment plan. 8. a. Read the next few parts then evaluate the eight candidates' rsums. b. Create a scoring key for the interviews. 9. a. Develop an assessment and selection plan that does not exceed the remaining $4,000 budget. b. Justify your proposed selection system in your report. c. Submit your assessment plan to your instructor. Receive scores from your instructor. d. Use the scoring key you developed for the structured interviews to view and score the eight structured interviews. Also view the eight unstructured interviews and score them if you included them in your assessment plan. APPENDIX Strategic Staffing at Chern's: A Case Study CHERN'S COMPANY HISTORY AND ORGANIZATION Siblings Ryan and Ann Chern founded Chern's, an upscale men's and women's department store, 20 years ago after they graduated with their MBAs. The pair had planned to launch their own company for years, and refined their business model after each spent a great deal of time learning about the retail industry by working in different retail organizations. The product mix and high-quality products Chern's sells made it rapidly successful, and the company developed a loyal following. The firm quickly expanded its product line and began opening additional loca- tions 15 years ago. Ryan and Ann have turned their basic idea of providing customers with the best service, selection, quality, and value into a thriving business. The two are now co-presidents of Chern's: Ryan serves as the company's chief executive officer; Ann serves as the company's chief operating officer. Chern's pursues an aggressive growth strategy. Currently the company has 140 stores in 28 states on the East Coast and in the Midwest. Chern's employs an average of 19,000 full- and part-time employees. Providing superior customer service has been the company's main business strategy and has successfully differentiated it from its competitors. Although the company's prod- ucts are expensive, the high product quality and excellent customer service have made the company successful. Because customers' tastes can differ from one store to the next, the company tries to be as decentralized as possible. Therefore, it gives its store managers a considerable amount of discre- tion in terms of how they run their stores. Likewise, each manager runs his or her own department as a small business and is rewarded according to the departments and the store's overall success. Because customer service lies at the heart of the company's business strategy, it is a core part of the corporate culture of Cherns. Ann and Ryan believe that customer service is the essence of selling and that because the firm's sales associates are in direct contact with customers, they are the core drivers of the company's performance. Both department managers and assistant depart- ment managers support the sales associates. Besides giving the sales staff their full support, the department managers at Chern's are, in turn, supported by their store managers, assistant depart- ment managers, buyers, and merchandising managers. Figure A-1 illustrates these relationships. Core values are an essential part of the Chern's brand and are the foundation of its culture. The company's family ownership contributes to its desire to make every employee and customer feel valued and cared for. The firm is known for its strong and unique culture, which it feels is due to its belief that the best approach to business is to hire good people. As such, Chern's tries to iden- tify and select the right people, train them, and give them the tools and autonomy they need to suc- ceed. Successful employees are rewarded with above-market base salaries and generous bonuses. Store Manager Buyers Merchandising Managers Assistant Department Managers Department Managers Sales Associates FIGURE A-1 The Sales Support Relationships among Chern's Staff Members The management philosophy at Chern's is based on empowerment. Chern's believes that by hiring well it can trust its employees to use their own judgment. Consequently, the firm gives them a considerable amount of freedom in terms of how they do their jobs. By striving to create a fair and positive environment and giving each employee the tools and autonomy he or she needs to succeed, the company feels it has created an environment in which its sales asso- ciates can truly excel. In fact, last year, 42 Chern's sales associates sold at least $1,000,000 in merchandisea company record. Because Chern's has a strong reputation for customer service, quality, and selection, it enjoys very positive brand recognition among its targeted customers. It is consistently named one of the top three retailers in regional customer surveys and has been listed among Fortune magazine's top 100 best companies to work for. Last year the company ranked number 72 on Fortune's list, down from 44 the previous year. It was the second-highest retailer on the list, behind Nordstrom's. It also ranked as having the best customer service among retailers for the past three years in customer surveys developed by the National Retail Federation. In addition to focusing on customer service, selection, quality, and value, Chern's has invested heavily in information-technology tools to improve its inventory management and help its sales associates make efficient transactions with customers. The company recently imple- mented a Perpetual Inventory System to help its buyers react more quickly to the feedback given to them by its sales associates and to track inventory to quickly adjust each store's product mix and clothing sizes available. The technology has helped the company increase its efficiency and lower its costs as well as add value for its customers. CHERN'S FINANCIAL PERFORMANCE Chern's has enjoyed a strong financial performance over the last few years. Over the past five years, the company's share price has increased 134 percent and the company's revenues have grown at an annualized rate of 9 percent. Revenues and net income have grown as all of the firm's stores have reported sales increases every year over the past three years. Growing rev- enues and income have provided the company with the financial base and stability it needs for further expansion. The five-year growth strategy at Chern's is to open 15 new stores a year and to continue to grow at an annual rate of 9 percent. Figure A-2 shows the company's revenue, gross profit, and net income trends for the last three years. The company's good financial performance has translated into strong operating cash flow, giving it the option of reinvesting in its business, buying back shares, or passing some of its earn- ings to investors in the form of dividends. Figure A3 shows the operating cash flow trend at Chern's over the past three years. 03 Years Ago 2 Years Ago Last Year 406 / 450 Net Income Gross Profit Total Revenue FIGURE A-2 Three-Year Revenue, Gross Profit, and Net Income Trends for Chern's Three Years Ago Two Years Ago Last Year FIGURE A-3 Three-Year Cash Flow Trend for Chern's Chern's has funded its expansion using its earnings rather than by taking on debt. The company believes that its conservative debt policies and strong cash flow help create shareholder value by enabling it to expand into new markets. CHERN'S HUMAN RESOURCES Chern's averages 1 store manager, 8 department managers, 8 assistant department managers, and approximately 100 full-time and 25 part-time sales associates per store. Full-time employees receive a generous benefits package, two weeks paid vacation, and are eligible for bonuses. Part- time employees are considered members of the core workforce and receive prorated benefits and bonuses. Because it feels that they would not reinforce its culture, Chern's does not currently utilize temporary or contingent workers of any kind. Turnover among its full-time sales associ- ates has been relatively stable, averaging 20 percent over the past three years. Turnover among the company's part-time sales associates has also been relatively low compared to similar retail operations, averaging 15 percent over the past three years. The part-time sales associates are used to increase the number of sales associates on the floor during peak periods. The human resources department at Chern's generally does a good job supporting the company's business strategy. The company's compensation, performance management, and training are all designed to get sales associates up to speed and selling quickly. The base pay they earn is 20 percent above the market average, and Chern's matches in their 401(k) plans up to 10 percent of their base pay. Twenty percent of a sales associate's bonus is tied to the person's customer service performance as rated by his or her department manager, 40 percent is based on individual sales performance in relation to that person's sales target, and 40 percent is based on overall store sales. New employees have a reduced sales target for their first year. Sales associ- ates can earn up to 150 percent of their base pay in bonuses based on both sales and customer satisfaction ratings. Top performers at Chern's earn well above the market average in pay. Semiannual performance evaluations assess sales associates' initiative, customer service behaviors, coworker support behaviors, and leadership. Raises to an associate's base salary include a cost-of-living adjustment based on inflation, and from 0 to 10 percent based on the department manager's perception of the sales associate's performance, adherence to company values, and leadership contributions. Sales associates are also given 10 personal days, includ- ing sick days, and generous health and dental benefits. If a sales associate refers a candidate to Chern's, and the person is hired, the company gives the employee a $1,000 referral bonus after the new hire passes the six-month mark with strong performance. Chern's largely focuses its training and development activities on its new hires. New hires undergo a two-day orientation. Each then receives on-the-job training from his or her department manager and shadows another sales associate for one week. Employees receive additional train- ing only if they fail to reach their sales quotas two months in a row. Sales associates who fail to reach their quotas four months in a row are given a warning. Those who fail to meet their quotas five months in a row are terminated. Sales associates can use the store's technology to identify how they are performing relative to their quotas. Chern's expects its employees to be relatively "tech savvy" and be willing and able to quickly learn its systems. Customer information, including information about their previ- ous purchases and fashion preferences, is stored in the company's computer for fast retrieval. Chern's also uses technology to give its buyers feedback about its customers' preferences and purchasing trends. The company's sales associates are also required to record information about customers' inquiries and unfilled requests for particular types of clothing. This is critical because it helps each department better track its inventory and quickly adjust its product mix and sizes to meet the changing demands of its customers. Sales associates can also use the store's computers to check inventory at other Cherns locations to better assist clients in locating desired products. THE COMPETITION CHERN'S FACES Chern's primary competitors include Nordstrom, Dillard's, Barney's, Nieman Marcus, and Saks Fifth Avenue. Table A-1 shows the previous and current year's sales, net income, and employee headcount for Chern's relative to its competitors. At Chern's, sales associates execute the company's customer service strategy by building long-term relationships with their clientele. Sales associates feel empowered, and their business freedom is strongly supported by the corporation as long as the employees work hard and do their best. Cherns tries to hire sales associates with an entrepreneurial spirit, a drive to be suc- cessful, and a desire to make money. The sales force's accountability for results and Chern's high expectations of them means that Chern's wants to hire only elite sales associates. TABLE A-1 One-Year Performance of Chern's Relative to Its Competitors Nieman Marcus Saks Fifth Avenue Chern's Nordstrom Dillard's Barney's 3,800 8,111 8,525 326 4,390 2,249 9.7 9.9 (.9) 2.3 6.9 8.2 193.4 672.5 242.2 24.2 247.8 164.2 9.0 6.9 .8 0.6) 6.0 6.4 Previous year's sales ($ millions) Current year's sales Growth (%) Previous year's net income ($ millions) Current year's income growth (%) Previous year's headcount (full and part time) Current year's headcount growth (%) 19,000 56,500 54,300 1,400 17,900 11,750 9 2.9 (1.2) .9 4.1 3.9 The levels of customer service excellence and sales skills required by Chern's employees are not the same for most other retail firms. High-end retailers, such as Neiman Marcus and Nordstrom, tend to compete more directly with Chern's for hires than do competitors such as Dillard's and Federated Department Stores, which focus less on customer service. The quality of Chern's sales force has enabled it to offer employees considerable upward mobility within the company, which is unusual for a retailer. Chern's fills 75 percent of its department manager and assistant department manager positions internally, whereas most of its competitors fill their man- agement positions externally; 80 percent of the current store managers at Chern's once worked as sales associates for the firm. Promotion from within is important to the company. Both Ryan and Ann strongly believe that internal hires reinforce the company's strong culture. In order to provide the highest-quality customer service and capture market share, Chern's knows it needs to hire the right sales associates. Although the company's strong culture and high quality initially attracted a sufficient number of talented sales associates who shared the firm's values, the competition for talented sales associates has been heating up. As a result, Chern's is finding it harder to staff and retain the level of sales talent it needs. The sales associates at Chern's are usually the top performers in the retail industry, so they are never easy to find. Because of the importance of hiring the right salespeople, and their expectation that staffing this important position will become more difficult in the future, Ann and Ryan have decided to launch a strategic analysis of how Chern's staffs its sales associate positions and have asked for your help. Chapter 8: Measurement, Chapter 9: Assessing External Candidates Remember to write your report so that the various measurements you learned about in these chapters will be understandable to the firm's store managers and department managers. These employees do not have a staffing or statistics background. Consequently, many of the concepts you discuss in the report will be unfamiliar to them. Be sure you thoroughly explain the concepts and their importance. This will be particularly important when completing the next part of the assignment, which spans Chapters 8 through 11. Chern's is in the middle of hiring two sales associates for its flagship store and has reduced the initial applicant pool to eight candidates. Because it is the company's flagship store, it is important that all sales associates who work at the store excel at customer service and embody the company's values, and they need the new people to get up to speed quickly. Although Chern's often invests in the training and development of new employees, in this case they would like the two new hires to arrive with the knowledge, skills, abilities, competencies, and other characteristics required to be immediately successful. They also would like the newly hired sales associates to be strong candidates for future management positions. Ryan and Ann ask you to become involved in the assessment and hiring process. Nearly 80 percent of Chern's sales associates are considered successful. However, Chern's would like the percentage to be at least 85 percent. Ryan and Ann feel that improving the company's assess- ment and selection system will help it accomplish this goal. Use this opportunity to help Chern's develop a new sales associate assessment and selection system. This is a pilot project to deter- mine how well you are able to improve Chern's staffing process. All eight candidates are already scheduled to participate in one structured and one unstruc- tured interview that you are asked to view and score (you may or may not choose to score and use the unstructured interviews). After deducting the costs of the initial applicant screening and the two scheduled interviews for each candidate from the initial budget, the store has $4,000 left to apply to this staffing initiative. It's up to you to decide how to spend the money. What other assessment methods should you use? (The costs of the two interviews are not to be included in your $4,000 budget.) The assignment for Chapter 8 is to read the case assignment spanning Chapters 8 through 11 and review the eight candidates' rsums at the end of the appendix. You then need to develop an assessment plan that does not exceed your $4,000 budget. Your goals in developing your sales associate assessment system are threefold: 1. Maximize the return on investment of your assessment system. 2. Maximize the job success of the new sales associates hired (in terms of their sales, turn- over, and levels of customer service). 3. Maximize the fit of the new sales associates hired (including their customer service orien- tation and leadership skills) with the company's culture. TABLE A-Z Potential Assessment Methods and Their Costs Assessment Method Scale of Assessment Cost Cognitive ability test (measures Typical scores range from 85 to $70 per candidate a candidate's ability to learn, 130 (mean and standard deviation process, and apply information for this sample are 112.5 and 8.02, rapidly; verbal, spatial, and respectively). mathematical abilities) Conscientiousness (measures Possible scores range from 1 to 6 $100 per candidate a candidate's persistence, (mean = 4.38, std. dev. = 1.06). dutifulness, order, attention to detail, and achievement motivation) Openness (measures a candidate's Possible scores range from 0 to 60 $30 per candidate openness to new ideas and (mean = 42.50, std. dev. = 7.07). situations and intellectual curiosity) Sales interest (measures a Possible scores range from 1 to 5 $50 per candidate candidate's interest in sales as (mean = 3.63, std. dev. = .92). a career; vocational interest inventory) Desire to avoid failure (measures Possible scores range from 1 to 4 $30 per candidate a candidate's need to avoid failure (mean = 2.88, std. dev. = .83). and desire to avoid taking risk) Technology skills test (measures Possible scores for this test range $70 per candidate a candidate's ability to become from 0 to 80 (mean = 58.13, std. proficient with the company's dev. = 7.99). various technology tools) Job knowledge test (measures Possible scores for this test range $150 per candidate a candidate's knowledge of from 0 to 50 (mean = 36.88, std. sales techniques, understanding dev. = 7.04). of effective customer service practices, and awareness of related issues in the retail industry) Simulation (measures a Possible scores for the simulation $250 per candidate candidate's leadership, sales, range from 0 to 70 (mean = 43.75, judgment, and customer service std. dev. = 10.61). skills using a work simulation) Integrity test (measures a Possible scores for this test range $70 per candidate candidate's trustworthiness, from 1 to 5 (mean = 3.50, std. dev. = integrity, and honesty) 0.93). Fashion knowledge test (measures Possible scores for this test range $50 per candidate a candidate's knowledge of fashion from 0 to 60 (mean = 38.75, std. trends, styles, and fabrics as they dev. = 8.76). apply to a variety of customers) Handwriting analysis (measures Possible scores for this analysis $150 per candidate a candidate's trustworthiness, range from 0 to 10 (mean = 5.38, personal drive, dependability, std. dev. = 3.38). sociability, and desire to achieve) Table A-7 summarizes the possible assessment methods you can use and their costs. Next is an overview of the steps you will need to take in completing the next parts of the assignment and the chapter in which each part is assigned. The work will be spread out over the next few chapters. 1. Develop a sales associate assessment and selection plan that does not exceed the remaining $4,000 budget. In your report, justify your proposed selection system using the determi- nants of the effectiveness of an assessment method identified in Chapter 8. These determi- nants include the following: a. Validityhow well the assessment method predicts relevant components of a person's job performance. Table 93 describes typical validities for various assessment tools across many different occupations. You can look at Table 93 and consider the results of your job analysis/competency model to determine which assessment is most likely to predict job performance at Chern's. b. Return on investmentthe extent to which the assessment method generates a finan- cial return that exceeds the cost associated with using it. c. Applicant reactionsthe extent to which applicants perceive the assessment methods to be job related and fair. d. Selection ratiothe extent to which the selection ratio is low. A low ratio means hiring only a few applicants, which allows an assessment method to have maximal impact in terms of improving the performance of the people hired. e. Usabilitythe extent to which people in the organization are willing and able to use the method consistently and correctly. f. Adverse impactthe extent to which an assessment method predicts job performance and other important hiring outcomes without discriminating against members of a pro- tected class. 2. Before viewing the interviews for the next part of the selection process, develop a scoring key for each structured interview question and create a formula to combine the three scores into an overall structured interview score (Chapter 8). The three structured interview ques- tions are as follows: a. A disgruntled customer is returning a damaged suit jacket he bought the previous week that he needed for an event that night. He is extremely upset. What do you do? b. A person walks into your store and mentions that she has just moved into the area and that this is the first time she has visited your store. What would you do to make her a customer now and a loyal customer in the future? c. You're working alone because two people called in sick. Suddenly, five customers walk into your department at once. What do you do? If you plan to use the unstructured interviews to assess candidates (optional), create a scoring key for the unstructured interview based on your expected determinants of suc- cess at Chern's. The scoring keys for both types of interviews should reflect the KSAOs or competencies assessed by the questions or interview, not the answers to the questions themselves. Then view the eight structured and eight unstructured interviews available on the book's Web site or if your instructor prefers, view them as a part of the class (Chapter 9). 3. Before or during your next class, submit your assessment plan to your instructor. Your instructor will then give you the candidates' scores on the assessments you choose to uti- lize (Chapter 9). If your instructor agrees, you can use a multiple hurdles, compensatory, or combined approach for your assessment plan. 4. Using your interview score results, candidate rsums, and scores on the assessment meth- ods you included in your assessment plan, determine which two candidates should receive an offer and submit this information along with the rationale for your choice to your instructor. Write a job offer letter to your top chosen candidate, who is currently consider- ing two other job offers from competitors (Chapter 11). At the end of the case, your instructor will give you feedback on the job success of your two new hires. For now you will work on step 1. Submit your assessment score request to the instructor by the deadline the instructor gives you to receive candidates' scores on the assessments you choose to utilize. Your instructor needs to know which scores you would like and which candidates you would like to assess. You can assess candidates in one round before making a hiring decision or in multiple rounds, depending on your assessment plan. 8. a. Read the next few parts then evaluate the eight candidates' rsums. b. Create a scoring key for the interviews. 9. a. Develop an assessment and selection plan that does not exceed the remaining $4,000 budget. b. Justify your proposed selection system in your report. c. Submit your assessment plan to your instructor. Receive scores from your instructor. d. Use the scoring key you developed for the structured interviews to view and score the eight structured interviews. Also view the eight unstructured interviews and score them if you included them in your assessment plan