A successful franchise owner of a sports equipment chain is feeling the effects

Question

A successful franchise owner of a sports equipment chain is feeling the effects of technology, with more and more online sales and less and less customers in the shops.

Locally there are three stores which together, average to $1,200,000 in annual revenue.

Typically each store needs the following positions staffed for optimum profitability and success:

- a store manager

- an assistant manager

- five department managers

- 20 customer service representatives

However, there has been a trend of 20 percent sales decline in stores, with an increase of 30 percent sales online (last year the online revenue stream was $300,000). The franchise owner was able to handle all of the online sales with a team of five full-time remote workers (working from home) last year.

The owner wants each store to maintain their productivity, which he measures as the revenue per employee. He also thinks that there is potential to grow the online business.

Please help the owner by answering the following questions:

1) Using your HR planning expertise, forecast the demand of labour in the stores and the online environment over the next three years.

2) Assuming an annual 15 percent turnover level of in-store workers and a 30 percent turnover level of online-focussed employees, determine overall HR supply estimates over the next three years.

3) Do you forecast a labour shortage or surplus? Develop a clear plan to help address the forecast labour shortage or surplus.

**Show all calculations**

Explanation / Answer

Ans....
Answer A:
Stores
The no. of employees in Stores = 1 Store Manager + 1 Asst. Manager + 5 Dept. Managers + 20 CS agents = 27 employees
Productivity per employee = Revenue / no. of employees
= 1200000 / 27
= $ 44,444 per employee
Online :
The no. of employees for employees
Productivity per employee = Revenue / no. of employees
= 300000 / 5
= $ 60,000 per employee
Forecast for 3 years :
Stores
Store sales to decline 20% Year 1 : Sales $960,000 Year 2 : $768,000 Year 3 : $ 614,400
To maintain the productivity of employees the no. of employees required for 3 years = Total Projected Revenue / Revenue per employee
Year 1 : 960,000 / 44,444 = 21 employees, Year 2: 17 employees, Year 3: 614,400 / 44,444 = 13 employees.
Online
Online sales to increase by 30% Year 1 : Sales $390,000 Year 2 : $507,000 Year 3 : $ 659,100
To maintain the productivity of employees the no. of employees required for 3 years = Total Projected Revenue / Revenue per employee
Year 1 : 390,000 / 60,000 = 7 employees, Year 2: 507,000 / 60,000 = 9 employees, Year 3: 659,100 / 60,000 = 11 employees.
B:
Stores :
15% annual Turnover
Year 1 Sales : 13,80,000 No. of employees = 13,80,000 / 44,444 = 32 employees
Year 2 Sales : 15,87,000 No. of employees = 15,87.000 / 44,444 = 36 employees
Year 3 Sales : 18, 25,050 No. of employees = 18,25,050 / 44,444 = 42 employees
Online :
30% annual turnover level
Year 1 : 390,000 / 60,000 = 7 employees,
Year 2: 507,000 / 60,000 = 9 employees,
Year 3: 659,100 / 60,000 = 11 employees.
C
The no. of employees projected for Stores will increase from 27 to 42 (annual growth rate of 15%) and for Online it will increase from 5 to 11 (30% annual growth rate). There will be annual attrition of employees in online and stores and hence the existing employees need to be groomed and promoted for the next level. It is better to have a growth plan for each employee and online staff can be moved to stores and given increments and incentives.
To maintain innovativeness in the team, it is important to hire external candidates with experience with competitors. This will bring in new ideas to do business. Hence, internal candidates must be moved up the ladder to retain people who have crucial experience and know-how to conduct your business well.

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