Tuesday, April 3, 2012

TCO Stories: We are the 1%

In any distribution of data, some data points have to fall within the top 1%. When we look at the TCO of payroll, who do you suppose falls in the top 1%? Think of it by industry…any guesses? 

Read on to see who are the 1% of the payroll TCO world!

When I go about determining the TCO of an organization I never know how the numbers are going to turn out. Often times, I know nothing about the entity before we begin the process. Sure, I know the name and probably what they do (but not always). Certainly, however, I have no idea what story the numbers will tell. Through the years I have encountered 99th percentile performers, as well as 90th and above. 

Every 99th percentile performer and all performers that were in the 95th or above had one thing in common: they were all in the retail industry. That's right: retail!

I am the sort of person that puts most everything I see and hear into that filter that asks "does this make sense". You know what I mean. I see survey results published and I wonder how they asked the questions. I read commentary or analysis and I wonder how it's been colored. Even straight news I wonder how much research went into the story. Don't get me started on investigative journalism. I think it's dying a slow death. Reprinting press releases as news seems to be the norm. 

So the first time I encountered a 99th percentile company I thought that something must be wrong. The costs seemed impossibly low. And while someone needs to occupy the one percent, does it make sense that it would be a retailer. Here's some background for you: while it wasn't published generally, by far the lowest cost industry in the studies I have seen in the results is retail (we can talk about the highest cost in a future posting). So from that standpoint I can see retailers in the 1%. It makes sense.

Does it pass the smell test generally, however? What do you know about retail and what do I know generally? I did work retail through high school, college and beyond. From ages 15 – 25, I was retail: management training after college and buying offices, merchandising the sales floor, analyzing sales trends, moving stock and managing people. What did I learn in retail and about retail? Margins are razor thin. Every opportunity possible, where a retailer could cut cost they would. If expenditure didn't directly impact sales, cut until you bleed. I once worked in an environment where we were asked to turn in pencils down to the nub before we could be issued new pencils. That's austerity!

I worked with a fast food retailer to determine their TCO for payroll some time ago. I went out to multiple stores to speak with store managers about the time collection process and the approval process. My prior retail experience was hard goods and soft goods, not restaurant. I'll admit I had preconceptions about what I would find. Wow, was I surprised! The store managers uniformly exhibited level of professionalism and knowledge about their business that I was very impressed with. They could tell me (without notes) what percent the food costs, labor costs, utility costs, etc. were for them. They knew what labor hours should be on a daily basis, and know if there were issues with time, punches, and labor laws for minors almost before they happened. With razor thin margins in the business of 99 cent value meals, a manager wouldn't be successful without this knowledge. That's retail!

So, retail as a one percent makes sense with my personal experience. Does it make sense from your experience? 

I'd love to hear from you!

About the author - Donald Glade is president and founder of Sourcing Analytics, Inc., an independent consulting firm specializing in helping companies optimize their HR / benefits / payroll service delivery through financial analysis, relationship management, and process improvement.


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