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Performance appraisals are formal reviews of employee performance over a set period, generally one year. Results of a performance appraisal can be tied into employee compensation policies to boost operational efficiency, ensuring that the highest salary costs are paid to the most productive employees. Developing comprehensive performance appraisal and compensation policies can pose distinct challenges in small retail companies.
Retail Pay Grades
Retail companies employ at least two fundamentally different types of employees: office staff and store employees. Retail operations may also employ warehouse and distribution staff, but smaller retail companies are likely to outsource these functions.
For store staff, retail companies generally start front-line employees at minimum wage or slightly higher. Front-line managers hired directly into their positions are offered more than store associates but are still often paid less than most office personnel. For office staff, retail operations set starting salaries based on specific job titles, as well as job candidates’ previous experience and education.
Store Staff Performance Appraisals
The first performance appraisal of a new retail store employee is likely to focus on the employees’ level of success or struggle with learning the various tasks of the job, including customer service, running a cash register and stocking shelves. Subsequent performance reviews for store staff are more likely to focus on individual goals set between front-line employees and supervisors. Reviews may focus on developing customer-service skills for one employee, for example, and on attention to detail for another.
Office Staff Performance Appraisals
Retail back-office staff have a much different workplace experience than their front-line counterparts, necessitating a completely different approach to performance reviews. Reviews for office staff are likely to focus on aspects such as individual productivity, contributions to team efforts, making extra contributions to organizational success and taking on new roles in the company. Both office-staff and front-line performance reviews can center around employee-development goals, as well, such as completing advanced training courses or training newer employees.
Employee benefits are a form of compensation in addition to base salaries and hourly wages. Full-time retail office staff are generally offered comprehensive benefits packages in addition to their salaries. This may be challenging for newer small businesses, but companies should always plan to offer benefits as soon as it is financially viable.
The lines blur a bit inside a retail store. Part-time store staff are generally not offered benefits, and a large number of retail companies do not offer benefits to full-time employees, either. Employee-focused retail companies truly value and respect their front-line employees, extending the same comprehensive benefits packages to full-time store staff as office staff and offering part-time employees partially paid benefits options.
Promoting employees into higher positions should always be a component of performance review systems. Retail organizations face a large and distinct decision in this area, as a result of their workplace dichotomy. Retail organizations can decide to promote outstanding front-line employees to office positions from time to time or they can choose to fill entry-level office positions with outside applicants. The challenge in promoting employees from the store into the office is to find front-line employees whose educational pursuits or achievements match the profile of a good entry-level office employee, without discriminating against other high performers.