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Retailers pay a price for cutting their workforce.

Retailers pay a price for cutting their workforce

The words 'flexicurity' and 'simplexity' don't exactly trip off the tongue but it seems that we are going to have to get more accustomed to pronouncing them as the economic crisis deepens.

European Union civil servants use flexicurity to describe how member states should try to increase labour-market flexibility while maintaining security of employment. Flexicurity emphasises: flexible and reliable contractual arrangements, achieved through legislation and collective agreements; comprehensive lifelong learning; active labour-market policies that help workers to cope with change and reduce unemployment; and modern social-security systems that provide adequate income support, encourage employment and facilitate labour protection.

In other words, through making people more employable and providing an adequate floor of unemployment benefits, flexicurity implies a shift in focus from job security to security in the labour market.

Dr Jason Heyes (P08, WES) points out that the current economic crisis has put flexicurity measures to the test. Countries like Denmark and the Netherlands, which have maintained relatively strong employment protection, have tended to experience fewer labour-market disruptions than nations with weaker employment protection. Nevertheless, such convergence in employment and social-protection policy as has occurred across Europe has tended to result in less security rather than flexicurity.

While the European Commission continues to argue that flexicurity is a means of adapting to the economic uncertainties presented by globalisation and technological change, Europe's worst crisis since the 1930s has called into question the benefits, attainability and affordability of flexicurity.

The word 'simplexity' is used to cover sense-making, organizing and story-telling for our time.

Ian Colville, Andrew D. Brown and Annie Pye (P18, HURS) argue that people both in and out of organizations increasingly find themselves facing novel, complex and changing circumstances. To make sense of these - and to find a plausible answer to the question 'what is the story?' - they need to combine complex thoughts with simple actions.

The authors refer to this as simplexity. The word captures the notion that sense-making is a balance between thinking and acting. In a new world that owes little to yesterday's stories and frameworks, keeping up with the times involves clarifying through action. This process allows people to see both good sense and sense-making more clearly.

A group of retailers that includes QuikTrip, Mercadona, Trader Joe's and Costco is drawing on the concepts of simplexity and flexicurity by investing in employees rather than offering them low wages, poor benefits, constantly changing schedules and few opportunities for advancement in order to hold down prices to consumers.

Zeynep Ton (P10, HBR) explains that, even in the lowest-price segment of retail, 'bad jobs are not a cost-driven necessity but a choice'. Retailers that cut labour are often left with unmotivated and poorly trained employees who cannot keep up with their tasks in a complex operating environment. This causes a vicious circle of lower sales and profits tempting managers to cut even more employees.

In contrast, retailers that invest in their workforce can benefit from better performance, improved customer service, greater job satisfaction and higher sales and profits. She urges retailers to: simplify their operations by offering fewer products and promotions; train employees to perform multiple tasks; eliminate waste in everything but staffing; and let employees make some of the decisions.

'Of course the relationship between staffing levels and profitability is not linear,' Zeynep Ton concludes. 'After a certain point, increasing the former will reduce the latter. But instead of responding to short-term pressures by automatically cutting labour, stores should strive to find the staffing level that maximizes profits on a sustained basis. In many cases, that will mean adding workers rather than shedding them.'

Simplexity? Flexicurity? The policy contains a mixture of both. And it's not only good for the individual worker, but for the economy as a whole.