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Analyzing Turnover to Reduce Costs

Cutting manager turnover helps a discount retail chain cut costs and turn a higher profit

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Abstract

A discount retailer wanted to better understand what factors might be influencing high Store Manager turnover and the potential benefit from improving turnover rates. Among the findings: A 50 percent reduction in targeted turnover could result in $10 million in additional profit.

The Challenge

Based on the average operational cost of Store Manager turnover in the previous year, the retailer faced potential lost profits of approximately $60 million. The company wanted to understand the impact of management turnover, both Store Managers and District Managers, across all retail locations, as well as the cost saving and revenue improvement opportunities of reducing turnover levels.

How We Helped

Deloitte practitioners helped the company link existing data about Store Manager and District Manager turnover with key store performance metrics, looking for trends and correlations. Based on key findings and observations from the analysis, Deloitte helped the company develop “what if” scenarios to estimate the impact of improved turnover rates.

Solution

The analysis revealed that a 50 percent reduction in Store Manager turnover would result in $10 million in additional profit. Furthermore, moving 20 percent of the third quartile of profitable stores into the second quartile could result in $18 million in additional profit.

Other key observations from the analysis included:

  • Store Manager tenure and turnover are linked to store profitability, year-over-year sales and shrink.
  • District Manager turnover is also linked to shrink and profit and has a direct correlation with Store Manager turnover.
  • As District Manager turnover increases, so does Store Manager turnover.
  • As Store Manager tenure improves, so do store profitability and shrink percentages.

 

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