1 month ago

Why Retailers Are Scrambling to Reduce Toxic Behavior

The retail industry has changed dramatically in the last few years. Back at the founding of American retail, businesses delivered value by gathering products in one place and making them available to consumers. But over the last few decades, that paradigm has turned on its head. For retail companies in the 21st century, product is no longer the only driver of revenue. Today, one of the most important factors in attracting customers and driving sales is the human element of retail. In response to this shift, a growing number of companies are finding new ways to elevate their greatest asset: the employees who work for them.

Walmart has embraced this new paradigm and become a frontrunner in this regard. Recently, the company adopted virtual reality to train more than 1 million of its associates on legal compliance and soft skills such as empathy and customer service. It’s a move that says a lot about the company. Beyond demonstrating that it values learning and development, Walmart has shown that it understands every employee can have an impact on the business. Today, all it takes is one bad customer experience to damage profitability and brand value, putting the onus on retailers to figure out how to mitigate the incidence of damaging workplace behaviors.

Don’t believe that one employee can make that big of a difference? Consider the incidents of bias that rocked two large retail companies last year, both of which lost millions of dollars due to the discriminatory behavior of a single employee. After an incident of racial bias, one of these companies lost over $10 million in revenue and nearly 10% in stock value within 24 hours. The costs were even steeper for the other company. After sources announced that a company leader used a racial slur, the company lost over $80 million in market cap within a day, followed by multiple quarters of weakened sales and legal battles.

There’s no question that toxic behaviors such as bigotry, harassment, or threats have become major risks for retail companies. But how might retailers screen for these kinds of behaviors before they damage your brand? It’s challenging, even at the local level. Not only do you have to ascertain what is financially feasible when screening employees, but you also need to figure out how to surface relevant information without adding legal risks or operational hurdles to your hiring process. For many companies, this often gets so unmanageable that HR departments and hiring managers are often left to hope that their hires won’t cause this type of damage.

Now imagine having to do this at scale. In case these behaviors weren’t already hard enough to catch for a store manager, corporate HR managers are a layer removed—and unless they have systematic ways to identify potential risks, they’ll need to rely on local managers to protect the brand. According to our industry benchmarks, 7 to 10 percent of retail employees already express discriminatory behaviors online. For a company like Walmart, that means as many as 200,000 employees may pose a risk based on their online behavior alone. Retail enterprises have invested millions of dollars in the customer experience overall, but unless they take a people-first approach to risk management, they’ll remain exposed to employee-based scandals.

Choosing the right people to represent your brand is more important than ever. In a world where customer service is keeping the industry alive, it pays to reduce toxic behavior and help your employees demonstrate empathy across geographies and stores.

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