An interesting study from Harvard Business Review (1) analyzed the relationship between HR policies and financial results from two US supermarket retailers: WalMart and Costco.
The article started from WalMart’s obsession in cutting operational costs and controlling employees’ salaries and benefits.
Initially, the manhour value was estimated for the organizations, based on numbers published in reports from major American newspapers and interviews with employees.
Once the comparison was established, the first thing that management scholars can think is that the strict cost cutting, especially salaries, is directly translated into a greater return to shareholders.
However, when the results were analyzed upon productivity and expenses calculation, the study comes to a conclusion that revenue generated per employee may have a greater impact on competitiveness than expenses control.
Costco produces more with fewer employees, and even with a smaller number of stores, leads the famous “market share”.
The article has a hidden controversy related to the type and location of the stores. (Try to calculate what it is.)
To demonstrate the difference between the companies, the author proposes a comparative model, setting replacement costs at 60% for both.
This leads to the presupposition that WalMart’s turnover costs are more than twice that of its competitor.
In order to observe north academic culture, the article emphasizes quantitative aspects, rather than a reflection on the problematic that sometimes goes unnoticed.
Maybe, the study does not touch on the main issue, that haunts competing companies in markets with high rates of change.
By leaving financial aspects a bit aside, and looking at the impact of turnover on organizational competencies, we will have an inconvenient truth.
The key point is that firms have the so-called historical dependence (path dependence).
Once lost, certain core competencies cannot be replaced even trough merges and acquisitions. They will need to be internally developed, with a time consumption.
Maybe, this is a terrifying aspect of turnover, since its effects on obtaining competitive advantage are only perceived in the long run (and far away from the CFO’s desk).
It is in the healthy tension between the financial, willing to cut costs (the eagle, the accelerator), and the strategic, willing to keep the skills (the chicken, the brake) that the company gains sustainable competitiveness.