Farm Fresh
Lowering Labor Costs While Improving Labor Quality

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Part of the SUPERVALU grocery family, Farm Fresh Markets started with one store in Virginia in 1957. They have since grown steadily to 37 stores serving the Hampton Roads/Virginia Beach region, employing over 4,000 associates. Like most successful and stable grocery retailers, Farm Fresh realizes that the core of its business is based on the quality of its employees. Supermarkets, perhaps more than any other retailer, know that repeat business is king, and repeat business depends more than anything else on the relationship between customers and employees. For that reason, supermarkets have always been keenly interested in improving the quality of their hires. Farm Fresh is no exception.

Farm Fresh’s management recognized that one of the most critical factors in its sustainability was in the quality and consistency of the people it hires. Workforce Acquisition™ hiring management system for Grocery was known for improving the hiring effectiveness of grocers like Big Y and Kroger. Ron Dennis, Farm Fresh president, was convinced that the system would scale perfectly to a regional chain like his.

The Challenge

Regardless of the size of grocery chain, hiring is a burdensome process. Farm Fresh store managers, already stressed by the long days and myriad details required to run a supermarket, found they were spending far too much time interviewing and hiring employees. Moreover, using old fashioned face-to-face meetings and other inconsistent screening methods, their efforts at hiring quality employees resulted in too many disappointing hires. Consequently, turnover in staff was high — over 100 percent. And in an industry where it costs, on average, $3,000 to replace an employee, this was a negative impact on the bottom line.

Front-end positions like cashiers, customer service associates, and baggers tend to be critical to a supermarket’s customer service strategy. These are the people who are in direct contact with the customers, who remember their names, who go out of their way to help, and who make them feel welcome. They are also the key element in building customer loyalty, so hiring the right person for these positions is vital. Good people drive business growth.

Farm Fresh management knew this. As a result, in early 2002 they implemented the Workforce Acquisition hiring management system for Grocery throughout the Farm Fresh chain. With expected reductions in turnover, wasted time and shrinkage, as well as estimated increases in neglected employer tax credits, Dennis calculated that not only would Workforce Acquisition pay for itself within the first year, it should actually net the company some $868,000 in savings. He established a very defined target for the solution to hit.

The Solution

The Workforce Acquisition deployment took mere weeks and involved a web-based system with in-store kiosks and, of course, access through the Farm Fresh corporate site. Workforce Acquisition’s hiring management system was also installed in each store for the manager to review the results of each application and aid in subsequent interviews and hiring. A database was set up to retain each application for two years. And a realtime reporting system was included in the system’s interface, enabling both managers and corporate to evaluate the overall effectiveness of their screening and hiring process.

The Application Process

When job applicants come into the store, they are directed to an employment kiosk to electronically fill out the application.  They can also complete the same application online from a public or home computer. The applicant begins by entering all the prescreening information: name, contact information, Social Security number, age, etc. The prescreen is designed to automatically “knock out” ineligible candidates (because of age, residency, or other reasons). It politely terminates ineligible applications without wasting either the candidate’s or the hiring manager’s time.

Next, the applicant provides information that may be used to run a background check. At this time they are also screened for Work Opportunity Tax Credit (WOTC) eligibility. WOTC is a program that enables employers to receive up to $2,400 in tax credits per eligible employee (welfare, food stamp, rehabilitation recipients, etc., are eligible).

Finally, they take a personality assessment to determine their suitability for the job. Utilizing Kronos depth of experience and job applicant database, industrial psychologists at Kronos Talent Management Division have honed the company’s assessments down to a simple, quick format that has proven to be remarkably effective in screening out high risk candidates. The whole application process takes between 20 to 30 minutes of the applicant’s time, and best of all, none of the manager’s time.

At the conclusion of the application process, the manager is immediately notified via Workforce Acquisition’s hiring management system whether the candidate rates “green” (good prospect), “yellow” (some risk), or “red” (high risk). The manager can log on to the system to review the candidate’s summary. If he or she wants to interview the candidate personally before the candidate leaves the store, they have all the information about the person available in an easy-to-read format. At a glance, the manager can see the candidate’s schedule availability, experience and other relevant information, along with suggested interview questions. They can also see the applicant rating, so the hire can be made with a degree of confidence far greater than ever before.

Applicant Pooling and Sharing

Applications are also shared with other Farm Fresh Markets, so if a job is not open in one location, applicants can be shared with other stores (Farm Fresh gives their managers three days to view applicants prior to pooling them). In this way, cost efficiencies are realized because stores are able to leverage all area job applicants.

The Results

First Seven Months $340,800 in Tax Credit Capture

Of immediate impact to Farm Fresh’s bottom line was its ability to capture tax credits. WOTC encourages employers to hire people who might otherwise have a hard time entering the workforce. Because of the cumbersome bureaucracy involved in this program, real money is frequently left on the table by eligible employers. Because of Kronos’ interface with Farm Fresh’s WOTC provider, both screening for eligibility and processing are automatic. Now every eligible applicant is submitted for this lucrative employer benefit.

Ron Dennis’ initial projection for WOTC capture with Workforce Acquisition was around $168,000 annually. After just seven months, however, the actual tax credits earned were $340,800, more than double. This wasn’t a mere savings — this was a bottom-line tax deduction.

$1.1 Million Saved in Reduced Turnover

Another area Workforce Acquisition was able to make an impact was in reducing turnover, which is one of the biggest costs of any retail business. For every employee who quit, the company estimated that it cost $2,400 to replace them. Dennis projected at the beginning of the Workforce Acquisition implementation that the company’s turnover reduction could result in savings of approximately $476,000 annually. After only seven months the actual savings had already reached $1,106,000. 

$110,000 Saved in Hiring Efficiencies

One of the often overlooked costs in a paper-based, face-to-face hiring process is the sheer amount of time each manager must take away from his primary task of running the store to interview, screen, hire and process applicants. Then there are the costs of additional paperwork, first day no-shows, and the time wasted with ineligible candidates. Using known management costs, Farm Fresh conservatively predicted an annual time savings of $33,000 by using Workforce Acquisition. Within seven months that savings actually amounted to $110,000, more than triple the expectation.

Workforce Acquisition’s Grocery solution also automated bureaucratic new-hire paperwork. About 90% of the information HR required for its new-hire forms (such as the W-4 and I-9) was captured via the online application, which automatically prepopulates the forms for store managers. Payroll also benefits from this efficiency. Managers now spend significantly less time in the back office and have more time to manage store operations.

35% Increase in Employee Retention

Beyond simple turnover reduction, employee retention had increased 35 percent over the same period. Not only is there a savings in recruiting and replacement costs, but the more experience an employee gains, the better the customer service they provide.

64% Increase in Applicant Flow

Because the kiosk and web site now make it so easy for someone to apply, Farm Fresh has attained an astonishing 64 percent increase in the number of job applicants. The increased application flow is tied to the convenience and ease of the automated process.

21% Reduction in Shrink

According to the 2003 National Supermarket Shrink Survey, supermarket shrink amounts to 2.32 percent of total sales. Of this total, 57 percent is attributable to employees. Improved screening for honest and dependable employees reduces this problem. Just seven months after Workforce Acquisition was deployed, Farm Fresh found that shrink had decreased 21 percent — the effect of hiring more reliable people.

6% Increase in Sales Per Employee

Supermarkets have long realized the importance employees have in establishing an emotional connection with customers. A 2003 Gallup Study showed that customers who were extremely satisfied and emotionally connected have a 31.7 percent higher trip frequency rate and spend 45.8 percent more per trip. Key in building this emotional connectedness is hiring friendly, outgoing, and courteous people on a consistent basis. In just seven months after implementing Workforce Acquisition, Farm Fresh saw sales per employee increase by 6 percent. Clearly, hiring the right people made an immediate impact on customer relationships and subsequently improved top-line sales.

Reporting Boosts Operational Efficiency

In addition to the automation of the interview process, Workforce Acquisition’s post-hire reporting has given Farm Fresh a powerful tool to evaluate the efficiency of its hiring. Now HR can look in detail at each store or the entire enterprise. They can spot immediate needs or examine long-term trends in either a spreadsheet or graphical format. This, in turn, gives each store manager, as well as corporate operations, an invaluable tool to evaluate the effectiveness of Farm Fresh’s hiring practices, its compensation levels, its retention rates, and, ultimately, its overall success as a business.

The Net Benefits

Farm Fresh’s total savings and tax credits in the first seven months from using Workforce Acquisition’s solution amounted to $1,557,000. The annualized yield projected is a dramatic $2,600,000. The initial argument to use Workforce Acquisition was that the solution would more than pay for itself. From just an ROI point of view, that argument has been more than validated. Based on current trends and the fixed price of the system, the return has yielded almost 2,000 percent.

As If Strong ROI Weren’t Enough

Beyond direct savings and tax credits, there are the harder-to-measure benefits that come from simply doing a better job of hiring.

Aside from location, supermarket managers know they have basically four attractors for their customers; price, selection, quality and service. Since service is so dependent on the quality and tenure of the employee, the ability to hire and keep the best becomes critical. This is where the Workforce Acquisition hiring management system for Grocery makes the competitive difference. More conscientious employees see to the details, such as the facing of stock, the quality of the produce and meat, and the cleanliness of the store. They are more attentive to the needs of their customers, which in turn improves emotional connectedness and makes those customers loyal. And the money Workforce Acquisition saves Farm Fresh in finding good, long-term employees allows the company to apply those savings to its competitive pricing. The advantages propagate themselves.

Kronos’ Talent Management Division is proud to count leading grocers such as Albertsons, Kroger and SUPERVALU as clients. 

To find out more about Kronos’ Talent Management Division, please call (800) 355-4547.

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