Managers of big retail stores have an opportunity to boost profits by maintaining or increasing staffing levels even when sales are slipping.

That idea will probably sound strange to store managers, who tend to cut staff hours if there’s a dip in sales. Such cuts make perfect sense to the companies’ executives, given that big retailers place great weight on hitting prescribed targets for payroll as a percentage of sales. Moreover, reducing payroll often has no immediate discernible effect on other major factors in managers’ evaluations—typically, things like whether the store’s appearance is attractive and the bathrooms are clean. So managers get very used to the idea that if sales drop, payroll must drop too.

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Publication/Copyright: Harvard Business Review