FMI DISTRIBUTION CONFERENCE

MICHAEL GARRY

TUCSON, Ariz. - Richard N. Jurgens, president, chief executive officer and chief operating officer of Hy-Vee, last week urged the supermarket industry to take a more supportive approach to employee relations, including higher salaries, better training and greater recognition.

"We can't, as an industry, afford to get by with [paying] as little as we can," he said in a keynote address given last week at Food Marketing Institute's 2006 Distribution Conference here. "Our industry has a history of trying to get by on the cheap. But to keep the best people you have to pay the best."

For example, rather than paying an employee $15 per hour, retailers should pay in the range of $18-$19 per hour, Jurgens said. "And then we have to make sure we're hiring people worth $18-$19 and set high expectations of what we want." Jurgens said he recalls being paid unfairly 30 years ago "and I'm still livid about it."

West Des Moines, Iowa-based Hy-Vee, which is privately held and employee-owned, uses profit-sharing as part of its compensation structure. Jurgens called profit-sharing "a great way to pay."

Jurgens, who has been Hy-Vee's CEO for two years, also stressed the importance of employee education, pointing out that six Hy-Vee executives were in attendance at the Distribution Conference and about 80 would be attending the FMI show in May. The chain, he said, offers a program for pharmacy employees to become certified in disease states, and is about to roll out a certification program in photo processing technology. Hy-Vee also provides instruction on wines and lawn-and-garden products. Store directors are required to take a Dale Carnegie course.

Hy-Vee has also developed formal training for new store employees, "down to checkers and stockers," Jurgens said. Training had previously been less structured. Hy-Vee operates 220 stores in seven states.

In hiring, Hy-Vee is willing to select people with unorthodox credentials. To develop a computer-assisted reordering system, Hy-Vee hired a former warehouse selector and buyer with a degree in math and "overnight the program took shape," Jurgens said. The chain also hired an accountant to run a warehouse procurement program. "That was not an obvious choice but the whole company has grown because of him."

Hy-Vee also does not shrink from hiring employees' family members. "We have found that when people recommend family members, the odds for success go up dramatically," Jurgens said. "It makes the company stronger."

Jurgens also recommended hiring executives with retail store experience to run distribution centers. While most attention at DCs is focused on efficiency, "in reality retail success is paramount to a DC's success," he said. People with retail background "are critical for establishing a balance."

Hy-Vee believes in recognizing employees' accomplishments at formal dinners. Truck drivers, for example, are rewarded for accident-free driving performance. "It makes a difference," Jurgens said, who also sends birthday cards to staff workers and store directors, and acknowledges births and deaths of loved ones.

These efforts have helped Hy-Vee retain employees, Jurgens said. "We can't afford to lose people," he said, citing a study showing that losing a clerk costs a store $4,000.