Reports Persist of Budget Cuts, Emphasis on Revenue

August 27, 2012

Despite a public acknowledgement by Apple that recent retail store staffing changes were “a mistake” and have been reversed, store employees still haven’t received an official explanation of the changes, and signs persist of a continuing focus on revenues and profit instead of customer satisfaction. Sources say employee performance standards have changed to emphasize the employee sales functions, more small products will be stocked at the stores, and that several budget categories have been slashed, including for store maintenance. All the while, morale continues to drift lower among many retail store employees. Last month Sr. VP Retail John Browett made several staffing changes that included laying off probationary employees, reducing hours and limiting overtime. However, after the changes became public and generated sharp criticism from employees and Apple aficionados, The Wall Street Journal reported that Browett reversed the changes and instructed leadership teams to tell employees, ‘We messed up.'” He also told his team to stress that no one had been laid off, and that new hires were being made. But despite Browett’s denial, all the sources to IFO were unanimous that employees had indeed been laid off, fired, assigned no hours or otherwise made unemployed by Apple. The sources also say they’ve not heard one word from Browett about the incident, not even an acknowledgement of Apple’s public statement.

After Browett’s reversal, insiders say that everyone who had been dismissed was indeed rehired, and inter-store transfers were again approved. However, the number of in-store workshops at some stores has been reduced, sources say, overtime is still limited, demotions were not reversed, and managers are assigning only minimum contracted hours to part-timers. One tipster even claimed Apple has stopped printing the monthly workshop schedules that have been available at high-profile stores for many years.

More troubling, one source says, are changes in how employee performance is measured, so-called metrics. Contract sales of iPhones are now used to measure individual performance, and also now appear on store performance charts. Employee sales success is also being judged by something called, “essentials per hero product,” judging Specialists on how much value they can add to the sale of any product with cases, accessories and other products.

Adding to this pressure, Specialists have been told to make customers buy accessories using the EasyPay app. But if they do refer customers to EasyPay, that revenue is credited to the store, not to the Specialist’s sales history which, in turn, affects their performance report. That report is used by store managers to justify raises, inter-store transfers and other job benefits.

One source claims that training areas in the Family Room, and even product displays in the Red Zone will be sacrificed, removed and replaced by more “Etc.” and accessory shelving to help increase sales.

Even the stores’ physical condition may suffer under the new Retail segment management. Sources say that store maintenance budgets have been reduced, so that in the short and long term the stores could be more grimy and less attractive to visitors. Cleanliness has been a hallmark of the chain, with cleaning occurring even during business hours.

As for an explanation or apology from Browett or store management about the original staffing cuts or policy reversal, the employees have received neither. In fact, employees have been told not to discuss the situation with anyone. Overall, employee morale has plummeted due to the lack of information, the inability to discuss it with management and the increased emphasis on sales instead of customer satisfaction.

Background: Steve’s Support

Several sources have provided background on the original staffing changes that may provide some logic for Browett’s decisions.

One source said there is always an “ebb and flow” of hours available for part-time staffers at Apple’s stores. The changes in hours generally mirror store revenues, which peak during the pre-Christmas holiday season and decline after New Year’s Day and into the spring. Specialists can work full-time approaching the end of each year, but then hours are cut back after mid-January. In a typical year the working hours can from 35 to 40 hours per week, all the way down to 10 to 20 hours.

What didn’t make sense to many employees was the timing of the recent staffing cutbacks—Apple’s stores are heading into the busiest time of the year, and at least two major product launches are reportedly scheduled for September and October.

But the most compelling accounts date back to the early days of the retail chain and its first Senior Vice-President, Ron Johnson.

Johnson was champion of customer satisfaction, designing and staffing the stores to provide a superior experience for visitors and buyers alike. He was able to win over Steve Jobs with the concept that revenue and profit should be a secondary goal of Apple’s retail stores.

But in 2009, Jobs took six months of medical leave and put Tim Cook in charge of the company, including the retail stores. Cook is primarily an “operations guy,” sources explain, and his natural focus is revenues and profits, not customers. While Jobs was away, Cook and chief financial officer Peter Oppenheimer began to confront Johnson on his customer-centric retail philosophy—both felt the stores didn’t generate enough revenues to justify operating expenses.

According to accounts, Cook pushed Johnson “quite hard” about how other channels were selling more Mac’s per-capita than the retail stores. Without Jobs’ support, Johnson found it was nearly impossible to keep Cook and Oppenheimer from switching the chain’s primary purpose from a superior experience to revenues.

Last year when Cook became the permanent CEO, he hired Browett from UK-based Dixons to head the retail chain. Cook was apparently attracted by Browett’s like-minded focus on the more traditional concepts of retailing—logic and process leading to revenues and profits. With his new position as CEO and staffed with a revenue-focused Sr. VP, Cook naturally moved the retail operation in different directions, the sources say, resulting in last month’s staffing changes.

Ironically, Apple’s original retail mission was to re-invent retail, and it succeeded for the first 10 years. Now, sources lament, innovation in retail seems to be coming to an end. A source says, “Those that have come from other failed or failing retailers will be allowed to peddle their poor ideas at Apple, and tarnish what has been one of the single greatest retailers on the planet.”

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