Case studies

Why Morrisons gave its entire workforce a pay rise

2 Oct 2018 By Robert Jeffery

The supermarket giant ripped up the rule book, raised wages across the board, and hasn't looked back since

If the HR textbooks tell us anything, it’s that any boost to morale or engagement from a pay rise is at best temporary and at worst illusory. That notion doesn’t hold much water with Clare Grainger, group people director of Morrisons. And it certainly doesn’t explain why the supermarket giant appears to still be reaping the rewards from a momentous decision three years ago to hike wages for its army of store-based employees.

At the time, by Grainger’s own admission, “we were the worst payers in retail”, with a basic wage of £6.83 per hour in stores. The upcoming national living wage would have necessitated a hike to £7.20. But Morrisons made the decision to set its first pay review after that point at £8.20 for most shop staff; today, it stands at £8.70 and will “continue to rise” to reflect the cost of living.

The move, naturally enough, had a knock-on effect for wages across the business – and at around £14m in initial outlay, it certainly didn’t come cheap. But as part of a “colleague-led turnaround” of a retailer which was experiencing declining profitability and market share, Grainger says the concept of a “fair day’s pay” was (alongside “a boss that helps and supports me” and “tools and training to do the job”) crucial in signalling that the business was ready to think differently.

“It’s no good me and the CEO deciding this was the right thing to say and the right words to use without being able to put our money where our mouth is,” says Grainger, who stepped into the lead HR role in 2015 after six years with the business and a background in the banking sector. “I don’t care whether a colleague can quote the ‘fair day’s pay’ ambition to me or not – but I care whether they feel they are fairly rewarded every day when they walk in, for giving us a fair day’s work in what is a pretty tough job.”

The initiative didn’t stop at baseline pay, either – Morrisons swapped a profit share that was failing to offer staff strong returns for a bonus scheme linked to mystery shopper scores inside its 493 stores across the UK, rewarding “things everyone can choose to do, like wearing a name badge, smiling and saying hello, offering to help… we’re genuinely trying to pay more in bonuses,” says Grainger. Colleague discounts have been increased and, in contrast to competitors, can be shared with friends and family. 

At head office in Bradford, meanwhile, pay grades across buying teams and support functions have been consolidated to increase transparency – every employee now knows their pay band and their position within it, as well as what level of performance will enable them to move upwards.

The investment in pay arose from a listening exercise designed to diagnose the problems holding back a business with 104,000 employees and 12 million customers each week, in the face of increased competition from discounters such as Aldi and Lidl and fierce price wars with Tesco and Asda. A survey reached every corner of the organisation and was accompanied by events where store staff were able to directly question leaders around both strategy and more localised concerns.

The key to such empowerment was tackling progression, providing clear career pathways and overhauling performance management. Last year, 1,000 employees went through development programmes and every staff member had a ‘clear’ career conversation. “That’s easy to say, but logistically it’s a big thing, and we have to get managers to find the time to do that willingly and well, rather than a snatched conversation on the corner of a counter,” says Grainger.

Part of that shift meant upskilling managers rather than just expecting them to deliver more, she adds. “When I arrived, I would have rated us one of the best in retail in terms of technical training. If we hired you as a fish manager, you would know everything there was to know about fish. We were lighter, if not absent in some places, around behavioural skills training.”

A five-day residential course engaged the ‘critical’ audience of store managers, who each have between 50 and 350 reports. Away from the workplace, they took part in ‘sharing and storytelling’ and learned more about how to walk the floor and engage colleagues. “They came back enlightened,” says Grainger. “Do I think it fixed everything? Absolutely not. But it was really important as a way to kick things off.”

It sounds complex enough, but the context is about more than just stores. Morrisons produces much of its own goods in 18 food factories around the country as well as operating a thriving wholesale business. It even owns an abattoir and an egg producer. And the focus on pay and development has correlated with a financial upturn for the business; in 2017, it grew sales and profits for the first time in five years and more recently, revenues have been outperforming the market. At the same time, surveys suggest 70 per cent of employees now feel fairly rewarded, 20 per cent above the industry benchmark.

While attributing these results solely to HR-led initiatives is tricky, Grainger is confident they are having a positive impact. And HR’s success has enabled it to focus anew on increasing diversity among managers and introducing a new tranche of apprenticeships and sponsored degree places across the business. It’s been made possible by the introduction of “better, strong experts” into the HR team, but Grainger is mindful too that change will only come if leaders and managers shift their mindsets: “It’s no good doing things really well just when the HR team is around.” While it might not sound dramatic, there’s a quite revolution underway in this corner of Yorkshire.

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