Defense Infrastructure: Personnel Reductions Have Not Hampered Most Commissaries' Store Operations and Customer Service
Published: 2003-03-06T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: In response to concerns about the impact of proposed cuts in the Defense Commissary Agency's workforce, the House Armed Services Committee placed in its report on the Bob Stump National Defense Authorization Act for Fiscal Year 2003 a requirement that we evaluate the effect of the personnel reductions. Specifically, we assessed (1) the status of personnel reductions and how they have affected store operations and customer service, and (2) whether the agency uses a reliable methodology to measure customer satisfaction with its commissaries.
section_title: What GAO Found
paragraphs: The Defense Commissary Agency's commissary operations and customer services have been maintained at the same level, and in some cases improved, despite the recent reductions in workforce. As of December 31, 2002, the agency had completed most of its 3,047 planned personnel reductions in full-time positions. It accomplished this primarily by achieving efficiencies or eliminating vacant positions in the stores. Only 122 employees have been separated and 341 retired as a result of the personnel cutbacks. A major focus of DeCA's personnel reductions, as outlined in its strategic plan, was to reshape the workforce and develop a more efficient organization. We found that commissaries are making greater use of part-time employees because of the reductions. This has allowed some stores to increase their operating hours to better meet customer needs. It has also given store managers more flexibility in meeting workload fluctuations. However, DeCA's strategic plan does not include specific goals for achieving a certain full-time/part-time workforce mix in stores. As a result, the planned percentage of part-time positions varies widely by store. A recent customer satisfaction survey showed that commissary patrons expressed high satisfaction with their overall shopping experience, as well as with such key indicators as time waiting in line and convenient hours. However, the managers of the smaller commissaries reported concerns over balancing workload and maintaining store operations. We found that the Commissary Customer Satisfaction Survey methodology is reasonable. However, some improvements in the analysis of survey data could ensure that the findings are more complete and consistent. Such changes could include adjusting survey results for the volume of sales at individual stores or for the number of shoppers who refuse to fill out the questionnaire. Furthermore, the current survey does not collect information on the number of, and reasons why, potential customers do not shop at their local commissaries.

section_title: Letter
paragraphs: In January 2001, the Defense Commissary Agency (DeCA), which operates  276 stores in the United States and abroad for military personnel and  retirees, issued a strategic plan that outlined initiatives to reduce its unit  operating costs by 7 percent by fiscal year 2004. A major focus of the unit  cost reduction objective was to reshape the workforce by reducing  full-time positions and developing a more efficient organization. This plan  called for the elimination of over 3,000 full-time positions—about 2,700  in stores through efficiencies, closures, and contracting out some  functions and about 350 through efficiencies in the regional offices and  headquarters. The agency expects these actions to save about $82 million  without any loss of service to its customers. As a result of these savings,  DeCA reduced its fiscal year 2003 budget request.
In response to a requirement in the Committee on Armed Services House  of Representatives’ report accompanying the Bob Stump National Defense  Authorization Act for Fiscal Year 2003, we reviewed DeCA’s plan to reduce  personnel. Our objectives were to assess (1) the status of personnel  reductions and their effect on store operations and customer service, and  (2) whether the agency uses a reasonable methodology to measure  customer satisfaction.
subsections: section_title: Background
paragraphs: DeCA, headquartered at Fort Lee, Virginia, is the Department of Defense’s  designated agency for managing commissaries on a worldwide basis. A  Commissary Operating Board, which is comprised of representatives  from each of the military services, has day-to-day operational oversight  responsibilities for DeCA. The Under Secretary of Defense (Personnel  and Readiness) exercises overall supervision of the commissary system.  DeCA operates four regional offices that oversee the management of its  commissaries. Commissaries are located in 46 states and 14 foreign  countries. As of November 7, 2002, the agency had 276 stores and more  than 16,000 employees under its purview. Its annual sales in fiscal year  2002 amounted to about $5 billion.
In meeting its mission of providing groceries at a savings to the customer,  in the most efficient and effective manner possible, DeCA strives to  provide the lowest cost possible, charging patrons only for the cost of  goods plus a 5-percent surcharge. DeCA receives about $1 billion in direct  appropriations from Congress for its annual operating costs. These funds  pay for employees’ salaries, transportation, some above-store-level  information technology, and other expenses. DeCA also operates a resale  stock fund for the purchase and sale of products. To the extent that  savings in operating costs occur, they reduce the need for appropriated  funds. The savings in store operating costs do not have an effect on the  cost of merchandise sold to customers.
In January 2001, DeCA issued its current strategic plan. This plan included  objectives to reduce unit operating costs and reshape the workforce while  maintaining or improving customer service and satisfaction. A major focus  of the unit cost reduction objective was to reduce positions as well as  streamline operations and develop a more efficient organization. To  reshape the workforce, DeCA planned to determine the appropriate mix  of skills and expertise and the appropriate level of part-time employees  to carry out the reductions to reach a more efficient organization.
DeCA conducts a biannual Commissary Customer Service Survey to  assess customer views of products and services. A team appointed by  each store director administers the survey. Customers are systematically  selected while waiting in checkout lines. A predetermined number of  questionnaires are collected during three periods (morning, midday, and  evening) each day for 10 consecutive days during May and November each  year. The survey questions are multiple choice with space available for  written comments. See appendix I for a copy of the questionnaire. The  completed forms are mailed to DeCA headquarters for analysis, and  customer service scores are calculated for DeCA overall and for each  region and store.
section_title: Personnel Reductions Have Not Hampered Most Commissaries’ Store Operations or Customer Satisfaction
paragraphs: Despite the workforce reductions, store operations and customer service  have been maintained at the same level, and in some cases improved.  DeCA has used various measures to eliminate 2,602 full-time positions, or  85 percent of the planned reductions as of December 31, 2002; very few  employees have been separated from the agency. While downsizing and  reshaping were occurring, regional officials stated that they encouraged  store directors to use part-time positions to maintain store operations.  DeCA officials stated the use of part-time employees has enabled store  directors to better manage workload fluctuations, expand hours of  operation, and thereby improve customer service. However, because  DeCA’s strategic plan does not include specific goals for achieving a  certain full-time/part-time workforce mix in stores, the planned percentage  of part-time positions varies widely by individual store and region. Despite  personnel reductions, scores for the customer satisfaction surveys  completed since DeCA began the personnel reductions show the same or  slightly increasing levels of customer satisfaction with the stores.  Notwithstanding the improvements, managers of small stores report  having difficulty balancing store operations and duties, as a result of the  reductions in the number of management positions.
subsections: section_title: Savings Achieved Through Personnel Reductions
paragraphs: DeCA is using workforce reductions as the primary means to achieve its  goal of reducing operating costs by fiscal year 2004. As table 1 shows,  DeCA plans to reduce its workforce by 3,047 full-time positions, a  decrease of 17 percent from its fiscal year 2000 staff. Of these positions,  the largest number (2,690) will come from reductions at the store level  while 187 will come from headquarters and 170 from regional offices.
As of December 31, 2002, DeCA had completed all of its workforce  reductions at the regional offices and 62 percent of its planned  headquarters’ reductions. It accomplished this by eliminating 137 vacant  positions (114 in headquarters and 23 in the regional offices). It reduced its  regional staff by another 147 positions through organizational changes and  other efficiencies, including closing two area offices in one region.
By the same date, DeCA had completed most of its planned workforce  reductions at the store level, eliminating 2,316, or 86 percent of the  2,690 positions that it had targeted. As table 2 indicates, most of the  planned store-level reductions (51 percent) are being achieved by  implementing efficiency measures within stores. Efficiencies are being  derived by implementing new staffing standards for each department  within a store based on sales volume and other measures. The remaining  reductions are accomplished by other methods, including eliminating  vacant positions, closing stores, and contracting out some functions.
A breakdown of completed and planned workforce reductions at the store  level are as follows:    1,113 positions were eliminated by implementing the new store staffing  standards based on sales volume. The remaining 261 efficiency reductions  are planned in fiscal year 2003.    812 vacant positions were eliminated. A DeCA official stated that vacant  positions existed because stores had historically been funded at only  90 percent of their required staffing. The elimination of these positions  resulted in no personnel losses and produced no savings.    304 positions were eliminated as a result of 15 store closings. Closings can  stem from Base Realignment and Closure recommendations or Under  Secretary of Defense (Personnel and Readiness) approval of DeCA’s  recommendations from internal assessments. An additional 49 positions  will be eliminated at two stores scheduled to close in fiscal year 2003.    87 positions were eliminated by contracting out such store functions as  receiving, handling, and stocking. An additional 30 positions at various  stores will be eliminated in this way in fiscal year 2003. The remaining  26 planned reductions were canceled to provide positions for a new  computer-aided ordering function.
Although DeCA had eliminated most of the planned 2,690 positions from  its stores by the end of 2002, only 122 store employees were separated  from the agency by a reduction in force and an additional 341 employees  retired. Other employees were reassigned or moved to lower graded  positions through the reduction process.
section_title: Stores Plan Greater Reliance on Part-time Positions but Lack Specific Goals for Workforce Mix
paragraphs: As part of the effort to reshape the workforce, all stores have begun to,  or plan to, increase the use of part-time positions to manage workloads  and meet the needs of customers. However, since DeCA’s strategic plan  does not include specific goals for achieving a certain full-time/part-time  workforce mix in stores, the planned percentage of part-time positions  varies widely by individual store and region.
The available data shows that the number of part-time positions in stores  has increased since the personnel reduction plan went into effect. For  example, the number of part-time employees rose by 8 percent in stores in  the Midwest region between April 2001 and October 2002. Store directors  told us that using part-time employees improved their ability to manage  fluctuations in store workloads more effectively. For example, a store  director said that part-time employees were used during weekends and  holidays to save money. Another store director pointed out that part-time  employees are available to work if there is work to do in a department or  cover a peak shopping period, but they can be sent home if the work is  completed. In addition, some store directors told us that a greater use  of part-time workers has allowed them to increase their store operating  hours. We found that 30 stores have increased their hours of operation by  relying more heavily on part-time employees. For example, one store with  a part-time workforce of nearly 60 percent increased its operating hours  by 6 hours a week.
In addition, current individual store plans call for a growth in the number  of part-time positions in stores as of the end of fiscal year 2003. The  Eastern and Midwest regions estimate that about 56 percent of their store  positions will be part-time, and the Western Pacific region estimates  46 percent of its store positions will be part-time. Table 3 shows the range  in the percentage of part-time positions that stores within each sales band  plan to employ.
As table 3 shows, the planned percentage of part-time positions varies  widely by individual store and region. For example, one Eastern region  store expects to convert all of its store positions to part time while another  store in the Western Pacific region plans to have only 7 percent of its  workforce as part time. While some stores are close to the 75 to 80 percent  industry average for part-time positions in commercial grocery stores,  the overall regional average of part-time positions indicates that there  are opportunities to achieve more efficiencies through greater use of  part-time positions.
Store directors have the flexibility of changing the mix of full-time and  part-time positions in their stores. Some store directors told us they used  part-time positions primarily to meet their budget goals. One store director  said that part-time positions were created to meet the store’s budget and  that there were no plans to increase part-time positions in the store once  the needed reductions were made. However, nearly all of the store  directors we interviewed said that they could operate their stores with  more part-time positions rather than full-time positions. As indicated  earlier, they recognized that part-time positions provide flexibility to  manage workload fluctuations more effectively. A regional director said  that agencywide goals for part-time workers need to be incorporated into  the strategic plan to optimize agency efforts to reshape the workforce.
section_title: Customer Satisfaction Remains High Despite Workforce Reductions
paragraphs: According to recent surveys, customer satisfaction with commissary  stores has shown a modest, but steady, improvement between  October 2001 and November 2002, the period when personnel reductions  were being made. These improvements were registered in the overall  score, ranging from 4.33 to 4.39, as well as in specific products and service  categories. Table 4 includes results for 6 of the 14 questions, as well as the  overall score.
These scores reflect continuing satisfaction including those likely to  be most immediately affected by changes in personnel levels such as  checkout waiting time.
section_title: Reductions in Management Positions at Small Stores Is Causing Some Concerns
paragraphs: As part of the effort to reshape the workforce, many directors of small  stores (bands 1 and 2) told us they had to eliminate one managerial  position. Small stores that have less than $60,000 in average monthly sales  were required to reduce the number of managers to one manager. Small  stores with $60,000 to $500,000 in average monthly sales had to reduce  their number to two managers. The managers of 15 of the 28 band 1 stores  told us that they are having difficulties balancing store operations with  their own managerial and administrative duties along with doing the  work of absent employees. Some store directors said they typically  have to work more than 40 hours a week to perform all these duties.  Eighty-seven percent of these 15 band 1 stores are open more than  40 hours a week. Because DeCA policy requires that a manager be present  in the store when it is open for customers, when the second manager or  an employee is absent, the on-duty manager has to carry his/her own  workload and administrative functions, as well as the load of the absent  manager or employee, typically working over the usual 40-hour work  week. DeCA headquarters officials have recognized the concerns raised by  managers in small stores and the need to balance their overall workload  but have not yet developed a plan for doing so.
section_title: Customer Satisfaction Survey Methodology Is Reasonable, but Analysis Could Be Improved
paragraphs: Overall, DeCA’s customer satisfaction survey methodology is a  reasonable approach to obtain customer feedback. It adheres to standard  questionnaire design principles, and attempts to select shoppers in an  unbiased fashion. However, some improvements in the analysis of survey  data could be made to provide more precise and complete customer  information. For example, it could adjust survey results for actual sales  volumes, or report and possibly adjust for shoppers who refuse to  complete the survey questionnaire. Because these factors are not  considered, overall survey results could be distorted to some degree.  Furthermore, the current survey does not collect information on the  number of service members who do not shop at a commissary and reasons  why they do not.
subsections: section_title: Weighting Survey Responses by Current Sales Volume Categories May Give Incomplete Results
paragraphs: DeCA’s current methodology appropriately attempts to obtain more survey  responses from stores with higher sales volumes than stores with smaller  sales volumes. DeCA places commissaries into three groups according to  sales volume. They do this so that survey responses of customers in  greater sales volume stores receive more emphasis than those in lower  volume stores. For example, stores in the largest sales volume group are  required to collect 150 responses, stores in the next largest sales group  collect 100 responses, and those in the lowest sales volume group collect  50 responses. However, sales volume can vary significantly among the  stores in the same group as well as between groups. A more precise  methodology would entail weighting survey responses by the relative sales  volume of individual stores. This approach could help DeCA avoid  potential over- or underreporting of survey results, and evaluate changes  in survey results that may be impacted by changes in sales volume.
section_title: Number of Non-respondents Needs to Be Recorded
paragraphs: DeCA does not document the number of customers who refuse to  participate in the customer satisfaction survey. DeCA officials told us  that most customers selected to participate in the survey willingly  respond, but they acknowledge that documenting the number of  non-respondents would enhance survey reporting. Survey literature  indicates that even nominally low levels of non-responses can influence  the interpretation of survey results. There may be a particular sub-group  of customers that does not respond to the questionnaire and that would  not be reflected in DeCA results. By not adjusting for non-response,  DeCA is assuming that respondents have similar satisfaction scores as  non-respondents. Also, by collecting data on non-respondents, the agency  may be able to determine if the results omit customer subgroups whose  opinions may be important. For example, some dependents of service  personnel may not feel comfortable participating in the survey because of  language barriers.
section_title: Assessing Why Eligible Shoppers Do Not Shop at Commissaries
paragraphs: DeCA does not conduct systematic assessments of the number and types  of personnel who do not shop at commissaries. The customer satisfaction  survey is conducted in the stores, and thus reflects the views of those who  shop at the commissaries. They do not capture the views of those who do  not shop there. Although DeCA’s strategic plan addresses the need to  attract more military personnel to use the commissary, DeCA officials do  not know to what extent eligible customers are not shopping at a  commissary and the reasons why not.
section_title: Conclusions
paragraphs: Realignment of the workforce, through greater use of part-time employees,  has enabled many stores to increase their operating hours and maintain  or improve customer service. However, DeCA’s strategic plan does not  include specific goals for the full-time/part-time workforce mix. As a  result, the extent of part-time employees varied among the stores and is  significantly less than current industry practice. Opportunities to achieve  even more efficiencies may exist through greater use of part-time  positions. In addition, small store directors have concerns about balancing  their workload and maintaining store operations. Although DeCA’s  customer satisfaction survey questionnaire is reasonable, survey results  could be subject to some under- or over- stated because the current  methodology does not explicitly weight stores’ results by sales volume and  does not collect data on non-responding customers. Finally, DeCA  does not know how many eligible service members do not shop at a  commissary and the reasons they do not.
section_title: Recommendations for Executive Action
paragraphs: We recommend that the Under Secretary of Defense (Personnel and  Readiness), in consultation with the Chairman, Commissary Operating  Board, require the Director, Defense Commissary Agency, to    update the strategic plan to include goals that identify the percent of  the store workforce that is expected to be full- and part-time to  achieve further efficiencies from reshaping the workforce;  reassess the management reductions at small stores to ensure managers  can balance their workload and maintain store operations;    adjust the customer survey results on the basis of sales volume and    document the number of survey non-respondents and their reasons for not  completing the questionnaire; and    examine potential methods and analyses to periodically determine how  many and why eligible personnel do not shop at commissaries, to identify  ways to improve service and increase the number of potential customers  using the commissary benefit.
section_title: Agency Comments and Our Evaluation
paragraphs: In commenting on a draft of this report, the Under Secretary of  Defense (Personnel and Readiness) concurred with four of our five  recommendations and outlined actions to be taken to address the four  recommendations the department concurred with. He disagreed with our  recommendation that the Defense Commissary Agency update its strategic  plan to include goals that identify the percent of the store workforce that  is expected to be full- and part-time, expressing the view that staff in  Washington should not prescribe the full-part-time mix for stores. The  intent of our recommendation was not for the Under Secretary to  prescribe the workforce mix for stores but rather have the Defense  Commissary Agency include agencywide goals on the projected workforce  mix in its strategic plan to help achieve the goal of reshaping the  workforce. Rather than being arbitrary or prescriptive, such goals, if based  on considered research or best practices, could provide an important term  of reference to guide staffing decisions at the local level to optimize  organizational performance and cost effectiveness. We continue to believe  the recommendation is an appropriate one for the Defense Commissary  Agency to implement. The department’s comments are reprinted in  appendix II.
section_title: Scope and Methodology
paragraphs: We performed our work at DeCA headquarters located at Fort Lee,  Virginia, and DeCA’s three regional offices in the continental United States  (the Eastern Regional Office in Virginia Beach, Virginia; the Midwest  Regional Office in San Antonio, Texas; and the Western Pacific Regional  Office in Sacramento, California). Due to travel costs and time constraints,  we did not do any work at the European Regional Office in Germany;  however, the total number of reductions shown for DeCA does include  positions in the European Region.
To determine the status of DeCA’s personnel reduction plan, we  obtained data from DeCA headquarters and each regional office on the  number of reductions planned by region by store as well as made as of  December 31, 2002. We also analyzed reduction-in-force data to determine  the actual or estimated impact on store employees. We also reviewed  DeCA’s strategic plan to document DeCA’s plans for reducing unit  operating costs and reshaping the workforce. We did not validate the cost  savings reported by DeCA.
To determine how store operations and customer service have been  affected by the personnel reductions, we interviewed officials at DeCA  headquarters and the three regional offices in the United States. We  also interviewed store directors at eight stores that were near the  Eastern and Midwest regional offices. In addition, we also conducted  telephone interviews with either the store directors or managers for  38 band 1 and 2 stores in the continental United States (defined as  having average monthly sales volume of less than $1 million), resulting in  interviews of all 41 band 1 and 2 stores in the continental United States.  We also determined the planned use of part-time positions by each store in  the three regional offices visited. Finally, we also reviewed and discussed  the Commissary Customer Service Survey results for the surveys  conducted in October 2001 and May and November 2002, to identify  changes in the satisfaction scores as the personnel reductions were  being implemented.
To determine if the DeCA customer satisfaction survey methodology is  reasonable, we reviewed DeCA’s questionnaire and methodology and  contrasted these to standard questionnaire design and statistical sampling  procedures used in industry and government research. We also  interviewed DeCA officials responsible for administering the survey  regarding their analysis of survey results. We also observed the survey  being conducted at the Fort Myer store in Virginia in November 2003.
We conducted our review from July 2002 through January 2003 in  accordance with generally accepted government auditing standards.
We are sending copies of this report to the Secretary of Defense; the  Under Secretary of Defense (Personnel and Readiness); the Chairman,  Commissary Operating Board; Director, Defense Commissary Agency; and  the Director, Office of Management and Budget. In addition, the report will  be available at no charge on GAO’s Web site at www.gao.gov and to others  upon request.
Please contact me at (202) 512-8412 if you or your staff have any  questions concerning this report. Major contributors to this report  were Michael Kennedy, Leslie Gregor, Betsy Morris, Curtis Groves,  and Nancy Benco.
section_title: Appendix I: Commissary Customer Service Survey Questionnaire
section_title: Appendix II: Comments from the Department of Defense