Businesses have a choice in how they treat employees to make profits. They can choose the low road by offering employees low wages, basic benefits and uninspiring, menial job responsibilities. Or, they can choose the high road by offering employees a living wage, better benefits and a job that motivates them to do great work. Unfortunately, too many businesses choose the low road.
Zeynep Ton, MIT professor and operations management expert, has been studying businesses and has learned that retailers, even the low-price players, do not have to choose the low road to find the pathway to lasting profits.
In her book, THE GOOD JOBS STRATEGY, Zeynep upends conventional business wisdom and outlines a practical vision for how companies can profit without taking advantage of front-line employees.
According to Zeynep, “There are companies in business today that [follow] the good jobs strategy. These companies provide jobs with decent pay, decent benefits, and stable work schedules. But more than that, these companies design jobs so that their employees can perform well and find meaning in their work.”
For many businesses, especially retail chains, labor is their biggest controllable cost. So when sales decline, store managers quickly turn to reducing employee work hours, shifting full-time employees to part-time, cutting back on training and slicing benefits in order to rein in costs. These drastic cuts can negatively impact employee morale, which can further erode sales.
Model businesses featured in the book following Zeynep Ton’s good jobs strategy include Costco, QuickTrip and Trader Joe’s. All three businesses compete on offering customers low prices but each business has chosen the high road pathway to profits. Zeynep profiles each of these companies in the book and explains how they make greater profits than their competitors all the while treating their employees better.
The good jobs strategy recipe that these model businesses follow is a combination of investing in great employees and making smart operational choices.
Investing in employees starts with hiring somebodies and not warm bodies. Somebodies are cultural fits that display a willingness to learn and eagerness to help. (Warm bodies are just people to fill a hole on the daily labor sheet.) Once a great person is hired, pay them a living wage and offer them benefits that can sustain a family.
Zeynep also observed that these model companies view overstaffing as a good thing because customer service will improve, stores will be cleaner, re-stocking will happen and employee morale will be higher.
Making smart operational choices is about simplifying everything from the number of products on the shelves to the amount of promotions needed to be implemented by employees. Zeynep’s research revealed that each layer of complexity a business adds on, the more an employee has to manage. And the more an employee has to manage can result in increased mistakes, less time to spend with customers and greater inefficiency on all levels.
It’s easy for businesses to fall into the trap of offering customers more variety and more services because they believe customers want that. Zeynep’s good jobs strategy approach disagrees. She explains, “It is as if the store hasn’t taken the time to really figure out what its customers want or which products will best satisfy their needs, so instead, it just offers everything.”
Why don’t more companies follow the “good jobs strategy”? The answer is simple: it’s difficult.
It’s difficult because the culture of company has to be centered around designing their entire business around employees. Zeynep writes, “The good jobs strategy requires more than providing decent wages and benefits, stability, training and opportunities for success and growth. Companies pursuing it also need to think carefully about their offering of products and services, their work design, their staffing, the allocation of work among employees, and how employees will actively engage in improvement.”
Which path are you choosing to find business success?
If you choose the high road, the good jobs strategy way, then make sure your company culture is focused supremely on your employees and treating with respect and dignity. This road will not be easy but it will be meaningful to everyone connected to your business.