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The Good Jobs Strategy: How the Smartest Companies Invest in Employees to Lower Costs and Boost Profits, by Zeynep Ton
FOR an insightful, unique addition to your practice as a manager of a business, this is the best book of the year – bar none.
The author, Zeynep Ton, holds a professorship in Operations at MIT. Her assertions are not the product of a creative mind, but the results of solid research into what has been achieved by superb companies.
The book’s focus is on retail, she explains, because if what is suggested is possible in this most difficult of environments, it is possible elsewhere. It is important to state this upfront so the message of the book is not ignored by those outside of the retail trade. This message has wide applicability.
Most employers in businesses with wafer thin margins believe that the only way one can succeed is at the expense of their employees. This is achieved by offering jobs that pay low wages, which have scant, if any benefits, and unpredictable work schedules. These businesses are often understaffed, and lack equipment to do the job well. The result is that it is very hard for employees to perform well, and finding meaning and dignity in the work is impossible.
This is the “bad jobs strategy”. It produced the “vicious cycle of retail”.
Customers do not want to buy from these retailers, but do so because they are on tight budgets, and the prices are low enough. Customers are served by harried staff, in chaotic settings. Customers’ buying experience is unpleasant, finding what they want is difficult, and getting help, nearly impossible. The store managers need to offer ever lower prices by paying staff less, and spending less on the operations of the store.
In the US in 2011 the median hourly wage for the 15 million retail workers was 34% lower than all other workers. To achieve its “everyday low prices”, Walmart employees in California were found to be receiving over $85m in public assistance annually to supplement their paltry wages. In the UK only one in seven people working at supermarkets earned a living wage in 2012.
And these are people with real jobs.
Decades ago, Sasser and Schlesinger argued in their seminal book, The Service Profit Chain, that capable, committed and satisfied employees provide good customer service, which then drives customer loyalty to improve sales and profits. This is not difficult to believe this of companies that sell high-end, differentiated products, or that compete on the basis of service.
Most people do not believe it is possible to do the same in industries with wafer-thin margins such as low-cost retail. So, our experiences with restaurants, airlines, hotels, hospitals and call centres, must remain disappointing, frustrating, and time-consuming.
Ton asserts that the “bad jobs strategy” is a choice. It does not have to be this way, and she has proved this from her studies.
The alternative is the “good jobs strategy” and its “virtuous cycle of retail”.
Ton focuses on four “model retailers” and refers to many businesses in other industries able to achieve huge returns to shareholders, great service to customers, and well-paid, challenging and satisfying work for their staff.
The model retailers are Costco, a wholesale-club chain that has 580 stores with a turnover of $76bn; Mercadona, the largest supermarket chain in Spain, with 1 400 stores and a turnover of €19bn; QuikTrip, a convenience store that also sells petrol, with 600 outlets and a turnover of $8bn; and Trader Joe’s, an American supermarket chain with 340 stores and a turnover of $8bn.
All of these businesses outperform their industry and have greatly enriched their shareholders despite spending much more on staff than their competitors in order to have a well-paid, well-trained, well-motivated workforce. The same is found in business such as Southwest Airlines, UPS, Toyota, Zappos, the Wegmans supermarkets, and Shouldice Hospital.
The “good job strategy” does not rely on a hefty investment in staff alone. It requires a set of four operational decisions consistently upheld, and rigorously applied.
All these companies have limited the number of products and services they offer to a basic set of the necessary and important. They sell, for example, only the six most popular types of tomato sauce, instead of 26.
These companies delicately balance job standardisation and employee empowerment. They have efficient, proven, and ever improving operational systems which are standard across their huge number of stores. Within these parameters their staff are empowered to make decisions in the best interests of the customers.
Staff are taught to multi-task so that customers can be assisted during busy periods by any of the trained staff who might be available. A shelf-packer is able open an additional till to relieve queueing customers.
Staffing levels are high so that the slick operational system can be easily and well managed, but no higher than they need to be. Overstaffing is as unprofitable as understaffing, as Ton research shows.
There are many common excuses, Ton explains, for not pursuing a “good jobs strategy.” This carefully argued books shows that none are valid.
Among these excuses are that “public companies cannot do it” because shareholders expect managers to sweat all assets including people. But Costco is a public company.
Another excuse: “Big companies can’t do this.” Costco employs more than 140 000 people, Home Depot, 200 000.
Another excuse: “Those model companies must have idiosyncratic qualities that we don’t have.” The real reason for there being so few companies offering good jobs, low prices, good customer service, and superb financial performance, is the difficulty. Excellence is much harder to achieve than mediocrity.
“I wrote this book for managers, executives, and entrepreneurs who want to offer good jobs but don’t think they can, because controlling costs is so important to their business.” Read this book carefully if you are one of these managers, executives or entrepreneurs.
Readability: Light -+--- Serious
Insights: High -+--- Low
Practical: High +---- Low
* Ian Mann of Gateways consults internationally on leadership and strategy and is the author of Strategy that Works. Views expressed are his own.
