Why do some companies retain happy employees, while others find their ranks thinned by burnout and absenteeism? Is it possible for companies to boost their bottom line while also boosting employee satisfaction?
Zeynep Ton, adjunct associate professor of operations management at the MIT Sloan School of Management, answered these questions in her landmark 2014 book: The Good Jobs Strategy: How the Smartest Companies Invest in Employees to Lower Costs and Boost Profits (Amazon Publishing/New Harvest). Now, she works with a growing number of companies to implement the Good Jobs Strategy through MIT Sloan and the nonprofit Good Jobs Institute. Spectrum asked her to describe the results.
What problem has your research solved?
ZT: A widespread assumption is that people are just a cost to be minimized and that companies should work to minimize that cost. But I’ve found that underinvestment in people leads to operational and customer service problems, which leads to lower sales, which leads to shrinking budgets. This vicious cycle is costly for investors. It hurts customers. It is downright brutal on workers, from their wages to their schedules to their treatment and dignity. Everyone loses. There has to be a better way.
What sector could benefit the most from your work?
ZT: My research has been in retail, but the framework is applicable to other settings. Quest Diagnostics recently applied it in its call centers. If you want to fix income inequality and increase median wages, we need to transform low-wage service jobs first: retail sales, cashiers, food workers. Their median wages are poverty level, the schedules are unpredictable, and employees often lack meaning or purpose.
How do we fix the issue?
ZT: When I examined successful companies, like Mercadona or Costco, I found that they created an entirely different, human-centered operating system to make their employees productive. There are four components to my strategy. First, offer less. A typical store offers, say, so many kinds of toothpaste. How long does it take someone to shelve them and be knowledgeable about each type? Offering less can reduce costs and increase customer and employee satisfaction. Second, standardize and empower, instead of adopting a culture where rules come from the top down. More people will follow company standards if they feel like they’re involved in creating them and empowered to improve them. And how many times have you heard, “Sorry, we can’t help you, this is against our policy”? A smart company knows to empower employees to provide customer service at their discretion. Third, cross-train.
Many retailers manage variability in customer traffic and needs by changing the number of employees, which creates unpredictable work schedules. Instead of changing quantity, change what employees can do. Take Mercadona: If you’re standing in line with nobody to help you, you don’t hear, “Sorry, that’s not my department.” Chances are, any employee you see can leave the soup aisle to come help. Finally, operate with slack.
Many retailers cut corners by understaffing. Model retailers overstaff, building in slack—instead of being so busy coping with issues caused by understaffing, employees can spend time looking for ways to improve and innovate. The combination of these choices with investment in people and strong values is what simultaneously produces great outcomes for workers, customers, and investors.
Why is your approach different from others?
ZT: It appeals to people’s heads but also their hearts. I recently asked the co-CEO of a retail chain based in Washington state, ‘This requires a huge transformation. Why take it on?’ He said, “I wanted to create an organization that would stay around, but there’s also a moral argument: Why on Earth not do this?”
It’s been so nice to work with organizations. It’s inspiring to see how excited people are, because the way that they change not only will result in their company being more successful, but it will also affect the lives of people—vulnerable people. My mission is to improve the lives of low-wage workers in a way that benefits customers and companies. It has to benefit companies, or it’s not going to be sustainable.
ZT’s approach makes so much sense. I have sometimes encountered the “empowered employee” who makes my interaction so much easier, and brings me back to that store.
Professor Sakamoto of Hosei University, Tokyo, has studies over 8,000 firms in Japan. Of the sucessful 1,000 firms, their common point is that the owners of these firms have treated their “employees are the most important assets”.
Even though, we all learn “customers first”, these owners realize that their “employees are the one deal directly with the customers”. Unless the employees are well treated, they can not serve their “customers well”.
Professor Sakamoto has visited here in Taipei, one of the most sucessful chain restuarants, Din Tai Fung (famous for its signature ‘xiao long baos’, a michelin star awwarded restaurant). My friend, Mr. Yang, the owner, explained to him that he has used 55% of his total revenue for his “employees—wages, training and welfare”.
(I invited President Reif to this restaurant once, and had introduced him to the owner, Mr. Yang).
C. C. Chen
BS, MS in Sloan
Ph.D in Economics
I highly commend Mr. Yang for his approach of investing 55% of his revenues to his employees. whew they are happy , they are more motivated. Their standard of living improves, the knowledge in the business increases and they become richer.This increases their retention and they serve better, sales increase through improved customer service and revenues keep on increasing as a consequence. Everybody wins.
I like the findings of this research because as an owner of a mini grocery, I am convinced that I am on the right track as I have used this approach minus the training bit and I have managed to retain my employees for 2 years.
I can confidently say that this approach works.
I greatly appreciate the work of MIT Spectrum!
Proud and honoured to be an MIT parent.
MIT parent 2016