The Good Jobs Strategy
We’ve begun a new series of policy forums at the Labor Department, hosting national experts on issues that impact and inform our work here. Speakers have included Cass Sunstein (author of Simpler: The Future of Government), Cary Goglianese (Does Regulation Kill Jobs?), and Wage and Hour Administrator David Weil (The Fissured Workplace).
Most recently we hosted Dr. Zeynep Ton, who teaches operations management at the MIT Sloan School of Management and authored the book, The Good Jobs Strategy: How the Smartest Companies Invest in Employees to Lower Costs and Boost Profits. After studying retail operations for more than a decade, Professor Ton has found that some of the most successful businesses are choosing to make significant investments in their employees — and making a lot of money doing it.
Professor Ton launched her research by looking for ways to increase efficiency in operations and to improve businesses’ competitiveness. What she found flew in the face of what is sometimes considered conventional wisdom in today’s global marketplace: The days of good jobs are over, especially for low-cost retailers, who often seem to rely on low wages and just-in-time scheduling. Dr. Ton was surprised in discovering example after example of some of the most successful retailers making a very different choice.
Many of us may be familiar with the Costco story. They pay a living wage, they promote from within and benefit from incredible employee retention and loyalty, and their sales per employee are almost double those of their main competitors. But Professor Ton has found that this strategy is not unique to Costco and its segment of the retail industry.
As another example among several, QuikTrip — a chain of low-price convenience stores — has also made this model work. They pay higher wages and benefits, and they schedule more workers so they can commit to high-quality service. In fact, QuikTrip’s wages and benefits are good enough that they have been named one of Fortune’s “100 best companies to work for” every year since 2003. And this investment has clearly paid off: their sales per labor hour are 66 percent higher than those of an average convenience store.
Through her years of research, Professor Ton has documented the fact that low wages and unpredictable work schedules are a choice — they are not the only business strategy — and it is a choice that comes with costs. At our forum, Dr. Ton talked about the fact that some companies are stuck in a vicious cycle of low investment in employees, poor operations and bad service, decreasing sales and profits and decreasing labor budgets. But companies can instead create a virtuous cycle by combining investments in workers like cross-training and higher wages with a sustained focus on logistics and service, reaping the benefits in sales and profits.
“Offering good jobs is a choice that’s available to all retailers – small, large, regional, national, public private if you want to move our economy more towards a good jobs economy that works for all, we have to think about not just the wages and benefits, but look at the work itself, because as I examine different companies – from Costco to QuikTrip — what I found was they weren’t just paying their people more, they were designing the work differently. They were designing the work so their employees are more productive, so they are more engaged, so they contribute more, so their job is more meaningful — there is more dignity in their job. Good jobs — in my research and the research of others — good jobs equal good work.”
As Dr. Ton talked to us about the decisions that successful, high-profile businesses have made — paying a living wage, investing in training and others — I could not help but think about the millions of low-wage American workers who have been mobilizing to demand these same things. It’s no surprise that workers value higher wages, a say in scheduling, and a certain dignity at work. But Professor Ton’s research shows that these same values can play a crucial role in building a successful, profitable business.
Secretary Perez talks often about rejecting “false choices” and lifts up companies that “do well by doing good.” If you missed his recent speech at the National Press Club, it’s a pragmatic as well as optimistic call for a return to the core American values of shared responsibility and shared prosperity. He talked about the fact that investing in workers is a crucial part of building an economy that works for everyone, and he highlighted the leadership of business executives, who believe an investment in their workers is an investment in the strength of their companies. Among other success stories, Secretary Perez lifted up the remarkable action this past summer of Market Basket workers and managers who came together around shared values, partnership and a mission that works: low prices, great service AND great jobs.
As we meet with business leaders from across the country, we continue to see there are companies all around us illustrating that what’s good for American workers is good for American business, too. And Dr. Ton’s concrete data and analysis are a critical new contribution to making the business case for investing in employees.
Worker engagement isn’t just the right thing to do; it’s a winning strategy for competitive high-quality services and a high-profit bottom line.
Originally published November 3, 2014.