In The Good Jobs Strategy Zeynep Ton explores the question of what makes a company successful. Contrary to popular belief, she argues, a company can adopt a low cost strategy that promotes investments in employees.
The rule of thumb for many companies has been to drive down wages and operation costs, creating a vicious cycle of disinvestment in search of higher profits. What if the focus shifted from lower costs to smarter investments: creating products that people want to buy, jobs that people want to keep, and eventually shifting the norm for companies worldwide to include livable wages, good benefits and a healthy work environment?
Ton shows that treating employees as assets in which to invest can foster an environment for profit, efficiency, and better customer service. Retail stores can succeed by abandoning the vicious cycle (a self-reinforcing model of low wages, low quality labor, poor operational execution and low store profit) in favor of a virtuous cycle which creates the opposite dynamic. This counter intuitive process puts people first, allowing their knowledge, training and commitment to lead a company to success. All operational choices under this strategy aim to encourage employees and create room for growth as they explore different career pathways.
Ton presents multiple examples of companies that have succeeded in this strategy, creating a work environment that promotes quality and organization, rather than offering bargain prices at the expense of service. A case in point is Mercadona, a small grocery store in Spain, which provides an extensive training and benefits package for each employee. This practice leads to competent cross-trained staff and low turnover, resulting in lower overall costs for training, even though the cost to train each employee is high. Furthermore, companies can choose to make operational choices, such as reducing inventory, that would at first glance seem like a sacrifice of product offerings. Trader Joe’s, for example, has been able to invest in and track the products in its limited inventory, with improved oversight as to where they are and how fast they sell. As a result, employees are also more knowledgeable about the products. This leads to reduced waste in the form of products that no one wants or buys, replaced by others that provide new opportunities for profit.
The idea that a company can put its employees first revolutionizes conventional wisdom about business, challenging the philosophy driving the proliferation of overworked, understaffed workplaces seen today in the wake of the recession and in the face of other economic challenges. Often, companies react to such circumstances by reducing staff numbers, regardless of the increase in workload. This dynamic affects workers in retail, blue collar, and white collar jobs at all levels.
The service industry is the main focus of The Good Jobs Strategy, and Ton highlights in particular the challenges experienced by retail workers, caught in a vicious cycle of failure from being over-worked, often having to make difficult choices between performing assigned tasks and addressing the needs of their customers. A recent New York Times Article by Tony Schwartz and Christine Porath, Why You Hate Work, reflects that the same type of pressure is felt by middle and senior managers in other industries, who feel pulled in multiple directions as the demand for their time exceeds their capacity. In line with Ton’s argument, the article highlights the relevance of investing in employees, beyond just salaries. Employees are more productive and satisfied when they are able to get their work done, have the opportunity to focus, and feel connected to a higher purpose at work.
Ton makes a strong case that the Good Jobs Strategy is not just theory but reality, based on the success of companies in the United States and in Europe. Could forward-looking enterprises in developing economies follow the same pathway to success?