‘The Good Jobs Strategy’ – Adopting a Better Approach

An idea gaining traction recently is ‘The Good Jobs strategy.’ This ideal is based upon the fact that one in four working adults in the US has a job that pays less than the living wage; and promotes “providing employees with a decent living,” as quoted from Joe Nocera’s column in the New York Times.

Mr. Nocera was in attendance at the Aspen Ideas Festival, a forum for interesting ideas where one of the important themes this year was jobs.

Zeynep Ton, a professor at the MIT Sloan School of Management, spoke at the festival, her ‘big idea’ is that companies provide a decent living, including not just equitable salaries, but also a sense of purpose and empowerment at work, can be just as profitable as those that strive to keep their labor costs low by paying the minimum wage without any benefits. In fact, she’s written a book about it titled, ‘The Good Jobs Strategy: How the Smartest Companies Invest in Employees to Lower Costs and Boost Profits.’

Ton’s thesis, drawing on more than ten years of research on supply chain management in the retail industry, shows ‘how operational excellence enables companies to offer the lowest prices to customers while ensuring good jobs for their employees and superior results for their investors.’ Reaching those goals, Ton points out, means companies need to adopt ‘human-centered operations strategies’ which she also acknowledges ‘is neither quick nor easy.’

The crux of what Ton and her research team discovered, is that frequently companies view their employees as a cost to be minimized – leading to an underpaid and poorly trained workforce. This condition snowballed into other problems such as poor customer service, low morale and high turnover. When she asked executives at the companies why they put up with this business model, they explained that the only way they could guarantee low prices was to pay employees as little as possible as labor is such as large part of their overhead.

Ton searched for firms using a better method – and found some in Costco, Trader Joe’s, Mercadona (the largest supermarket chain in Spain) and QuickTrip. These companies are all highly regarded by customers and industry peers, show healthy sales and profit growth, and have substantially higher asset and labor productivity than their competitors. Most importantly for the workforce, these retailers feature higher pay, better benefits and more flexible schedules than their counterparts. And they make a concerted effort to provide advancement opportunities – with no fewer than 98% of managers promoted from within.

These firms have managed to combine the lowest prices in their respective industries, with better customer service and low employee turnover. The combination of investment in employees with efficient operational and work practices allows these retainers to break the presumed chain of the tradeoff between employee investment and low prices – and that’s a healthy ‘Good Job Strategy’ for all!