How Good Jobs Can Drive Profits

12 Feb 2014 | Chris Schildt
How Good Jobs Can Drive Profits
Above: Zeynep Ton, author of The Good Jobs Strategy (image credit: Evgenia Elieseeva)

Even in competitive industries like retail, businesses can boost profits and provide good jobs, argues MIT business professor Zeynep Ton. Her new book, The Good Jobs Strategy, explains how investing in workers and implementing smart business practices can benefit investors, customers, and millions of employees. Ton's groundbreaking research provides important evidence that we can raise the minimum wage without hurting businesses' bottom line, and should help to inform the national dialogue about inequality. America's Tomorrow spoke with Ton about her research.

What is the good jobs strategy?

It is a strategy that yields great value to investors and customers while creating good jobs for employees. And it is a strategy that doesn't depend on charging customers more. The good jobs strategy involves two components: investment in people and a good design in operations. The strategy is not just about paying employees more or treating them nicely. It's about making smart operational decisions that transform the investment in people into high performance.

Sounds like everybody wins.

The good jobs strategy benefits everyone. It works great for employees because they have good jobs. The companies I studied paid their employees higher wages than their competitors. They do a better job providing more predictable schedules. They design jobs in a way that provides meaning in the job and sets up employees for success. It's good for customers because they end up having low prices and great customer service. And investors also benefit. When companies pursue the bad jobs strategy, the pervasive operational problems have a big effect on their sales and profits. They end up leaving money on the table because their operations are not that good.

How do companies implement a good jobs strategy?

The companies I studied were all making similar and smart operational choices. First, offer fewer but better choices for customers. Second, combine operations standardization with employee empowerment. Third, cross-train employees, and fourth, operate with enough staffing so that employees can do their jobs well. These four choices really enabled the good jobs strategies by reducing cost, increasing the productivity of workers, and enabling employees to have an effect on company profits.

Most people want to do a good job at work. They don't go to work thinking, how they could mess this up. They want to contribute. The companies that offer the good jobs strategy do this well.

Tell me about a company doing it right.

QuikTrip, based in Tulsa, Oklahoma, is one of the best Fortune 100 companies to work for, and has been for many years in a row. Their wages are higher than the industry average, and they provide more stable schedules and room for advancement than their competitors. Not surprisingly, they have one of the lowest turnover rates. At the same time, they offer the lowest prices in their industry, outstanding customer service, and thrive financially. Their per store profits are almost double the top quartile in their industry and they have one of the highest sales per square foot in the industry.

In my interviews, several QuikTrip employees told me they loved their job because they were held to very high standards. The company had very high expectations of them and they loved being able to meet those expectations. They told me how their job is about making people happy. This is a convenience-store chain with gas stations; part of their job is cleaning toilets and gas pumps. But they see their job as so much bigger than that.

Can the good jobs strategy reduce poverty and inequality?

Absolutely. Look at companies that follow the good jobs strategy. Employees with full-time jobs at these companies are nowhere near the poverty line. Millions of people work in retail, so this could have a large impact.

What will it take to move the needle on this?

We can all do our part to encourage more companies to adopt this. As business school academics, we can educate our students, the future business leaders who will manage these companies, to show them you can run a business and make money by satisfying multiple stakeholders at the same time.

Customers can clearly vote with their own feet. They can choose restaurants and stores that provide good jobs.

What policy levers would help?

This is not my expertise. But if the minimum wage were to increase, that would put pressure on companies to find ways to improve the productivity of their employees.

Why don't more companies pursue a good jobs strategy?

There's a mindset that the only way to get the lowest prices is to pay employees as little as possible, treat them as a cost to be minimized. This has become the conventional wisdom. And companies tend to have more short-term focus than long-term focus. The good jobs strategy is about making a set of choices that improve the productivity of employees and that ensure that employees can play a big role in driving profits. It's not an easy strategy to execute but this should not be an excuse, given how much of a social problem we have and how much everyone can benefit.

This interview originally appeared in the February 12, 2014 issue of the America’s Tomorrow newsletter.

economy