Conventional wisdom holds that bad jobs are the unavoidable price of low-cost service. The rule of thumb for many companies in industries like retail, hospitality, banking, and health care has been to drive down wages and operating costs, creating a vicious cycle of disinvestment in search of higher profits.
“There are millions of jobs in retail stores, restaurants, call centers, hotels, and day cares—but most of them are lousy and have been for decades,” writes MIT Sloan Professor Zeynep Ton in a recent Harvard Business Review report, The Good Jobs Solution. However, some companies have come to realize that “the way they run their operations, including treating their employees as replaceable commodities, is not sustainable.”
In the past three years, large companies including Walmart, McDonald’s, GAP, and Aetna have raised wages. Walmart is investing more in training. GAP is experimenting with more-predictable schedules. And Aetna is letting call center reps use more discretion to meet customer needs. These companies and others are realizing that happy, well-trained, engaged workers are more productive, provide better service, and are more loyal. Together these moves may herald a radical shift.
The case for good jobs
In her ongoing, groundbreaking research, Ton has accumulated volumes of evidence that good jobs are good for business. A growing number of service companies that have long offered frontline workers low pay, few benefits, unpredictable schedules, and dead-end careers are changing or at least questioning their model. Their shift toward what Ton refers to as a Good Jobs Strategy may be driven by financial, competitive, or moral reasons. Or, all the above.
Financial: There is a dollar value to adopting the Good Jobs Strategy. In her HBR report, Ton cites Quest Diagnostics, a provider of medical diagnostic services, where, before changing their approach, 60% of call center reps left within a year, resulting in $10.5 million annually in direct turnover costs. Ton and her students have seen strong correlations between indicators of bad jobs, such as high turnover and frequent last-minute schedule changes, and costly operational problems (such a stock outs and unhappy customers).
Competitive: At Quest, that high turnover rate referenced above also undermined service. Customers were subject to long hold times or inexperienced and undertrained reps. The company lost important customers as a result. Another prime example is brick-and-mortar retails stores, which are facing massive challenges and disruptions from e-commerce. Physical retailers must create a compelling shopping experience or risk closing.
Moral: Many of today’s managers and executives don’t want to build a business on the backs of their employees. For those leaders, doing right by their employees is justification enough to adopt a better strategy.
(In her two-day MIT Sloan Executive Education program, Achieving Operational Excellence Through People, Ton shares case studies and survey data from her research and helps participants develop a roadmap for implementing operational excellence in their organizations.)
Getting your company on board
The transition to a good jobs strategy is daunting and takes time, but it's achievable. A human-centered strategy that gives frontline employees a living wage, adequate training, predictable schedules, and career opportunities is well worth the effort. Ton advises trusting the process; she provides many tools and resources to support this effort as part of her nonprofit initiative, the Good Jobs Institute.
As in any transformation, it is important to:
1. Create a compelling vision that appeal to both heads and hearts.
2. Form a centralized implementation team that includes members of the c-suite as well as field managers.
3. Maintain constant and honest communication about the transformation through town halls, short videos, memos and more.
“The CEOs of service companies have a unique opportunity to generate more value for their investors and customers while creating meaningful work for millions of people—work that will allow them to escape poverty and join the middle class,” write Ton. “That’s a privilege and a responsibility.”
Learn more about achieving operational excellence with a Good Jobs Strategy:
- Read Ton’s popular book, The Good Jobs Strategy: How the Smartest Companies Invest in Employees to Lower Costs and Boost Profits.
- Hear Ton make a compelling case for good jobs in this MIT Sloan Executive Education webinar.
- Learn how to adapt this strategy to your organization in Ton's two-day Executive Education program, Achieving Operational Excellence Through People: Delivering Superior Value to Customers, Employees, and Shareholders.