The Good Jobs Strategy

Key Concepts

Bad jobs exist because of the mindsets of companies

“So how can it be that a lot of companies offer such bad jobs? Wouldn’t they want to make their employees more satisfied in order to bolster sales and profits?” (p. 6)

“Here’s why they don’t. It is widely believed in the business world that investment in employees is a great idea when companies sell differentiated products or compete on the basis of service.” (p. 6)

“But in industries such as low-cost retail, where companies sell standardized products and customers are (supposedly) willing to sacrifice good service for low prices, the link between satisfied employees, good service, and good profits (supposedly) breaks down. In the world of low-cost retail, where the profit margins are razor-thin, what matters most to management is keeping expenses as low as possible. Since labor is such a big expense and personal service isn’t really what keeps customers happy, these companies seek to keep labor costs as low as possible. Hence the belief that offering good jobs is a luxury that low-cost retailers cannot afford. This is the argument for bad jobs in retail, and similar arguments can be found in other service industries.” (p. 6)

Excuse #1: Public companies can’t do it.

Excuse #2: You have to be born this way.

Excuse #3: Big companies can’t do this.

Excuse #4: Those model companies must have idiosyncratic qualities that we don’t have.

Bab jobs cause a vicious cycle

“At most retail chains, payroll budgets are determined as a percentage of sales. For each month or week, store managers are given a target for payroll as a percentage of sales. So when sales drop, store managers will do whatever they can to bring their labor budgets down in proportion. They will schedule fewer hours or shift the mix of employees toward more part-timers. This is not the logical response it may seem. It’s more like a negative feedback loop, reacting in a way that reinforces whatever caused the reaction in the first place. A given store’s sales can go up and down for all kinds of reasons. But one consistent reason for going down might well be that customers are responding to the low quality of service. If so, they are probably responding—though they wouldn’t know it—to a sinking level of operational execution. They’re finding it more of a nuisance to shop here and maybe less of a nuisance to shop there.” (p. 49)

Good Jobs Operational Choice #1: Offer Less

“But what retailers do not realize is how much each additional product, each additional promotion, and each additional holiday they choose to stay open increases the complexity of their business. Higher product variety and more promotions, in particular, increase costs all throughout the supply chain, boosting manufacturing costs, transportation costs, inventory costs, store labor costs, and stockout costs. That’s if everything goes right. More product variety and promotions also increase the likelihood of errors and operational problems in the stores.” (p. 77)

“We have seen that offering less—be it products, promotions, services, or amenities—while also investing more in employees, such as through more training, more stability, or more pay, helps companies reduce their own costs and therefore helps them reduce costs for customers. Offering less makes operations more efficient and accurate, which in turn improves customer service and hence sales. Since improving operations helps employees do a better job—sometimes in ways the customers can see with their own eyes—employees feel greater pride and joy in their work. (Most people like being helpful to other people.) This, in turn, contributes to greater dedication and lower turnover, both of which are good for service, sales, profits, growth, continuous improvement, and return on investment.” (p. 96)

Good Jobs Operational Choice #2: Standardize and Empower

“This brings to light yet another way that standardization benefits employees, customers, and investors. Standardizing forces managers and employees to give detailed thought to exactly how a task is being done and how else it could be done—perhaps even how it could be eliminated. You are forced to examine what may simply have been an organizational habit. Thinking about any one task or process in that way is likely to bring other tasks and processes under scrutiny.” (p. 126)

“Service that thorough also creates more opportunities for improvement because employees find out more about what their customers need or want and what might keep them from buying something.” (p. 127)

“Let me conclude with a final observation about employee dignity. I have had many, many conversations with retail workers. One thing I have heard over and over is how motivating it is for them to be able to help one person after another. Though what they help customers with may not be of earth-shattering importance, each time they can make a bit of someone’s day go better, they feel proud of themselves. What’s more, if they feel their employer is helping them do this, they feel proud of their company and not only glad but even grateful to work there. Employee motivation like that is priceless. Of course, if employees consistently feel that they have to fight their own company in order to do right by the customers, that’s another story.” (p. 127)

Good Jobs Operational Choice #3: Cross-Train

“Companies do not have to train every employee to do every job. In fact, it is widely known in the field of operations management that small levels of cross-training can go a long way in accommodating variability. This is good news because in many contexts, full-skill cross-training would be very expensive.” (p. 144)

“We know from years of research in job design that one way to improve motivation is to make the job more meaningful. What makes a job meaningful? According to the renowned psychologist Richard J. Hackman and his colleague Greg R. Oldham, the three important qualities are (1) the chance to use a variety of skills, (2) the chance to see a job through from beginning to end, and (3) the chance to do something that makes a difference.6 Cross-training offers all three. Being cross-trained doesn’t mean an employee will perform every step of selling a product from unloading the truck to ringing up the sale on the cash register, but it does mean he or she will perform more than just one of those steps and will therefore have a sense of being a part of the whole process.” (p. 148)

“At the same time, cross-training allows customers to enjoy not only lower prices but also better service. Products are where we want them to be, stores are tidy, employees are knowledgeable and available, and we spend less time in the checkout line finding out way too much about the latest celebrity scandal from the gossip magazines. Apart from all this, employees who are committed and who know a broad range of tasks—employees who can see the forest for the trees—can suggest improvements.” (p. 150)

“Cross-training interacts productively with offering less. One reason that all Trader Joe’s employees can operate the cash register is that it’s much easier to operate a cash register there than at an ordinary supermarket. First, there are fewer products at Trader Joe’s, so it’s easier to learn them. Second, most of the produce there does not need to be weighed, because it’s in packages that are already weighed and priced, so the cashiers don’t have to learn product codes for hundreds of produce items.” (p. 151)

“Cross-training works well for model retailers for all the practical reasons I have mentioned. But it also works well because it reflects the overall mind-set that employees are at the center of a company’s success. It perfectly expresses the realization that employees are human beings and that most human beings are capable of many different things and aspire to do great things, even if on a small scale.” (p. 152)

Good Jobs Operational Choice #4: Operate with Slack

“The cost of overstaffing is not the only important thing here. It’s the opportunity cost of not having slack. Store employees operating in an environment with some slack can add tremendous value that employees pushed to the limit cannot. Employees who are not always swamped with immediate tasks and who are empowered can use their extra time to identify problems, come up with solutions, and communicate both the problems and the solutions. For example, if many customers are asking for a product Mercadona does not carry, employees can use the extra time they have to communicate that information to field employees who work with the marketing and purchasing departments.” (p. 164)

“When I asked BJ Hess, the former senior vice president of worldwide operations at Arrow, why they involved warehouse operators in finding and solving problems, her response was quite intuitive and also consistent with what a lot of operations management scholars and thought leaders have argued for many years. The people closest to a problem have the best chance of spotting it and spotting what causes it. They are also the most motivated to solve it because it’s causing them pain every day and putting them behind schedule.” (p. 166)

“Previously, we saw the importance of trust from the managers’ perspective. For empowerment to work, managers need to trust that their frontline employees will make good decisions. For employee involvement to work, employees also need to trust their managers and their companies. Employees in many companies believe that if the company gets its hands on a more efficient way to do something, it will decide it needs fewer employees. Unless employees can trust that their jobs and their friends’ jobs will be safe, they will not be enthusiastic about suggesting improvements. Model retailers make it clear that they will not eliminate employees as their processes become more efficient.” (p. 170)

“Mark Graban, an expert on lean implementation, makes a similar observation: In many Lean implementations (including mine in hospitals), we insist on “no layoffs due to Lean” and management makes that pledge. If employee input is critical to Lean improvements, layoffs will understandably kill most of the enthusiasm for Lean. We try to think of employees as partners in providing value and improving quality, not “heads” to be cut.” (p. 170)

Quotables

“The good jobs strategy is not just a book title, it is a concrete strategy. It combines investment in people—much more investment than normal—with a set of operational decisions related to (a) how many products and services a company will offer, (b) the balance of job standardization and employee empowerment, (c) the allocation of work among employees, and (d) staffing levels and how employees will engage in continuous improvement.” (p. viii)

“The problem with understaffing is not simply that there aren’t enough bodies to do the work. Even when there are enough bodies to do the work, that doesn’t mean the work will be done as well as it should be. There are many effects of failing to invest enough in one’s employees, including—but by no means limited to—phantom stockouts; promotions that are executed incorrectly or not executed at all; data corruption that undermines inventory and strategic planning; and loss of products due to theft, spoilage, and faulty paperwork.” (p. 40)

“When companies do not invest in their employees, those employees may be more likely to steal. A study of the convenience store industry by Clara Xiaoling Chen of the University of Illinois and Tatiana Sandino of Harvard Business School found—after controlling for employee characteristics, a store’s socioeconomic environment, and other factors—that the store’s relative wages (defined as the employees’ wages relative to the wages of other stores’ employees performing similar jobs in the same region and sector) were negatively associated with employee theft. In other words, the lower paid that a store’s employees were as a whole, the more employee theft there was.” (p. 49)

“Costco did not listen and saw significant drops in its stock whenever it missed its earnings targets. Its cofounder Jim Sinegal, who was CEO until 2012, did not seem to mind the drop in the stock price. ‘On Wall Street, they’re in the business of making money between now and next Thursday,’ he remarked. ‘I don’t say that with any bitterness, but we can’t take that view. We want to build a company that will still be here 50 and 60 years from now.’” (p. 192)

“You can hear the same logic from other CEOs who lead public companies and invest in their people. Jim Kelly, the chairman and CEO of UPS from 1997 to 2001, said: ‘We think our share owners should get treated well and should get a fair return, but we’re not as concerned with whether they’re going to get a fair return tomorrow or a year from now or five years from now. We’ve always thought that the long term was the important thing. If we were to start dancing for the folks on Wall Street because they expect something in the quarter, it would be counterproductive.’” (p. 193)