Why raising retail pay is good for the Gap — Zeynep Ton

MIT Sloan Adjunct Associate Professor Zeynep Ton

MIT Sloan Adjunct Associate Professor Zeynep Ton

From Harvard Business Review

Gap announced last week that it would increase its hourly minimum wage to $9 this year and $10 next year. Naturally, President Obama applauded the decision, which was in line with his own push to raise the minimum wage. But what Gap is after is not greater fairness or less income inequality. According to the chain’s CEO, Glenn Murphy, the reason for this move is that Gap implemented a“reserve-in-store” program 18 months ago, meaning that customers can order a product online and then pick it up at a particular store. Gap realizes that this program won’t work without skilled, motivated, and loyal employees.

This is hardly a surprise to me. Remember Borders bookstores? Almost 15 years ago, I studied Borders as it was trying to integrate its online store with its physical stores. Borders had great technology to tell online customers which book was available at which store. But there was a fatal hitch: the inventory data was not reliable. The system would tell a customer a book was in the store, but no one could find it. This happened 18% of the time! That’s way too many customers to let down and, in fact, Borders had to give up on the idea. Eventually, it went out of business.

Why were so many products not where they belonged? I found that stores that had fewer employees, less training, and more turnover had more of this problem. By going cheap on labor expenses, Borders made it hard to act on a strategic opportunity.

Read More »

Robots will stay in the back seat in the second machine age — Andrew McAfee and Erik Brynjolfsson

Erik Brynjolfsson, Director of the MIT Center for Digital Business at MIT Sloan, and Andrew McAfee, Principal Research Scientist at the MIT Center for Digital Business

Erik Brynjolfsson, Director of the MIT Center for Digital Business at MIT Sloan, and Andrew McAfee, Principal Research Scientist at the MIT Center for Digital Business

From the Financial Times

It is easy to be pessimistic about jobs and pay these days. More and more work is being automated away by ever more powerful and capable technologies.

Not only can computers transcribe and translate normal human speech, they can also understand it well enough to carry out simple instructions. Machines now make sense of huge pools of unstructured information, and in many cases detect patterns and draw inferences better than highly trained and experienced humans. Recent advances include autonomous cars and aircraft, and robots that can work alongside humans in factories, warehouses and the open air.

Read More »

For women to thrive, men should lean out — Lotte Bailyn

MIT Sloan Professor Emerita Lotte Bailyn

MIT Sloan Professor Emerita Lotte Bailyn

From USA Today

Earlier this year, McKinsey & Co. published a survey of 1,400 managers revealing that female executives are just as ambitious as men. The survey found that79% of all mid- or senior-level women say they “have the desire to reach a top-management position,” similar to 81% of men.

The press went wild. “Career Drive Equal for Men and Women,” said the Business News Dailyheadline. “Study finds executive women are just as, if not more, ambitious than men,” said The Washington Post. The newspaper quotes a breathless McKinsey executive saying she was “so flabbergasted” by the finding. This isn’t news. It has been shown before and mirrors my experience teaching at the Massachusetts Institute of Technology.

Read More »

The Volkswagen way to better labor-management relations — Matthew Finkin and Thomas Kochan

MIT Sloan Professor Thomas Kochan

MIT Sloan Professor Thomas Kochan

From the Los Angeles Times

Works councils — elected bodies representing all workers in a plant, both blue and white collar — are acclaimed as one of the best, most innovative features of Germany’s labor relations system. They have been shown to enhance efficiency, adaptability and cooperation. By supporting the use of work sharing (agreeing to reduce everyone’s hours rather than laying some people off), for example, these councils helped Germany experience less unemployment during the Great Recession and a faster, more robust recovery since then.

For years, labor law, labor economics and labor-management researchers like us have urged experimentation with works councils in the United States. Volkswagen and the United Auto Workers are proposing to do just that at Volkswagen’s Tennessee plant. This could be a watershed in American labor relations, one that rejects the outmoded adversarial doctrines that have built up in U.S. labor law and practice. And it signals management and labor support for a new model of cooperation and partnership.

Unfortunately, the National Right to Work Legal Defense Foundation and others are opposing this effort by arguing that such cooperation would violate U.S. labor law’s 1935 ban on sham or “company” dominated unions.

A comparison of German and American labor law makes it clear they are dead wrong.

Read More »

Stop forcing employees to work on Thanksgiving — Zeynep Ton

MIT Sloan Adjunct Associate Professor Zeynep Ton

MIT Sloan Adjunct Associate Professor Zeynep Ton

From WBUR Cognoscenti

With retailers opening ever earlier on Thanksgiving Day and being rewarded with ever longer lines out their doors, it’s no wonder they see the holiday as a bottom-line bonanza that may benefit everyone — except employees who have to spend long hours at work and miss out on time with their families. Opening on Thanksgiving Day is yet another demonstration of how little retailers value their employees. That disregard is a natural result of the way most retailers view their labor force — a large cost that needs to be minimized. The result is millions of bad jobs with poverty-level wages, minimal benefits, very little training, and unpredictable work schedules.

Conventional corporate wisdom is that bad jobs are the only way to keep costs down and prices low. Otherwise, customers would have to pay more or companies would have to make less. But I have been studying retail operations for over a decade and have found that the assumed trade-off between good jobs and low prices is false.

Read More »