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Zeynep Ton is a Professor of Operations Management at the MIT Sloan School of Management.
She studies the retail sector and the way that some firms have invested in paying more and doing more for their workers. She studied firms like QuikTrip, Trader Joes, Mercador in Spain – she found that firms that treat their workers better achieve better results.
Zeynep Ton, MIT Sloan Professor and author of The Good Jobs Strategy, took part in a live conversation on how operational excellence enables companies to offer low prices to customers while ensuring good jobs for their employees and superior results for their investors. Also appearing on the program were Thomas E. Perez, U.S. Secretary of Labor and James Sinegal, co-founder and former CEO of Costco. The Business Case for Good Jobs is a part of the MIT Sloan Expert Series.
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.
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.