Raising wages is the right thing to do, and doesn’t have to be bad for your bottom line – Zeynep Ton

MIT Sloan Adjunct Associate Professor Zeynep Ton

MIT Sloan Adjunct Associate Professor Zeynep Ton

From Harvard Business Review 

The “working poor” are a growing problem in America — one that is increasingly embarrassing to the corporate elite. Business leaders who are morally inclined to do the right thing should and can play a stronger role in solving this problem by raising wages to a level where their employees’ earnings cover the cost of living.

Jamie Dimon, CEO of JPMorgan Chase, was recently stumped in a U.S. House Financial Services Committee hearing when California Congresswoman Katie Porter asked him what advice he could give to a constituent — one of his own bank’s tellers, who makes $2,425 a month and lives with her daughter in a one-bedroom apartment with a $1,600 rent in Irvine. Food, utilities, childcare, and commuting cost about another $1,400, leaving her $567 short every month. Dimon had no good answer.

Yet Dimon is one of a number of corporate leaders — others include Warren Buffett, Ray Dalio, and Paul Tudor Jones — who have expressed public concern that the version of capitalism that has allowed them to be so successful is not sustainable for our society. The data are daunting. Between 1980 and 2014, while the pre-tax income doubled for the top 1% and tripled for the top 0.1%, there was little change for the bottom 50%. In 2017, more than 45 million Americans worked in occupations whose median wage was below $15 an hour. Although wages increases have finally been accelerating, 40% of Americans are living so close to the edge that they cannot absorb an unexpected $400 expense—not much, as car repairs or dental work go.

For business leaders operating in settings like that of JPMorgan Chase, where profit margins are high and low-wage employees are a small driver of overall costs, doing the right thing morally is not even that risky. Some wage increases would even pay themselves by increasing productivity and reducing turnover — employees would be more motivated, less distracted with life problems, and less eager to find a better job. For those leaders compelled by the same moral argument but operating in businesses with low profit margins and a high percentage of low-wage employees, doing the right thing morally is still possible. But it requires a lot more work.

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The good jobs strategy – Zeynep Ton

MIT Sloan Adjunct Associate Professor Zeynep Ton

MIT Sloan Adjunct Associate Professor Zeynep Ton

From Acast. 

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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.

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Whole Foods CEO’s poor excuse for poor performance – Jose Alvarez and Zeynep Ton

Harvard Business School Senior Lecturer Jose Alvarez

At a town hall meeting announcing Amazon’s purchase of Whole Foods, a Whole Foods employee had this question for CEO John Mackey:

“I have a question about Whole Foods’s commitment to those win-win-win-win partnerships with our suppliers, with our team members— and how that’s going to live on once this merger is complete.”

Mackey’s response was curious, to say the least:

MIT Sloan Adjunct Associate Professor Zeynep Ton

MIT Sloan Adjunct Associate Professor Zeynep Ton

“I think, sometimes, our company’s gone a little bit too much team-member focus at the expense of our customers. And that’s one definite evolution that’s gonna happen. I love the passion these guys [Amazon] have around the customer. They put the customer first in everything they do and think backwards. And— we— we’re gonna be the same way.”

If Mackey thinks that investing in people is part of the reason for Whole Foods’s poor performance, he’s wrong. From what we see, the real problem is a lack of operational excellence. Whole Foods may be paying its employees more than competitors do, but it has not created an operating system that leverages that investment. You can’t put premium gas in a clogged-up engine and expect to win a race.

Whole Foods strikes us as an organization that doesn’t standardize where it needs to and doesn’t empower where it needs to. Five stores within a city may have five different people purchasing from the same local farm in five different ways. Their information systems are mediocre at best.  John Mackey’s own words about Whole Foods technology are useful here: “So I think that we can expect that we’ll go to the front of the class, eventually, in the grocery business, from … the class dunce to… the class valedictorian.”

Poor systems and lack of appropriate standardization mean lower labor productivity and higher costs. At the same time, frontline team members appear to have little empowerment to satisfy customers. One of us recently wanted to return a $3 Whole Foods reusable shopping bag that had broken the first time it was used.  You would expect the cashier to just exchange the bag for a new one.  Instead, she called for her manager to resolve the problem.  It was a waste of time for all, including the other customers waiting in line. Paying team members more than competitors do won’t pay off if you don’t empower them to make a $3 decision! Lack of empowerment reduces not only motivation but also customer service.

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MIT Sloan Expert Series — The Business Case for Good Jobs — Zeynep Ton

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.

The most rotten part about Thanksgiving Day — It’s time for America’s retail industry to change its ways — Zeynep Ton

MIT Sloan Visiting Prof. Zeynep Ton

MIT Sloan Visiting Prof. Zeynep Ton

From Fortune

This year, all kinds of holiday shopping traditions are being upended as desperate retailers do everything they can think of to increase sales. On what’s being called “Gray Thursday,” retailers like Walmart WMT 0.85% , Toys“R”Us, Target TGT 0.37% , and Kmart are giving shoppers the jump on Black Friday by opening on the evening of Thanksgiving, presumably after you’ve had enough turkey and cranberry sauce. JC Penney JCP 1.57% is opening even earlier — at 3 p.m.

This is a rotten break for employees forced to work while the rest of the family gathers together, as I point out here. REI, the outdoor sports and gear retailer, seems to be taking another approach, closing its 143 outlets on bothThanksgiving AND Black Friday. This move may earn REI a lot of publicity and goodwill. It is also consistent with the company’s brand as an environmentally concerned business and its “get out there” message: In this busy world, you don’t get enough time with your family or with nature. Why not use the holiday to enjoy the very things that REI promotes? You can always shop for our products later.

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