A Recipe for Happy Workers
MIT Sloan professor Zeynep Ton’s good jobs strategy wins over Walmart
By Andrew Hill
Amazon’s decision this month to raise the minimum wage it pays to staff sent a shockwave through rival retailers. It also galvanised the small team at an ambitious non-profit organisation based in Cambridge, Massachusetts.
The Good Jobs Institute was set up last year to help companies flourish by creating better jobs. It is the brainchild of Zeynep Ton, a self-confessed supply chain obsessive. As a doctoral student at Harvard Business School, she examined inventory problems at, among others, Borders, the now-defunct bookstore chain. She realised many low-margin retailers were locked in a vicious cycle, in which staff were often the victims.
“When you think that people are a cost, you create a whole organisation performance management system around minimising that cost,” says Prof Ton, speaking in her office at MIT Sloan School of Management.
Lower sales prompt store managers to cut labour, which triggers operational problems, which further reduces sales. “It just made no sense, as an academic, to see people are worse off, customers are worse off, and investors are worse off,” says Prof Ton.
To reverse the cycle, she suggests retailers adopt a different approach. They should simplify the way stores operate, standardise processes, train staff to fill multiple roles, and operate with “slack” by scheduling more employees than are needed so they can perform better and engage with customers. The message to Amazon and other retailers is that raising wages alone is not enough to create good jobs.
Prof Ton, who first came to the US from her native Turkey on a volleyball scholarship in 1992, analysed companies that had succeeded in implementing this virtuous cycle, putting an end to such frustrations as the “phantom stockout”, when items are listed in stock, but staff cannot find them. The stories of these companies and their relatively happy and well-paid staff formed the backbone of her 2014 book The Good Jobs Strategy.
Four steps to good jobs
1 Focus and simplify Know the problems you are solving for customers, and make strategic trade-offs accordingly. Simplify operations to maximise value for customers and improve staff productivity and motivation.
2 Standardise and empower Make routine processes consistent — with employee input — and give workers the power to improve those standards. Ensure your employees can make decisions that improve customer service and reduce costs.
3 Cross-train Build flexibility to meet variable customer demand by training employees so they can perform different roles. This means employees are busy even when there are no customers.
4 Operate with slack Staff shops with more hours of labour than the expected workload to meet peak customer demand and to give employees time to perform their tasks well and make improvements. This frees managers to lead, rather than fight fires.
Source: the Good Jobs Institute
She described, for instance, how Costco’s policy of employing more staff than it needed helped the US chain save money. Employees used extra time to identify problems and suggest savings, from improving packaging to digging a water well to irrigate landscaped areas outside one Florida store. Mercadona, a Spanish supermarket chain, trained staff for a range of roles so they could help customers, manage product flow, order products and do stock checks.
Pressure on retailers has increased since 2014. One symptom: Sears, the US retailer, has just filed for bankruptcy protection. The need to improve the lot of service workers has also grown, as they take a larger share of US jobs.
“These are really bad jobs with poverty-level wages,” says Prof Ton. They come with unpredictable schedules and a lack of autonomy, exacerbated by poor systems and a pervasive lack of respect. “Respect is one word I heard over and over,” she says of her meetings with put-upon staff, “because they make no decisions, because they don’t have the information, because they fail in front of the customers every single day, and sometimes they are put in situations where they feel stupid in front of customers. So, it was heartbreaking to hear those stories.”
After the book was published, retailers started to call Prof Ton seeking help. “I’m not a consultant — I’m an academic,” was her stock response until Roger Martin, now director of the Rotman School’s Martin Prosperity Institute, pointed out that, if she wanted to change workers’ lives, she would have to learn how to put her theories into practice. The Good Jobs Institute, which employs a handful of people and where Prof Martin is now a director, was one consequence.
Prof Ton has stepped off the track to professorial tenure. After a series of setbacks, including missing out on promotion at Harvard, she asked herself: “What do I want to do with my life?”
She decided: “I want to be part of making [a] positive difference in the world.” Now 44, she devotes 60 per cent of her time to MIT and 40 per cent to “extracurricular activity”, including leading the institute and raising her four children.
Among retailers struck by the simple logic of her theory was Walmart, the “800lb gorilla of low-cost retail”, which Prof Ton’s book castigated for practices such as unstable staff schedules and low benefits. “Walmart’s choice to operate this way forces the whole industry in the same direction,” she wrote.
The gorilla seems to be changing its ways. “When I read the book, I went, ‘Bingo!’” Greg Foran, who heads Walmart in the US, told the Harvard Business Review in December last year.
Prof Ton has not worked formally with Mr Foran, though they have met and discussed her ideas. Walmart says it had already started work on improvements before 2014. It has increased staff wages and training and has now “changed nearly every process” on the sales floor as it embeds a standard operating procedure called One Best Way, similar to the “standardise and empower” element of the good jobs strategy (see box). Employee engagement and customer satisfaction have increased.
“Are they moving in the right direction? It seems absolutely so from outside,” Prof Ton says in the interview, but adds: “Can we expect them to make changes within a couple of years? No. We work with much smaller companies and you realise it takes years to be able to implement certain changes.”
Failure to keep up with ecommerce and competition from Walmart, Costco and Amazon helped lay Sears low. But online pressure can also push retailers towards a good jobs strategy.
Bricks-and-mortar retailers now increasingly use stores as click-and-collect hubs. Amazon, through its purchase of Whole Foods Market, has extended into physical shops. “Your people in the store had better be productive . . . your processes need to be good to create that consistent service for people who come to pick up the merchandise,” Prof Ton says.
The Amazon wage increase should be good for the company, she says, “both competitively and politically”. But while higher wages are necessary, they are “not sufficient to make a job a good one for workers or to create good outcomes for companies”.
Even before Amazon’s takeover, Whole Foods was an example of operational inefficiency, Prof Ton says. Having raised wages, Amazon will now “have to increase the productivity, contribution and motivation of their workforce. They need to make their workers matter more for their success.”
Copyright The Financial Times Limited 2018
© 2018 The Financial Times Ltd. All rights reserved.
*Content derived from original article: https://medium.com/financial-times/a-recipe-for-happy-workers-8ecf3bbf1b25
