ESM: Welcome to the Engagement Strategies Media podcast, ‘Engagement Radio.’ Today our guest is Zeynep Ton, Associate Professor at MIT’s School of Management. She was previously at Harvard and has earned numerous awards for teaching excellence. She has been featured in the Atlantic, New Yorker, Washington Post, Bloomberg and numerous other media outlets, specifically about the work that she’s done and the book she recently released, The Good Jobs Strategy: How the Smartest Companies Invest in Employees to Lower Costs and Boost Profits. The book is based on over 10 years of research, and in it Ton describes how successful companies can actually increase the investment in their employees and still drive greater profits and greater connection with their consumers.
Zeynep, thanks so much for being a part of our podcast here at Engagement Strategies Media. Let me start by asking you what made you decide to write this particular book about the whole idea of the investment in employees?
Ton: The book pulls together the research I’ve done over more than 10 years, when I was a doctoral student and then an Assistant Professor at Harvard Business School, and also when I joined MIT. I wanted to put all my research ‘under one roof’ and in a book because I wanted to reach a broader audience than my fellow academics and my students. Specifically, I wanted to reach the managers and also two different audiences. The first is executives or managers who want to offer good jobs but think that it’s not possible in their industries. I wanted to highlight how investing in people could actually lower costs and increase sales if it’s done right. The second audience that I really wanted to reach was those people who argue that the purpose of a company is to make money and not necessarily to offer good jobs. I wanted to show that companies that offer good jobs don’t work for charity. They’ve found it to be the most sustainable way to operate their businesses. Those were some of the reasons that motivated me to write this book.
ESM: Those are obviously some really great reasons, and I think it’s a good idea to talk about the fact that companies, while they’re in the business of making money, there are ways to do that that are different then just cutting costs. I think that’s an interesting angle to look at. What has been the reaction so far? Have you had any indication that this has been having positive impact out there in the market or with companies?
Ton: The book came out at a time when income inequality had been widening and becoming a very important topic and a problem, and wages have also been stagnant. Median household income was lower in 2013 than in 1989, in current dollars. That’s a problem. The focus of the book is on retail, which is the largest employer in the United States. Of course the book got a lot of reaction – and mostly caused a reaction, an optimistic reaction – because it really highlights that businesses and capitalism can do a lot to solve big problems in our society. It also highlights that there’s a win/win/win situation where customers, employees and investors can all win through a good job strategy.
Not surprisingly, I've gotten some positive feedback from executives in a wide range of settings – from entrepreneurs starting new businesses to executives in very large companies. I’m optimistic that we’re going to see more ‘Good Jobs Strategy’ companies in the future.
ESM: In your book you talk about Costco and QuikTrip and a few others, but do we need government intervention at all? We’ve talked a lot about the government wanting to raise the minimum wage, and that takes some of the decision away from the organization itself. Now we’ve got an imposition of a minimum wage, a government influence there. Do you think that’s a requirement, or do we think this whole social media side of the equation – the availability of information, more transparency if you will – is going to be one of the bigger drivers of this idea of having the higher wages and investing this way?
Ton: I think one of the drivers will actually be economic. When you look at companies that follow this strategy, they’ve outperformed their competitors over the long term. In industries like retail, where eCommerce is gaining more and more of the market share, the retailers that will survive will be those that can offer their customers something more than just low prices. The government increasing the minimum wage could certainly encourage more companies to adopt a different strategy, because if you have to pay your employees more you need to find ways to increase their productivity or the contribution they can make to your business. That would encourage companies to adopt a Good Jobs Strategy.
Certainly, the information that’s out there is going to be a driver as well. One of my latest projects, for example, is to create a Good Jobs Score that rates companies on how well they’re following a Good Jobs Strategy. You can find it at www.goodjobscore.com. What I do is evaluate companies on their customer satisfaction, employees satisfaction and productivity. The purpose of this Good Jobs Score is to encourage investors who are interested in investing in more sustainable businesses, to have that information available to them and for customers who are interested in voting with their wallets – spending money at companies that offer good jobs and social information that says here are the retailers that are following Good Jobs Strategies. I don't see it as ‘either/or,’ but instead that all of these forces would work together to encourage more companies to adopt a Good Jobs Strategy.
ESM: That leads into my next question: You had mentioned the score, so you’re going to have a way for people to see who’s implementing Good Jobs Strategies and investing in their employees and treating them well and doing the things that you've talked about. Is raising the wages automatically, is that the only thing you need to do? Or are there other things within the organization that either are – let’s call them ‘force multipliers’ or other things you need to do in addition to the salary side or the pay side? Are there other things that need to be included to have a Good Jobs Strategy?
Ton: Absolutely. In fact, economists will argue that just increasing wages alone – if you offer higher-than-marketplace wages – then you attract better people and encourage them to stay longer, so you reduce turnover. But the positive effect from that is very limited in an organization where the job itself is designed in a way that makes people pretty much interchangeable.
If you have an operations strategy based on people whose contribution is deliberately limited, then employee turnover isn’t that costly. Skilled employees don’t matter as much. But if you design an operational strategy that’s more human-centered and empowers people, that has them trained in and involved with multiple functions, then it makes sense to pay people more and offer them much better jobs. Higher wages alone might not lead to what people talk about.
ESM: Interesting. So what I’m hearing you say is that a Good Jobs Strategy is probably more important today than ever because jobs are becoming less factory-like in creativity. Everything you read today says that companies are looking for employees to think more – employees are the engines of productivity now and we’re creative and innovative and that's what we have to foster.
Ton: Yes, and another thing to mention is that a creative, innovative philosophy could even happen at places like retail, and that's important for people to know. Let me give you an example: You can run a retail store with people who do daily tasks and do them routinely without using their judgment. One of the most common jobs in retail is to stock merchandise. There are people who do that every single day. They take the merchandise from the back room and put it out front. The contribution you make to an organization just stocking merchandise can be very limited.
But let’s look at a different scenario. Let’s now take our merchandise stocker and ask him or her to make decisions for the customers – to have a say in what kind of merchandise this store needs, or to help customers uncover their needs, or to open a cash register when he or she sees a long line of people at the check-out. If a company can design an innovative, creative place like this, then not only will they offer better customer service and reduce costs, but we can also keep people longer because now they feel they’re contributing more to the organization. That’s an important distinction to make, I think.
ESM: I hadn't thought of it that way, but as soon as you said it, it made all the sense in the world. What I took away from all this is that it’s not just about raising salaries and increasing costs, but because you’re reconfiguring what your expectations are, that actually changes that whole equation. So to close this out, what would you say are the key lessons leaders and managers should take away from this?
Ton: At a high level, the big lesson is that offering bad jobs is a choice, not a necessity. There’s a better choice, and that better choice is the Good Jobs Strategy, but that choice requires operational excellence, and what I mean by operational excellence is a human-centered operations strategy that has several elements. I'll just mention a few of them: One is to empower your employees, your lowest-level employees, to make decisions for their customers or for their context. Another is to give them enough time so they can actively engage in problem-solving – identifying problems, solving problems and including processes and products.
Another concrete lesson is to cross-train people to be able to perform multiple tasks, which is great for employees because it makes their job much more meaningful and fun. It’s also great for customers, because it allows everybody to offer good customer service. And it’s great for investors, because it ensures that everybody’s productive at all times.
ESM: Zeynep, thanks so much for your time today. Much success going forward with everything you’re doing. And don't forget to go to Zeynep’s website, check out her bio and buy the book! Thanks again.
Ton: Thank you, Paul. It was my pleasure.
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