How great companies bring dignity, pay, and meaning to work
To be a high-performing company, you’ll need high performing teams. Yet, so many companies are operating with leagues of quiet quitters, high turnover, and glaring operational issues. To counteract the human tendency to repeat past actions expecting better results, Zeynep Ton recommends companies adopt the good jobs strategy. In its simplest frame, the strategy suggests investing well in your people and operations.
As Greg Foran, the CEO of Air New Zealand once said, the good jobs system is “blindingly obvious.” While it may be conspicuous, it’s also working. Companies that adopted the good jobs system saw employee turnover costs drop by more than 25%. In addition, all companies saw significant improvements in their labor productivity, customer satisfaction, and sales.
We asked Ton, author of The Case for Good Jobs: How Great Companies Bring Dignity, Pay, and Meaning to Everyone’s Work to share more about the strategy and the specific actions companies can take to offer good jobs and reap the rewards.
Zeynep Ton: Many business leaders agree that winning requires having a great team that’s set up to succeed. But many leaders, especially in frontline service businesses with low-profit margins, think they can’t afford to invest in their team. Instead, they believe low wages—and the resulting high turnover and poor service—are necessary to compete in their business.
But companies end up paying a hefty price for low people investment. They end up in a vicious cycle in which low pay drives employee turnover, which results in poor operational execution, low productivity, and poor service. All this erodes customer satisfaction, sales, and profits. Low performance makes it harder to invest in people, and the cycle continues.
Companies operating in this vicious cycle make many interrelated decisions that weaken their system. They can’t hire the right people and train them well because managers are always fighting fires. They can’t trust employees enough to be able to empower them. They can’t develop and retain strong managers. They can’t have high expectations. These corporate disabilities create an uncompetitive, vulnerable, and inhumane system.
Instead, I offer the good jobs strategy. Companies from low-cost retailers (e.g., Costco $COST and QuikTrip) to luxury hotel chains (e.g., Four Seasons) deploy this strategy to win with their customers. They invest in their employees to attract the right people, retain them, and set high expectations. But the secret sauce of the good jobs strategy is four operational choices that increase their employees’ productivity, contribution, and motivation and enable them to serve the customers well.
Two key and mutually dependent components of the good jobs strategy are:
Let me give an example to demonstrate how this system works together. Costco pays its employees almost $10 an hour more than a typical retailer. Almost all store managers are promoted from within. They have amazing employee retention—60% of employees have been there for more than five years. But investment in people isn’t all Costco does. If you go to Costco, you won’t see twenty types of tomato sauce like you would at a typical retailer. You might see two—but they will be the best two their merchants could find. Why just two? Because Costco’s value proposition is to offer members high-quality products at low prices. Fewer products reduce costs, make employees more productive, and enable them to know about the products.
More than other retailers, you will see a lot of employees because Costco operates with slack. That is, they operate their store with more hours of labor than the expected workload. How does that help? The shelves are always stocked, customers can go through checkout as quickly as possible, employees have time to experiment with different ways of displaying merchandise to drive sales and reduce costs, and managers have time to lead people and find ways to improve performance. All this makes employees’ work more valuable, which means Costco can invest more in its people.
Unit managers may be the most important people in frontline businesses. In every company we work with, units with more experienced managers have stronger performance. Companies like Costco and QuikTrip that have been operating with a good jobs system consistently have strong unit managers who have been promoted from within. These managers stay in their roles for a long time and develop real expertise.
Companies that operate with high employee turnover, however, can’t consistently retain and develop strong managers. Instead of leading their team, they’re filling in on the cash register or onboarding team members who will leave in a few short weeks. Many good managers leave because they are burnt out from constantly dealing with unreasonable requests from headquarters, staffing problems, or operational and customer service issues. The talent pipeline is often weak, which means that the company often resorts to hiring managers from outside instead of creating a solid career path for their internal talent.
There are three factors that reduce risk. One, the good jobs system itself carries little risk. As Greg Foran, the CEO of Air New Zealand once said, the good jobs system is “blindingly obvious.” Focusing on customer value proposition, simplifying, and empowering people have been known as good management practices for decades.
Two, just like there is a vicious cycle, there is a virtuous cycle. Companies don’t need to make all changes, and all people investment all at once. The operational choices of the good jobs strategy also reduce the risk of people investment—yes, you are investing in people, but now their work is more valuable. For example, Mud Bay, a small retail chain in the Northwest with 2% profit margins, began with frequent (every six months) increases to hourly pay until they reached a living wage for all their employees in 2022.
Three, I have been startled and touched by how badly people in all parts of the organization want to make this kind of change. In workshop after workshop with one company after another, they are excited and genuinely anxious to begin a journey that will not only help them win with customers and improve performance but will change employees’ lives.
The good news is, from a $60 billion retailer to call centers of a public company to a specialty retail chain, the way to escape the vicious cycle involved two big levers. They invested in people by raising pay, improving schedules, raising expectations, creating clear career paths, and giving employees enough time to do their jobs. How can companies afford such investment—especially if they have low-profit margins? Along with people investments, they examined the biggest drivers of workload on the frontlines. They did some smart subtraction that not only improved work but also improved customer service and loyalty.
Let me provide an example. Sam’s Club initially increased the pay of their team leads and specialty positions by $5 to $7 an hour and created stable schedules. But they also reduced product variety by as much as 25% in some stores, simplified shelving, and used new technologies to automate some of the tedious tasks.
Investing and subtracting significantly reduced turnover, improved productivity and service, and laid a foundation on which to build. Sam’s then continued to make pay increases in other positions and, in 2021, raised everyone’s pay to a minimum of $15 an hour.
While these changes might look simple in hindsight, getting teams aligned around the urgency to change and investigating the specific combinations of changes can be daunting. There is no clear playbook on how to change your system when it involves stakeholders from many different departments, which is why Good Jobs Institute works with leaders to bring them through a process that can enable this journey.
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