The Good Jobs Strategy by Zeynep Ton, published in January, argues that retailers should change low-level jobs in four ways:
- Offer fewer choices — fewer versions of each product.
- Standardize common tasks and empower employees to handle unusual situations.
- Cross-train employees so that each employee can do several jobs.
- Operate with slack, that is, hire more employees than seemingly necessary.
The brilliance of this book is that it addresses a major problem (bad jobs), includes substantial evidence and persuasive argument, is practical, and is exceedingly non-obvious (judging by how many retailers already follow her recommendations). Ton is an MIT business school professor whose area of expertise is operations.
I interviewed her by email.
ROBERTS How did you get into studying this? My impression is that the details of how employees are treated is not what operations professors usually study.
TON Early in my career I studied pervasive operational problems at retail stores that hurt supply chain and financial performance. My doctoral thesis was on misplaced products and the resulting phantom stockouts. I found that even retailers that were great at managing the backend of their supply chain, by getting the right products to the right stores at the right time, were pretty bad at managing the last ten yards of their supply chain. Once the products made it to the store, they would stay in the backroom or in the wrong place and often not meet the customer that wanted to buy them.
Problems like misplaced products were common, frequent, and had a huge impact on customer service, sales, and profits. When I studied what drove these problems I found that stores that had more workload for employees, lower training, and more employee turnover had worse performance.
Things really clicked for me several years ago when I was presenting my research to a group of retail managers and executives. I showed them my findings from analyzing a lot of data from Borders that showed that if stores increased the amount of people they would make more money. This finding just didn’t make sense—why would managers staff their stores with too few people even though having more would increase profits? When I asked people in the audience to raise their hands if I would find a similar result if I analyzed data from their chain, almost all raised their hands.
What I saw was that a lot of retailers were operating in what I call a vicious cycle. Low investment in employees caused operational problems, which reduced customer service, sales, and profits. When stores had low sales and profits, they had low labor budgets, which further reduced their investment in employees.
Everybody suffers from this vicious cycle. Employees have bad jobs, customer get bad service, and investors are worse off because there is a lot of money left at the table. I thought there have to be some companies that operate much better. That’s how I started looking at firms that follow the good jobs strategy.
ROBERTS How have your ideas on this subject changed over the years?
TON There was a period when I wasn’t sure if excellence was possible in low-cost retail. All the examples around me were of retailers that offered bad jobs and had poor operational performance. When I went to Spain to study Mercadona I realized that I finally had found the “Toyota Production System” of retailing. What really excited me was studying QuikTrip after Mercadona. Here were two completely different companies—the largest supermarket chain in Spain and a convenience store chain with gas stations based in Tulsa, Oklahoma. Yet they were both beating their competitors by offering much better jobs than their competitors. At the same time they were both offering low prices and great service to their customers.
When I looked into what allowed them to deliver value to their employees, customers, and investors at the same time, I saw that they were both excellent operators. They were both making a set of operational choices that reduced costs, increased employee productivity, and allowed employees to have a big role in driving profits. When I looked at Costco and Trader Joe’s, I saw they were making the same choices. In my book I highlight the four choices I observed [shared by these four companies].
ROBERTS When you present these ideas to retailers, what is their reaction? Of course there is a range of reactions, but which reactions surprised you the most? Which reactions did you learn the most from?
TON The reaction that I learned most from is the following. When Marshall Fisher, a Wharton professor and a thought leader in operations management, presented his finding that retailers could make more money by increasing staffing levels, a CEO said, “I spend my days saying no to a long line of people suggesting ways to spend money, including adding more staff. I don’t need a couple of Ivy League professors with their fancy statistical analysis giving them more ammunition!”
This really shows how retailers view their labor — as a cost to be minimized.
ROBERTS What do you think about how Amazon treats employees? Do you have any suggestions for them? [The book is published by Amazon.]
TON I have not studied Amazon.
ROBERTS Your book lacked a chapter called “What Happens When…” about what happens when companies try to implement the changes you suggest — I mean, make changes based on your research. Can you say anything about that?
TON Of the four model retailers that follow the good jobs strategy, only one went through a dramatic change. Mercadona started as a company that operated just like most companies operate right now, but had to change in order to compete against much larger companies. I hope that my book will encourage more companies to adopt a good jobs strategy. If I can observe some of these changes, I will be in a better position to offer suggestions for implementation.
ROBERTS It seems to me the underlying theme of your book is “Look, your employees have brains. The more you take advantage of those brains, the better off everyone — you, them, owners, customers — will be.” Is that a fair summary?
TON One could say that the book is about designing the work that employees do to leverage committed, motivated, and capable employees. It’s also about making smart operational choices that benefit employees, customers, and investors at the same time.
ROBERTS Do you have a theory — is there a theory — that ties your four suggestions (“operational choices”) together? Is there an underlying principle from which all four of them can be deduced?”
TON The four choices I observed are choices that operationally excellent companies have been making for decades and they could be traced to lean manufacturing. Overall, the good jobs strategy—the combination of the four choices and investment in people—is a blueprint for operational excellence.
ROBERTS Why has it been hard to learn to make the choices you describe?
TON Unfortunately, the dominant view in business is that paying employees as little as possible and treating them as a cost to be minimized is the best and perhaps only way to run a profitable business, especially in industries with low profit margins.
As I show in my book, that’s not the only way and that’s not even the best way.
But companies can make bad choices just like people can make bad choices. We know exercising is great for our health but regular exercise requires commitment, discipline, hard work and a long-term view. The good jobs strategy is good for companies’ health but that too requires commitment, discipline, hard work, and long-term view.
Excellence is always harder to achieve than mediocrity. And right now we have too many companies stuck in mediocrity.
ROBERTS You say “the dominant view in business is that paying employees as little as possible and treating them as a cost to be minimized is the best and perhaps only way to run a profitable business, especially in industries with low profit margins.” That is a common-sense view that Adam Smith might have expounded. Why has such a wrong view persisted so long? On the face of it, I would think that how to treat employees would be one of the central questions that business professors (and CEOs) try to answer and nobody would be satisfied with repeating ideas of several hundred years ago. It’s one thing for a third grade teacher to tell students “the earth is flat” — yes, it looks vaguely flat. But for sophisticated university professors and captains of industry to say “the earth is flat” for hundreds of years when there is a vast amount of money to be made from realizing it isn’t flat, that is puzzling.
TON But it’s not just ignorance. Perhaps I should have worded it differently. Following the good jobs strategy is not easy. You have to get many things right. It requires excellence.
POSTSCRIPT This is what Ton said in the book — that the good jobs strategy is difficult. I wasn’t persuaded. CEOs of major retailers have done many things that are not easy. Why has this difficult thing been out of reach?
I suspect an examination of why the 4 retailers Ton study broke from the pack and treated their employees differently would not find that the people in charge were more capable of excellence than the leaders of other companies. Maybe their personalities were different, maybe their cultures (internal company culture or external society culture) were different, I have no idea.
I am unsurprised that business profs had failed to figure out what Ton figured out (although her conclusions are supported by the work of other professors). Other disciplines have enormous blind spots — epidemiologists never study the immune system, for example. The more things you can take for granted, such as the idea that labor is a cost to be minimized, the easier it is to publish papers. In academia what is rewarded and selected for is not solving real problems, it is publishing papers in prestigious journals, which is quite different.