The first part of Zeynep Ton’s book made a case for investing more in workers, even in the retail industry where bad jobs proliferate. The later chapters deal mostly with operational choices that support a good jobs strategy. These two sides of the problem are interdependent. On the one hand, investing in better paid, better trained and more highly motivated workers can improve operations. On the other hand, smooth operations not only make work more enjoyable, but they can reduce costs, improve productivity, and justify the investment being made in workers. Good operations are essential to maintaining the good jobs strategy.
Ton describes four operational choices that companies pursuing a good jobs strategy usually make: Offer less, standardize and empower, cross-train, and operate with slack. All of them are departures from what retail businesses usually do.
Ton’s model companies tend to offer fewer products and run fewer sales promotions than their competitors. Trader Joe’s carries around 4,000 products, while the typical supermarket carries almost 40,000! Trying to give customers anything they might want makes it more costly and complicated to run a store. It means trying to have the right number of all those items in inventory, and putting a greater burden on employees to locate them and stock them as needed. It makes it harder to cut costs by buying and shipping in bulk, which requires ordering more items of the same kind. It confuses customers, who can never be sure they made a good choice among all the alternatives.
By concentrating on a smaller number of products, Trader Joe’s gives more attention to selecting them carefully with a view to customer satisfaction. It conducts extensive taste tests and sets high standards–“no artificial flavors, no MSG, no synthetic colors, no partially hydrogenated oils, and always at a low price.” Employees are able to discuss the merits of the product with the customers, making the job more enjoyable, and the customer-friendly policies generate the revenue that justifies high wages as well.
Standardize and empower
Standardizing operations and empowering workers are usually seen as mutually exclusive. Theodore Levitt wrote in the Harvard Business Review that “discretion is the enemy of order, standardization, and quality.” Tell the worker exactly what to do if you want a reliable, high-quality result.
Ton’s view is more nuanced. Some forms of variation are undesirable, such as stocking variations that create problems for customers trying to find a product. But some variations are normal, such as variations in customer wants. “It is almost impossible to anticipate precisely what every customer will want, how each will behave, and what will make each one happy, and to create a script or rule book to achieve that.” Service industries have to strike a balance between standardizing their operations and empowering workers to respond sensibly to situations as they arise. “When employees are asked to follow tasks mindlessly, they are not engaged in their work, and that shows up in how well they do their jobs and satisfy customers.” Some tasks can be highly standardized, especially “tasks that do not depend on local business conditions or on individual customers’ needs,” but others cannot.
Many retailers try to achieve a “just-in-time” scheduling of workers to match fluctuations in customer traffic, analogous to the “just-in-time” scheduling of inventory to meet customer demand for products. This attempt to treat people the same as commodities can be a mistake. It makes the job worse for employees by limiting them to short hours, temporary schedules, and last-minute changes, resulting in higher turnover, absenteeism and tardiness.
Retailers with a good jobs strategy deal with variations in customer traffic less by varying staffing and more by varying the tasks to which staff are assigned. Managers find other things for workers to do besides serving customers, and they train them to do those things. “During off-peak hours…they perform all their other tasks that do not directly involve customers. They conduct inventory checks, bring products from back rooms, arrange their shelves, look for problems and improvement opportunities, and order more stock.” That makes the worker more of a person with a steady job, not a temporary functionary.
Operate with slack
Ton considers adequate staffing the “ultimate expression of putting employees at the center of a company’s success.” As I mentioned in Part 1, retailers are tempted to understaff their stores because the costs of additional employees are obvious, while the costs of understaffing are more subtle and harder to measure. Ton quotes Marshall Fisher of the Wharton school, warning about “business-school thinking gone wrong”:
We teach our students to be rigorous and manage by the numbers. Not a bad idea, except that it leads to over-weighting the measurable and under-weighting what’s hard to measure. In a store, what’s measurable is the payroll checks a retailer writes every week to its stores’ staffs. What’s hard to measure is the impact that stores’ staffs have on revenue.
Having a little slack in staffing insures that customers will be adequately served even in times of unexpectedly high traffic. It also allows workers–in conjunction with cross-training–to devote themselves to store improvements when they are not directly engaged with customers.
We have seen that committed, empowered, well-trained employees who aren’t rushing desperately from task to task make higher performance standards possible because they like having high standards they can actually achieve. One can feel so much more proud of oneself when one does a really good job, especially for customers. We have seen that committed, empowered, well-trained employees who aren’t rushing desperately from task to task are a huge source of ideas about improvement and are often the means by which those ideas can be implemented.
Ton discusses two additional benefits of the good jobs strategy that contribute to economic competitiveness. The first is being better able to adapt to changes in the competitive environment, such as changing customer tasks or new technologies. Here she uses a negative example from her own dissertation research, in which she documented the failure of Borders to adapt to changes in the book business. Borders tried to add an online sales operation, but gave up because it couldn’t integrate it with its physical stores. Borders wanted customers to be able to order online and pick up locally, but customers couldn’t be assured of being able to get the book in the store, even if it was supposed to be in inventory. “Employee turnover, understaffed stores, lack of training, operational complexity, and poorly defined processes all contributed. Borders lacked what other companies that follow the bad jobs strategy lack–the ability to execute operationally.”
The other benefit is being able to make the business special in the eyes of customers. Companies with the good jobs strategy “have a better shot at keeping their customer base loyal by giving them a reason to shop there rather than at other physical stores or online.”
Companies that maintain a good jobs strategy place a high value on taking care of their workers and their customers, and setting a high standard of excellence. This is explicit in Costco’s mission statement, for example. Strong values enable a company to resist short-term pressures to put quarterly earnings above investment in workers. Unlike other airlines, Southwest refused to lay off workers during the industry slump that followed September 11, and yet it continued to outperform its competitors.
Values impose constraints on businesses, discouraging them from adapting in worker-unfriendly ways and forcing companies to innovate in alternative ways. If they understand that, and they enlist their workers in contributing to those innovations, they can do well.
I found this discussion of values refreshing. It implies that companies have a “freedom to choose” in a more meaningful sense than promulgated by “free market” advocates such as Milton Friedman. The freedom they describe isn’t all it’s cracked up to be, since it often turns out to be illusory when real questions of value are raised. If you suggest that businesses might choose to raise wages or choose to improve working conditions, you will probably hear that they are not really free to do so, since the market constrains them by punishing such actions. Economic decision-makers are nominally free, but they are really regarded as cogs in a competitive economic machine. That’s okay, we are told, because the machine works great. It’s as if the market is good, so people don’t need to be. Individual values are irrelevant because people must conform to the laws of the marketplace, and this conformity is paradoxically referred to as liberty.
Three cheers for Ton, for reminding us that we all have choices, and that we don’t have to settle for a vicious cycle of bad jobs and poor service. The idea that a prosperous and productive society needs better jobs is an idea whose time has come. What strange philosophy ever made us think otherwise?