The Good Jobs Strategy: How the smartest companies invest in employees to lower costs and boost profits; Zara’s investment in staff is crucial to this speed, together with its ability to collect information from employees on what is popular
January 29, 2014 4:07 pm
‘The Good Jobs Strategy’ by Zeynep Ton
Review by Gill Plimmer
The Good Jobs Strategy: How the smartest companies invest in employees to lower costs and boost profits, by Zeynep Ton, New Harvest $25/£8.99
When Madonna was on tour in Spain a few years ago, teenage girls turned up at her final performance wearing the very outfit she had worn for her first show. They had bought it from Zara, the Spanish retailer.
While most fashion retailers take months to introduce new product lines, Zara’s supply chain can design and deliver new clothes to its 1,500 stores in more than 70 countries within days.
In her book The Good Jobs Strategy, Zeynep Ton argues that Zara’s investment in staff is crucial to this speed, together with its ability to collect information from employees on what is popular. Zara’s shop assistants, for example, tell managers if customers are requesting a long-sleeved version of a particular shirt.
The question that Ton, an academic at MIT Sloan, set out to answer is how do Zara and other successful retailers treat employees better than rivals, yet still deliver healthy profits and shareholder returns? Her work focuses on low-cost retailers because they compete on price and because it is often argued that the only way companies can keep costs down and prices low is to skimp on labour costs – whether through low wages, minimal benefits or underinvesting in training.
As the title implies, The Good Jobs Strategy argues that this is not the case. The author focuses on four low-cost retailers in the US that treat employees well: Costco, the discount retailer, Trader Joe’s, a food store, Mercadona, the Spanish grocer, and QuikTrip, a petrol retailer. It contrasts these with low-paying, “bad” employers such as Walmart
, the world’s largest private sector employer.
Salespeople and cashiers are also the two largest occupations in the US, even though a typical retail worker earns wages beneath the poverty level. In 2011, staff at Walmart received $585m in public assistance.
Moreover, Ton points to studies that have shown that when Walmart has opened a new store, wages have tended to fall in surrounding shops.
If you had invested $100 in Walmart 10 years ago your money would have grown 40 per cent; invest in a company with a “good jobs strategy” such as Costco and your money would have tripled.
While there are likely to be many reasons for this difference, Ton argues that the decision to give employees low-paid jobs for which they are badly trained ultimately costs companies in lost performance – such as empty shelves, or stock recorded as being on the premises but impossible to find.
The book identifies some crucial practices that have helped model companies transform their investment in staff into higher profits. These include cross-training employees, offering secure contracts and paying them properly. While Walmart deals with erratic customer traffic by hiring staff at the last minute on hourly rates, Costco shifts employees between jobs and occasionally offers staff unpaid time off work. If they do not take up the offer, Costco takes the financial hit. However, staff often do opt for the unpaid leave because they have regular pay packages and benefits.
Another practice is to give workers more power. Although window displays in Zara are modelled in Spain, shop assistants can suggest local improvements, sending snapshots back to head office for approval.
But Ton’s advice is not limited to employment strategies. She also found that successful retailers offered a smaller range of products and fewer promotions. This helped retailers buy at bigger discounts, avoid confusing customers and forecast sales better.
Critics would argue that companies such as Walmart are successful, profitmaking machines, and that without surveying all retailers it is impossible to tell whether combining good employment conditions and standardisation of products really delivers higher profits growth overall or just at a few key companies. But at a time when the complexity of workers’ jobs is increasing and labour force investment declining, this is a methodically researched riposte to cutting staff and wages.
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