Creating a Winning Retail Business through Employee Investment - Good Jobs Strategy Part 1

Hey there!

Today, we're diving into Zeynep Ton's "The Good Jobs Strategy." Let's cut the MBA jargon and get straight to the point: it's all about choosing between good jobs and bad jobs, and how the power of operations can make all the difference.

• Janet’s story - a bad job

• Sally’s story - a good job

• Excuses

• The good job strategy

estimated read time: 5 minutes 21 seconds

Meet Janet

When our author, Zeynep began researching retail stores, she met loads of people working their butts off without reaping the rewards. One of those people was Janet.

Janet used to have her own little video rental biz, but she had to close it down in 2005. She landed a job at a big retail chain, starting at just $8.20 an hour. She worked super hard, got promoted a few times, but the raises? Barely noticeable. By 2012, she was managing a whole bunch of employees but still earning only $11.60 an hour.

And if that wasn't bad enough, her hours were all over the place, her health insurance was a mess, and her work-life balance? Nonexistent.

Janet's story is, unfortunately, a classic example of the "bad jobs problem." Loads of people work incredibly hard, but their jobs give them peanuts, zero stability, and a lack of pride. This isn't just Janet's struggle – it's something millions in the US face daily.

The bad jobs problem

In 2011, the median hourly wage for almost 15 million retail workers in the US was $10.88, a whopping 34% lower than the median wage for all US workers.

You might think retail workers are mostly high school or college kids, but most people working in retail are like Janet. This is how they support their families. In 2011, the median age of US retail workers was 38, and only 23% were between the ages of 16 and 24. Women make up slightly more than half the retail workforce, and many of them are the sole or primary source of income for their families.

Bad jobs are a growing problem, and the future looks bleak. The Bureau of Labor Statistics predicts that most occupations with the largest employment growth during the next seven years will be low-wage jobs, such as cashiers, restaurant workers, customer service representatives, and daycare workers. By 2020, nearly 30% of all US workers are expected to hold jobs that pay below-poverty-level wages.

Why do companies offer such bad jobs? In the low-cost retail world, where profit margins are razor-thin, it's believed that keeping labor costs low is the key to success. Offering good jobs is seen as a luxury that low-cost retailers can't afford. Walmart, for example, is notorious for its efforts to minimize labor costs, which has influenced the whole industry to follow suit.

But here's the thing: the trade-off between low prices and good jobs is a myth. There's actually a good jobs strategy for low-cost retail that combines investment in employees with operational decisions that benefit everyone: employees, customers, and investors. It's time to rethink the status quo and work towards a better future for retail workers.

Patty’s story

So, let me tell you about Patty's experience working at QuikTrip, which is way different from Janet's story. Patty started at QuikTrip when she was 19 and discovered that it wasn't just a job, but a great career. After working there for seven years, she was making almost three times what Janet made, earning more than $70,000 a year. She's also got affordable healthcare, a stable schedule, and she really enjoys her work. Can you believe that QuikTrip has made it onto Fortune magazine's list of top one hundred companies to work for eleven years in a row?

Now, you might wonder how QuikTrip manages to pull this off. Well, it's because they chose to put their employees first, treating them like the driving force behind sales, service, profit, and growth. This way of thinking has led to QuikTrip being super successful and profitable, and everybody wins – the employees, customers, and investors.

Choosing to offer good jobs instead of bad ones can be a game-changing decision. By putting their employees first, they end up with higher profits, growth, and happier customers. It just goes to show that when you treat your employees well, everyone benefits!

Excuses

If companies can be highly successful financially while offering good jobs, why don't we see more of them doing it? Why is the bad jobs problem so prevalent? Here are some common excuses:

• Excuse #1: Public companies can't do it.

  • People think that public companies can't offer good jobs because of short-term pressures from investors. However, companies like Costco and Starbucks have managed to resist these pressures and still focus on the long-term benefits of treating their employees well.

• Excuse #2: You have to be born this way.

  • Some believe that only companies with an enlightened founder can create good jobs. However, companies like Mercadona and the NUMMI plant have shown that it's possible to drastically change their strategies and improve their work environment.

• Excuse #3: Big companies can't do this.

  • The argument is that big companies can't find enough hardworking people to make a good jobs strategy scalable. However, companies like Costco, Mercadona, and Home Depot have all managed to invest in their large workforces and still achieve success.

• Excuse #4: Those model companies must have idiosyncratic qualities that we don't have.

  • People often attribute the success of model retailers to specific qualities unique to them, such as Costco's membership model or QuikTrip's origins in Tulsa. However, these idiosyncrasies don't explain the success of their good jobs strategies.

The real reason we don't see many retailers offering good jobs while also offering low prices, good customer service, and great financial performance is that it's not easy. Achieving a good jobs strategy takes a lot of effort and getting many things right. However, the success of companies like Costco, Mercadona, QuikTrip, and Trader Joe's proves that it's possible to offer good jobs and still achieve excellence.

What is the good jobs strategy?

The Good Jobs Strategy is a powerful approach that combines well-designed operations and significant investment in employees, enabling companies to achieve financial success while providing good jobs, low prices, and excellent customer service. The key components of this strategy are as follows:

1. Offer less: Model retailers focus on offering fewer products, fewer promotions, and sometimes even reduced operating hours compared to their competitors. This helps reduce costs while potentially increasing customer satisfaction.

2. Standardize and empower: While many companies centralize decision-making, model retailers strike a balance between standardization and employee empowerment. This allows for increased efficiency while enabling employees to adapt to customers' needs.

3. Cross-train: Instead of managing customer traffic by constantly changing the number of employees, model retailers cross-train their staff. This ensures employees are consistently engaged, and customers receive excellent service regardless of traffic levels.

4. Operate with slack: Model retailers deliberately overstaff their stores, building slack into their staffing. This not only improves customer service but also surprisingly reduces costs by encouraging employees to participate in continuous improvement initiatives.

Alongside these operational choices, investment in employees is a crucial aspect of the Good Jobs Strategy. This includes offering competitive wages and benefits, and investing in recruitment, training, scheduling, equipment, and promotion. High performance standards and accountability are also essential in fostering employee motivation and commitment.

These two core ingredients—operational choices and investment in employees—are highly dependent on each other. They work together to break the low prices/good jobs trade-off, demonstrating that the Good Jobs Strategy is a viable and successful approach for companies across various industries.