The Case for Good Jobs

1. Good jobs are not just ethical, they're profitable

"It's not altruism. It's good business."

Invest in people. Companies like Costco, Trader Joe's, and QuikTrip have proven that paying higher wages, providing better benefits, and investing in employee development can lead to superior business performance. These companies enjoy lower turnover, higher productivity, better customer service, and stronger financial results. By focusing on creating value for customers through empowered and motivated employees, these companies have built sustainable competitive advantages.

Operational choices matter. The good jobs strategy combines investment in people with four key operational choices:

• Focus and simplify
• Standardize and empower
• Cross-train
• Operate with slack

These choices enable companies to leverage their investment in people by increasing productivity, improving customer service, and driving continuous improvement. The result is a virtuous cycle of high performance and employee satisfaction.

2. The vicious cycle of low investment and poor performance

"Profit can hide many sins."

Mediocrity is expensive. Many companies are trapped in a vicious cycle of low wages, high turnover, poor operational execution, and declining performance. This cycle is self-reinforcing: low investment in people leads to high turnover and poor execution, which hurts financial performance, leading to further cost-cutting and underinvestment.

Key elements of the vicious cycle:

• Low wages and unstable schedules
• High employee turnover
• Poor operational execution
• Declining customer satisfaction
• Financial pressure to cut costs further

Breaking free requires courage. Escaping this cycle requires leaders to recognize the true costs of mediocrity and have the courage to invest in people and operations, even when short-term financial pressures push against it.

3. Market wages aren't enough: The true cost of low pay

"If you understand that people have to pay for food and lodging and everything else and you try to make it possible for people to buy a home and to be able to send their kids to good schools, then you look at your business a little differently."

Living wages matter. Many companies pay "market wages" that are insufficient for employees to meet basic needs. This creates financial stress that impacts job performance, health, and family well-being. Even a $15/hour wage is often below the living wage in many areas, especially for single parents.

Consequences of low pay:

• Financial stress and anxiety
• Difficulty focusing on work
• Health problems
• Cognitive impairment ("bandwidth tax")
• Unstable home environments for children

Pay affects ability. Low pay doesn't just reflect worker ability - it actively diminishes it. Financial stress makes it harder for workers to perform well, creating a self-fulfilling prophecy of low expectations and poor performance.

4. High turnover is more expensive than you think

"If it was a machine, we'd take care of that machine every day. We'd make sure it's running properly, it's oiled properly, it's cleaned properly, it's shut down properly. We don't do that with our employees."

Direct costs add up. The direct costs of turnover - recruiting, hiring, onboarding, and training - are often higher than companies realize. In some industries, these costs can amount to 20-45% of annual payroll.

Indirect costs are even higher. The hidden costs of turnover include:

• Lost productivity during vacancies and training periods
• Lower quality and customer service from inexperienced staff
• Higher error rates and waste
• Increased workload and burnout for remaining employees
• Loss of organizational knowledge and customer relationships

Competitive disadvantage. High turnover makes it difficult for companies to build the capabilities needed to differentiate themselves and adapt to change. It creates a workforce that can't be trusted or empowered, limiting a company's ability to innovate and improve.

5. Corporate disabilities from underinvesting in people

"It's the basic stuff we can't execute on."

System-wide weaknesses. Companies operating with high turnover and low investment develop a set of interrelated disabilities that prevent them from performing well:

1. Can't hire the right people or train them well
2. Can't trust or empower employees
3. Can't match labor supply with demand
4. Can't develop or retain strong managers
5. Can't hold employees to high expectations

Vicious cycle reinforces mediocrity. These disabilities reinforce each other, creating a system that makes excellence impossible. Breaking free requires addressing the whole system, not just individual elements.

6. Overcoming fears and doubts about investing in workers

"We are not a company that tends to make bets on its people."

Common objections. Many leaders fear investing in frontline workers, citing concerns such as:

• Can't quantify the benefits
• Investors won't support it
• Implementation risks are too high
• Workers might take advantage

Reframing the question. Instead of asking "Does investment in people pay off?", successful leaders ask: "Can we be a strong and lasting company—one that wins with our customers and adapts to changes—if we don't invest in our people?"

Evidence supports investment. Companies that have made the leap to good jobs have seen significant improvements in turnover, productivity, customer satisfaction, and financial performance. The competitive benefits of a stable, motivated workforce extend beyond what can be easily quantified.

7. Leaders with conviction drive successful change

"This organization has a lot of courage muscles. We believed we were doing the right thing. We just stuck to our guns."

Customer-centric mindset. Leaders who successfully implement good jobs systems prioritize creating value for customers above short-term financial metrics. They see investing in frontline workers as essential to delivering great customer experiences.

Ethical imperative. These leaders also view providing good jobs as a moral obligation and a key part of their company's purpose and values. They refuse to compromise on worker well-being for short-term gains.

Disciplined focus. Successful leaders maintain discipline in growth, avoiding the temptation to expand too quickly at the expense of operational excellence. They are willing to say no to opportunities that don't align with their core value proposition.

8. How to start the virtuous cycle of good jobs

"You have to pay people and offer good benefits … and then you can expand out from there. But if you're just trying to do a few things around the edges, you can't expect too much."

Invest early in pay. Raising wages is often the most crucial first step in breaking the vicious cycle. It reduces turnover and financial stress, enabling other improvements.

Subtract to add. Simplify operations by removing unnecessary complexity in products, promotions, and processes. This frees up resources to invest in people and makes jobs more manageable.

Key steps to start the virtuous cycle:

1. Raise pay for key positions
2. Improve schedule stability
3. Create clear career paths
4. Reduce workload complexity
5. Smooth out demand variability
6. Cross-train employees

9. Empowering employees and continuous improvement

"Before the FIC [Frontline Idea Cards], you never felt like your ideas were being heard. You could say something to someone, but it didn't go anywhere."

Build trust first. Empowerment and continuous improvement initiatives are most effective after establishing a foundation of stability and trust through better pay and working conditions.

Involve frontline workers. Successful companies create formal mechanisms to collect and implement ideas from frontline staff. This taps into their knowledge of customer needs and operational challenges.

Elements of effective empowerment:

• Clear decision-making authority
• Training on problem-solving techniques
• Regular forums to share ideas (e.g., daily huddles)
• Recognition and rewards for improvements
• Management support and follow-through

10. Sustaining excellence through commitment devices

"Temporary suspensions don't tend to stay temporary. They can put you in a vicious cycle."

Resist short-term pressures. Even after establishing a good jobs system, companies face ongoing temptations to cut corners for short-term gains. Successful companies create "commitment devices" to maintain their focus on long-term excellence.

Examples of commitment devices:

• Costco's 15% maximum markup on products
• Targeting 100% internal promotion for management roles
• Explicit stakeholder prioritization (e.g., customers first, then employees)
• Requiring removal of a menu item to add a new one

Continuous reinvention. Staying the course doesn't mean resisting all change. Companies must continue to innovate and evolve while staying true to their core principles of investing in people and operational excellence.

Last updated: November 23, 2024