Weekly Business Insights from Top Ten Business Magazines | Week 292 | Strategy & Business Model Section | 1

Extractive summaries of and key takeaways from the articles curated from TOP TEN BUSINESS MAGAZINES to promote informed business decision-making | Week 292 | April 14-20, 2023

The Obstacles to Creating Good Jobs

By Zeynep Ton | Harvard Business Review Magazine | May–June 2023

Listen to the Extractive Summary of the Article

The conventional wisdom in retail and other low-margin service industries has been that bad frontline jobs—with low pay, unpredictable schedules, and few opportunities for advancement—are necessary to compete. Yet for decades a handful of companies—including Costco and QuikTrip in the United States and Mercadona in Spain—have been proving that false.  They remain market leaders in their very competitive industries without the bad jobs on which those industries supposedly depend—and it’s no secret how they do it: by adopting “good jobs” systems.  

For the bad-jobs system the playbook is simple: Pay as little as you can, make the job as easy as you can, and hire anyone willing to work under those circumstances. The good-jobs system, which enables greater customer satisfaction, is context-dependent: Managers need to find the pay levels and the job-design levers (such as empowerment and cross-training) that best fit their situation. 

Four false orthodoxies account for why the leaders of most companies are reluctant to set out on the same path.

1. Our business model won’t support higher investment in people. Many executives have been taught that labor is just another cost to be minimized; market pay is the right pay, even if it’s not a living wage; and lean and mean is what drives efficiency.  In this falsehood the companies don’t consider that investment in people drives improved productivity and service that ultimately reflected in better financial performance.
2. We can’t trust frontline employees. The good-jobs system requires trusting employees to solve customers’ problems and improve their own work. This runs counter to how companies that operate with low pay and high turnover view their employees. They see rampant absenteeism, sloppiness, and a lack of focus. How, they ask, can the company’s fate be put in the hands of such a workforce? So they install as many controls as they can.  They failed to understand that whatever managers assume about people will be proved right, because they’ll end up creating a system that promotes the very behavior they expect.
3. Our financial analysis shows the investment won’t pay off.  Most of the financial analysis failed to show what would happen if a company didn’t change the status quo. Could it offer a good customer experience if it didn’t fix frontline turnover and all the problems that caused? Could it fix turnover without raising pay? Nor did the analysts consider how higher pay might improve other factors, such as productivity, manager turnover, and absenteeism.   Companies consider pay in isolation when the whole point of the good-jobs system is that it is a system.
4. Implementing system change is too risky. Even leaders convinced that a good-jobs system would improve company performance may fear the implementation risks and time horizon. If you’re operating in a vicious circle, people are already overworked and operations are already too error-prone. A big change is bound to have ups and downs. Will you survive the transition?  Bolstering the fear of implementation risk is the fact that companies clearly can profitably grow even if they offer bad jobs and bad service.

3 key takeaways from the article

1. The conventional wisdom in retail and other low-margin service industries has been that bad frontline jobs—with low pay, unpredictable schedules, and few opportunities for advancement—are necessary to compete. Yet for decades a handful of companies have been proving that false.
2. Four false orthodoxies account for why the leaders of most companies are reluctant to set out on the same path:  our business model won’t support higher investment in people, We can’t trust frontline employees, Our financial analysis shows the investment won’t pay off, and Implementing system change is too risky.
3. For the bad-jobs system the playbook is simple: Pay as little as you can, make the job as easy as you can, and hire anyone willing to work under those circumstances. The good-jobs system, which enables greater customer satisfaction, is context-dependent: Managers need to find the pay levels and the job-design levers (such as empowerment and cross-training) that best fit their situation. 

Full Article

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Topics: Organizational Performance, Decision-making, Business Model, Leadership