Why Investing In Employees Pays Off

Good jobs with good wages — It's what everybody wants, but millions of Americans have bad jobs. They endure low wages, poor benefits and few opportunities for advancement. A case in point: the average American cashier makes about 20-thousand dollars a year, hardly enough to support a family on. And it's part of conventional wisdom that to protect their bottom lines, many companies have no choice but to offer bad jobs.

To put it another way: the best way to raise profits is to cut labor costs. So lots of companies, especially retailers, offer lots of bad jobs — with low pay and no benefits. But Zeynep Ton of MIT's Sloan School of Management is challenging that way of thinking. She says, investing more in workers is the secret to increasing sales, productivity, and thus, profits.

Zeynep Ton, adjunct associate professor of operations management at MIT's Sloan School of Management and author of the forthcoming book, The Good Jobs Strategy.

Harvard Business Review, "If investing in retail labor is such a good idea, as my research suggests, why isn’t everybody doing it? The main reason is that labor is often a retailer’s largest controllable expense and can account for more than 10% of revenues—a considerable level in an industry with low profit margins. In addition, many retailers see labor as a cost driver rather than a sales driver and therefore focus on minimizing its costs."

Bloomberg News, "A thinly spread workforce has other consequences: Longer check-out lines, less help with electronics and jewelry and more disorganized stores, according to Hancock, other shoppers and store workers. Last month, Wal-Mart placed last among department and discount stores in the American Customer Satisfaction Index, the sixth year in a row the company had either tied or taken the last spot."

The Atlantic, "Many employers believe that one of the best ways to raise their profit margin is to cut labor costs. But companies like QuikTrip, the grocery-store chain Trader Joe's, and Costco Wholesale are proving that the decision to offer low wages is a choice, not an economic necessity."