The Good Jobs Strategy: A Q&A with MIT Sloan’s Zeynep Ton

New book shows how companies like Costco and Trader Joe’s thrive by investing in employees

December 18, 2013


At first glance, The Good Jobs Strategy: How the Smartest Companies Invest in Employees to Lower Costs and Boost Profits is a book about the workforce.

And it is that, but it is also a book about making a company work.

In The Good Jobs Strategy, out Jan. 14, MIT Sloan adjunct associate professor Zeynep Ton delves into data and more than a decade of research about retail and service companies. She argues that even in low-cost businesses, good jobs aren’t only good for employees, but for customers and employers as well.

It is an operations book. While bringing the human pain of bad jobs—low wages, unpredictable schedules, low self-worth, and a vicious cycle of poverty—to life, Ton anchors the book with research, case studies, and a framework for implementing the strategy for which the book is named.

That’s how a book ostensibly about labor instead takes up business decision-making, such as how offering fewer products or operating with slack in staffing levels can benefit a company.

   Zeynep Ton<br/>Photo: Evgenia EliseevaZeynep Ton
Photo: Evgenia Eliseeva

MIT Sloan spoke with Ton about investing in employees, how she began studying the intersection of labor and operations, and what it takes to pull off the good jobs strategy.

This book appears to be about workforce issues. But it’s really about developing operational excellence.

When I studied companies that offered good jobs to their employees, low prices to their customers, and great returns to their investors all at the same time, I found that the key to doing all this was operational excellence. The good jobs strategy is a blend of investment in people and four operational choices that ensure a great return on that investment in people. One of those four choices is to offer less. Companies that follow the good jobs strategy offer fewer products to their customers. That reduces their costs, increases labor productivity, and ensures that employees are familiar with the products so they can help customers.

I wrote this book for managers, executives, and entrepreneurs who want to offer good jobs but don’t think it is possible because controlling costs is so important to their business. I also wrote it for people who believe that offering good jobs may be good for individuals and society, but that’s not what companies should care about. Companies that follow the good jobs strategy don’t do it just to be altruistic. They do it because they found it to be the most sustainable way to provide superior returns to their investors.

I say this to my students all the time. There are different ways to make money. Companies can certainly make money not following the good jobs strategy. But especially in service industries, bad jobs lead to frustrated customers and lost sales and long-term profits. Bad jobs also cause a lot of suffering for people who have them. We live in a country where more than 45 million people are poor. We live in a country where millions of people who work can’t get by. And bad jobs are not necessary, even if we want low prices. Companies can make as much if not more money following the good jobs strategy and still offer their customers low prices.

You’re an operations specialist. How did you end up writing a book about the workforce?

During the first several years of my academic career, I focused on problems that had to do with the supply chain literature. I was seeing that even in companies where the back end of the supply chain works so well, the front end—the stores—didn’t work so well. And then as I was studying these problems, I started interviewing people, collecting and analyzing data and began to see that inventory problems were often caused by people. Stores that had high employee turnover and less training had more problems. Companies would spend millions of dollars on supply chain technology only to have the ball dropped in the last ten yards.

At some point, I started connecting the dots between the business problem and the social problem of having millions of people with bad jobs and I thought that it shouldn’t have to be this way. Because we know that if you want to be exceptional operationally, it has to be through a combination of operational design and people.

You note in the acknowledgments that Harvard Business School dean Nitin Nohria, an MIT Sloan alumnus, encouraged you to write this book.

When I was leaving HBS, Nitin had just become dean. We had a meeting just before I left. He said ‘Often, people write books that have a head—so there’s great analysis and data—but the book doesn’t have a heart.’ And sometimes people write a book with heart that doesn’t have a head.

He said that if I put my mind to it, I could write a book that has a head and a heart. So as I wrote, I thought about what he said to me. I had stories from retail employees, and I wanted to show their struggle. And I also wanted to support the good jobs strategy with evidence.

The book focuses on four “model retailers”—Mercadona supermarkets in Spain, the Costco wholesale company, QuikTrip convenience stores, and Trader Joe’s grocery stores. Yet every large company out there professes to offer good jobs. They can’t all be that good, right?

There are big companies that say they provide good jobs and all their PR is about the good jobs they provide, but it’s absolutely not true. Especially in low-cost services, like retail, restaurants, or call centers, companies do not see their labor as an important asset. They see it as a cost, an interchangeable part, and workers feel that.

We desperately need more companies to follow the good jobs strategy. It’s not an overnight thing. It takes a long time to get things right. But I hope the evidence in this book will encourage some companies to follow the strategy. On a different note, if the minimum wage were to be raised to a high enough level, it may compel some companies to adopt the good jobs strategy. If companies are forced to pay more for labor, they will have to find ways to make workers more productive and more central to their success.

There is compelling evidence that companies following this strategy perform really well. We need executives with the courage to pursue these strategies.