People as a Cost

As I’ve blogged many times before, an increasing number of new jobs in this ultra-competitive employment marketplace fall into the lowest category of pay, job opportunity and satisfaction. It’s what I have referred to as the big “re-set” or the “barista-economy.” It’s the big lie hidden in our decreasing unemployment statistics, where the new work is heavily tilted to defined-term contract work, part-time jobs and labor in food services, hospitality and retail. With price comparison and shopping moving increasingly to online and mobile, Americans are more cost-conscious than ever before.

Naturally, our business practices and teaching agendas in our business schools have adapted to this cost-conscious emphasis, particularly where masses of employees need to be regulated in companies that have very large employment footprints. It’s called “operations management,” and just about every large company with a massive labor force applies complex analytical software that combines statistical experience, sales and demand trending based on real time or near real time performance with additional considerations that have been developed by seasoned “experts.” It’s euphemistically called “workforce management” software, and it tells these companies when and how to deploy and schedule their employees most efficiently (that should read “cost-effectively”).

But if you have ever been in discount-oriented big-box retailers and found it near impossible to find someone to talk to or ask questions of or find a line that is short enough not to try your patience, perhaps you have effectively questioned how stores have determined to under-serve your obvious needs. You may have also asked why Costco seems able to pay its workers a living wage just as too many Wal-Mart workers seem to be telling reporters that they not only suffer low pay and limited benefits but need to use federally-supplied food stamps to survive.

Enter M.I.T. Sloan Business School Professor Zeynep Ton and Wharton Business School Professor Marshall Fisher and a study they made of exactly how effective these cost-driven workforce management programs really are and whether they really produce the kinds of results they were intended to generate. Ton, born in Turkey where she learned early about the misery of routine work sewing pockets onto bathrobes during summers in her dad’s clothing factory, made it her life’s mission to address this bottom-end of employment. Her work suggests she has found a very satisfying path.

Most of current workforce software programs look at employees primarily as costs, pretty cold. But as hard as it may be for old-world managers to buy into this philosophy, treating these employees as human beings appears to be a better and more profitable approach.

“Ton, however, argues that workers are not merely a cost; they can be a source of profit — a major one. A better-paid, better-trained worker, she argues, will be more eager to help customers; they’ll also be more eager to help their store sell to them. The success of Costco, Trader Joe’s, QuikTrip and Mercadona, Spain’s biggest supermarket chain, indicate, she argues, that well-paid, knowledgeable workers are not an indulgence often found in luxury boutiques with their high markups. At each of the aforementioned companies, workers are paid more than at their competitors; they are also amply staffed per shift. More employees can ask customers questions about what they want to see more of and what they don’t like, and then they are empowered to change displays or order different stock to appeal to local tastes. (In big chains, these sorts of decisions are typically made in headquarters with little or no line-staff input.) Costco pays its workers about $21 an hour; Walmart is just about $13. Yet Costco’s stock performance has thoroughly walloped Walmart’s for a decade.” Adam Davidson writing for the New York Times, January 4^th. Wow!

As a result of the above and other similar studies, a new generation of workforce management software now takes per employee profitability, turnover, training costs and bottom line economic performance into consideration with a new and prioritized emphasis. An example of this new approach can be found in software tools developed by Kronos, a systems company that now provides software to entities as diverse as the New York Times and NPR to Ikea. Can this humanistic approach become the norm, particularly since it seems that we are having to learn how to live in a world where real futures with solid pay are sliding away?

 “Ton may have started her research in retail, but she believes her core findings are relevant in nearly every industry. After re-evaluating the relationship between worker management and profit, she argues that many corporate leaders will realize that paying their workers more and treating them better will actually make everyone better off. And this, indeed, would foment a small revolution. For generations, technology has been a source of misery for many low-paid workers, rendering their jobs tedious or eliminating them altogether. Gallup recently reported that only 29 percent of North American workers feel engaged with their work. Yet Ton suggests that a more sophisticated use of those same technological tools could reverse those trends. It’s possible that the lousy commodity jobs that we think of as central to an industrialized economy — from Charlie Chaplin’s ‘Modern Times’ to ‘Office Space’ to the latest disaster in Bangladesh — may not be a sad but inevitable result of a bigger, more efficient economy; it may just be a math error. Ikea’s decision to improve conditions for its workers is a major step forward. Persuading Walmart, with its 1.3 million U.S. employees . . . well, that might be a revolution.”

I’m Peter Dekom, and I sure hope that the stingiest of American (multinational?) companies can learn to treat their employees better… and perhaps wind up making even more money!