Transcript, E218: The Case for Good Jobs

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Jessi Hempel: From the News team at LinkedIn. I'm Jessi Hempel, and this is Hello Monday. It's our show about the changing nature of work and how that work is changing us. This is the second episode in our special series on what makes a good job. Last week, Bruce Feiler made the case that a good job is whatever you say it is, and that's true, but we don't want to let businesses off the hook here. There are a lot of jobs that used to be good, secure, well paying, reliable, and now just feel a lot less. So that's what the Writers strike is all about in Hollywood. This week's guest focuses on the basics.

Zeynep Ton: When I think about what is a good job, the first thing that I think about is a good job has to pay enough so that people can have agency in their personal lives and in their professional lives.

Jessi Hempel: That's Zeynep Ton. Zeynep's a professor at MIT's Sloan School of Management, and she believes that businesses absolutely should treat their employees very well. In fact, if companies do that, they'll make more money. It's that simple. But of course, this idea goes against the prevailing view that companies need to cut costs constantly to keep up their quarterly earnings.

Maybe you've heard of the Good Jobs Institute. Zeynep helped found it. Her new book is called The Case for Good Jobs: How Great Companies Bring Dignity, Pay, and Meaning to Everyone's Work. In her book, Zeynep talks about this big change that happened around the 1970s. Before that when productivity increased, so did pay, but then automation became a big thing. Jobs got sent overseas, companies became more aggressive with their unions as they tried to bring down the cost of labor.

Now, here we are. Today, we're watching the middle class dwindle. More money flows to the top, while the people doing most of the labor feel like their paychecks keep growing smaller. Zeynep offers an alternative, and she highlights significant companies that do business in this new way. You've probably heard of them, places like Trader Joe's and Costco.

In today's episode, Zeynep's going to lay out the problem she sees in today's labor market. Then she'll tell us how to fix them. Zeynep believes it can be done, but it's going to require some long-term thinking. A good job, according to Zeynep sets you up to take care of yourself and your family. Here's Zeynep.

Zeynep Ton: There are so many companies that offer programs to create meaning, to create a sense of belonging and letting employees express themselves freely at work, which are all great. One of the leaders that we work with, he started having pizza parties, then gatherings so that employees will get to know each other and little perks, and he realized that everything he was doing was on the edges, around the edges. And when people are balancing multiple jobs, there are millions of people who work two, three jobs, all part-time jobs. When you're balancing so many different jobs, when you can't sleep, when you're constantly thinking about, can I pay rent this month?

Jessi Hempel: Right.

Zeynep Ton: Then everything else is just a bandaid on a wound.

Jessi Hempel: So what is a good job? And we can start with pay, since you've focused so much of your book on there.

Zeynep Ton: Yeah, pay has to be sufficient. Again, as I said, pay has to be high enough to offer agency and along with pay comes stable, predictable schedules. Pay has two components. One is the hourly wage and the other is the number of hours. And what we oftentimes don't see is that so many workers are not provided enough hours. They're not provided full-time job even though they would prefer a full-time job. And even if they're full-timers, they don't get to work 40 hours a week every single week.

So when we think about pay, we need to consider both hourly wages and then the number of hours. And when we work with companies and we have them present their data on what percentage of their full-timers are not making a living wage, there's oftentimes silence in the room. And pay loan, I just want to be clear, pay loan does not drive a good job, but the absence of sufficient pay guarantees a bad job and guarantees high turnover.

Jessi Hempel: And I appreciated how over and over again in your book, you pointed out actually that what you are talking about is a system and pay is one aspect of that system. But should a company make the mistake of only addressing one or two aspects of the system, the system can't help but stay the same. It can't change unless you do a full analysis and movement of the system, right?

Zeynep Ton: Absolutely. And you have to think about system from your workers' perspective. You have to think about the system from your customer's perspective, from your investors' perspective. For your workers, of course, pay has to be enough, but they need to have enough stable schedules and they need to be set up for success and achievement. They need to have career paths so that they can move off to a higher paid position and feel respect in their work.

So those are some of the things from the workers' perspective. But when you think about their work, design of their work, what I found in my research is that you have to design that work to be able to create high productivity, high contribution and high motivation. I'll give you an example. When I studied companies like Costco, Trader Joe's, QuikTrip, I saw that these companies were operating with much lower turnover than their competitors.

They were providing much better jobs to their employees than their competitors. And their customers were fans. They loved them. They not only offered low prices, but also good service, and their shareholders were super happy as well. So what was your secret? And I wish the secret was, well, they just pay more and the world is a better place. But it wasn't that. So what they did was they created an entire system that enabled their employees to be extremely productive and serve customers so much better. And let me share with you some components of that system.

So if you go to a typical supermarket, you might see a hundred different types of jams and the prices of those jams will be changing all the time. So what the frontline employees do is they spend their time on very tedious activities. Changing the price tags for 15 cents at a time or shelving is very slow because of the number of products on the store.

If you go to a Trader Joe's, if you go to a Costco or Mercadona, you're going to see a lot fewer types of jams, but they're going to be good ones. And their employees are going to be knowledgeable about them and their prices will be stable so that employees don't waste their time on changing price stickers all the time, and they can do their job a lot faster. Now, this one particular choice is just a component of the system, but that type of productivity enables these companies to pay their employees more.

Being knowledgeable about the products means that now you can have a sense of achievement because when your customer asks you a question, you can answer that question. You have time to be able to serve the customer. So simplification, cross-training, empowerment were some of the parts of the good job system that created these outcomes for companies and their customers and workers.

Jessi Hempel: I really enjoyed thinking about all of the aspects that went into making a good job a good job. Think about grocery shopping this past weekend at Trader Joe's and how I really wanted the gluten-free egg noodles. And so I asked someone, and not only did that person know immediately where they were, but they walked me over there. And it was twofold, I got what I wanted, that was great, but I also had this really lovely interaction with this wonderful person who made me want to come back and do my shopping there and in person.

Zeynep Ton: Exactly. So think about that. That employee that you interacted with at Trader Joe's, the reason they could know about that gluten-free product that you are looking for is because Trader Joe's doesn't offer 80,000 different products, right? They simplify. The reason they could answer you was because Trader Joe's staffs their units with enough people, so they have time to talk to you.

Jessi Hempel: Okay, so let's stop on that piece a second. Because you talk about the importance of making sure there's slack in a system, and it made me reflect on how inefficient human beings are and how inefficient the process of being social and human is. And that runs counter to business as I've always thought about it, which is all about efficiency and getting everything exactly right. And part of the strategy then when working with humans is to just build in slack. Why?

Zeynep Ton: Yeah. Build in slack because that is how you optimize. If your followers have any operations classes, they will know that when you don't operate with slack, when you have high capacity utilization, all sorts of problems happen in your operating system. And what I found when I studied these companies that were incredibly successful was they always had slack. Why? Because they want to make sure that their employees can do their jobs without making mistakes. They want to make sure their employees can engage in improvement.

So they could suggest ideas for reducing product costs. They could suggest ideas for improving customer service. They operate with slack to make sure that people don't have anxiety, they don't have burnout. So many companies have high turnover, and one reason is because people are burned out. Their workload is just unbelievable. They can't take it anymore. And operating with slack also enables them to do hiring better, right?

When you don't operate with slack and when you're so desperate for people, you just hire the next person and you can't be rigorous about exactly who you hire. So there are so many advantages of operating with slack. So these leaders say, "Okay, are people a cost to be minimized or are they drivers of profits and success?" And when you see people as drivers of profit and success, then of course you operate with slack. But I will say one thing, you can't operate with slack if you have slackers. So while these companies operate with slack, they ensure that they have a high performance system.

Jessi Hempel: And is that the cross training piece that you talk about?

Zeynep Ton: Oh, that comes from so many different places. Pay is high, so there's performance pressure. Everybody wants the company to succeed so that your job is stable so that you can have a career path. Cross training, because these companies promote from within and they have very strong managers, there's constant interaction with your manager. So the performance pressure comes from so many different sources. But this is not performance pressure that controls. This is if we all perform well, we all do better. And there's deep care for people. It's the high expectations, high pressure, but it's combined with such deep care of people that it doesn't feel like a terrible place to work because we've all seen so many environments that have huge performance expectations, but then there's no deep care of people.

Jessi Hempel: Right. Well, and you make a very good argument for why turnover is absolutely toxic, both for companies and for individuals. Why is it so bad?

Zeynep Ton: So then there's a high turnover environment. There are constant operational problems, and unit managers or frontline managers are constantly fighting fires. That means that they don't have time to hire the right person. They don't have time to train the right person. They're constantly understaffed. So if you're a store manager, you're shelving merchandise or you're checking people out at the cash register because you're understaffed. So you can hire the right person, you can train them. Well, if you haven't done that, would you want to empower them to make decisions to use their judgment? Of course not.

So when you haven't hired right person, train them well, because of high turnover, now you tend to centralize as much as possible because you don't want people to make decisions. And when you centralize, many of those decisions are going to be bad decisions. They're not going to work in the front lines, which means that now there's lack of trust in your system. I found over and over again, frontline employees don't trust the headquarters because they think that headquarters decisions are wrong. They don't make sense on the front lines. And the headquarters don't trust the front lines because they see the frontline employees coming in late, making mistakes and not caring. So there's an amazing mistrust, and that loop just continues and continues.

Jessi Hempel: We're going to take a quick break here. Stay put, because when we come back, Zeynep tells us how the smartest companies break the cycle of mistrust.

And we're back. Before the break, Zeynep told us about the toxic environment created by high turnover. It's bad all around. It fosters mistrust. People on the front lines feel overlooked and undervalued, and they act accordingly. And when employers don't see their role in that cycle, well, it can be hard to want to pay employees more. But doing so often nets huge results. As we learned earlier this year from Jamil Zaki, "People are much better than we often expect when they're set up in better circumstances." More pay, more trust. Zeynep has this story about one company that tested that idea out to great effect. Here she is.

Zeynep Ton: Quest Diagnostics is one of the companies that adopted The Good Jobs Strategy. And early on in their journey, they not only raised pay, they did lots of things, but they also raised expectations. And one of the ways that they raised expectations was they created a stricter attendance policy. And when the executive director of the call centers announced this stricter attendance policy, one of the reps got up and he started clapping, and people were surprised, why was he clapping? Because those one or two people who don't show up, who are not perhaps working so hard, make the job so much worse for everybody else, right? So that's just one anecdote.

But I oftentimes get this question, what are people worth higher wages? And I see where this question is coming from. When employees are not paid enough, they don't make a living wage, then there is constant stress in their lives. They operate in a vicious cycle of poverty. Their physical health declines, their mental health declines. There's so much research that shows this. And even their cognitive abilities decline, low pay is almost equivalent to 13 IQ point decline.

So they make a lot more mistakes on the job. They have attendance problems, they can't focus on the job, they don't treat the customers well. So for executives, they see these employees because of the situation, the system that these employees are in, having attendance problems, having lack of focus, making mistakes all the time. And they say, "Hey, I don't want to pay this worker more." But what they don't see is that it's not the worker, it's the system that the worker operates in that causes them to operate this way. And it's been amazing to see how many organizations after adopting The Good Jobs Strategy, the same worker started behaving very differently.

One of my favorite interactions with a leader was the founder of Four Seasons, Isadore Sharp. He's 90 years old. He's been leading this business for 60 years, and Four Seasons is known as a hotel chain that empowers frontline employees all over the world to make decisions for their customers. So I asked them, I said, how can you trust people to make decisions that could put your organization in a difficult position? How could you trust the lowest level of employees to make decisions for your customers? And he looked at me and he said, "Have you ever met anyone who doesn't want to succeed?" And in his mind, and this is the mind of Jim Sinegal, the founder of Costco, this is the mind of good jobs leader, everyone wants to succeed, it might not be 100% of the people, but they designed their system assuming that everyone wants to do a good job, and then they make sure that their system enables everyone to do a good job, and they make sure that they hire the people who can do a good job in their system.

Jessi Hempel: I love that approach. And it's wonderfully illustrative of why maybe some of the businesses that don't succeed don't, because they've designed systems that assume that everybody is about to break the rules. And when you assume that you will implicitly encourage people in that direction.

Zeynep Ton: Absolutely. In one of our workshops, one executive said, "We've designed an entire system assuming people can't do anything right."

Jessi Hempel: So I want to get to the most critical question for us to discuss, which is that's really great that that works for Four Seasons, and that's super awesome. I love shopping at Trader Joe's. But how about for businesses that have realized that the business as they do it is not working and want to engage in this change, particularly big businesses that are entrenched and have worked the same way for a long time. Is this change really on the table for them?

Zeynep Ton: Yes. That's exactly why I wrote this second book. Because so many leaders came to me after I published my first book, said, "Great, I'm in that vicious cycle. I want to change, but I'm stuck."

Jessi Hempel: Let's talk about the pain points. Let's begin with the assumption that you're committed and that you have the support of leadership to do so. Whether that means you're the CEO and you have a board of directors, or maybe you're the restaurant owner and your investors have at least green lit this for a while. Where's this about to be hard? Where do you have to hang in?

Zeynep Ton: Yeah, the hardest part is going to be creating alignment. Because as we talked about, The Good Jobs Strategy is not an HR change, but it's a whole system change. And when you think about the work that frontline employees do, the people who drive that work are oftentimes functions in the headquarters that have nothing to do with frontlines, it's product design, it's logistics, it's marketing, it's sales. So the hardest part is to get these functions together and aligned so that they prioritize this change. We want those functions to feel their role in creating good jobs and a great customer experience. So that is the hardest part. And making choices is also another hard part because it's easier to just drift and do whatever what somebody else is doing than to make deliberate choices.

Jessi Hempel: Yeah, there's great risk involved in the choices, but as you point out, there's risk involved in every aspect of business, and there's a lot of risk involved in time. The time that you wait in order to implement something like this, or the time that you need to wait for example, for it to work. This is not something that you're going to experience the results of overnight. It requires a kind of culture change, right?

Zeynep Ton: That's correct. But what becomes very clear when we work with companies is the risk of not doing this is so much higher because one, they're already paying for very high prices for high turnover and low pay in terms of loss sales, in terms of mistakes, in terms of loss productivity, in terms of high turnover costs. And beyond that, they can't differentiate in the eyes of their customers. They can adapt to changes, and that could be an existential threat.

So the cost, the risk of not doing this is so much higher. Of course, you're not going to implement this in two months, but what we have found that if you can prioritize this change, there are some smart points where you can start your good job strategy adoption so that you can escape the vicious cycle and get on a virtuous cycle quite early on. The combination of certain changes, investing in people and simplifying enables companies to get out of that vicious cycle and start reducing turnover, seeing better performance, and that virtuous cycle gets you going.

Jessi Hempel: Well, I'm just thinking about this now. One cohort of people who actually might really push back here are the people who've been working at these companies perhaps for a while, and suddenly experience new colleagues arriving who are being paid what they're paid, or even maybe more than they're paid initially. I would imagine there's a culture clash on the front line that you would need to figure out how to address.

Zeynep Ton: So when you raise pay, there are two potential problems, compression and fairness. And we all care about fairness. And I haven't yet seen a pay increase where no one complained. Because if you increase the starting pay of all your employees, then people who have been there for a long time will complain, right? Unless you raise their pay so much more too. And you may not be able to initially. If you increase everybody's same the same way, some people might say, "Hey, I'm living in an area where the cost of living is so much higher. Why does my pay not increase more than somebody else's pay?" So there are all sorts of issues, but what we share with organizations is be as transparent as you can and explain the why. Explain the why over and over again, and that as we do better, things will continue to get better for everyone.

Jessi Hempel: Can I just ask you one question about Sam's Club? Sam's Club is a brand that I bet most people know. Most of our listeners have probably been into a Sam's Club at some point. Has it worked? And if so, how do you know?

Zeynep Ton: Yeah. So of all the companies that I've observed or worked with and that I described in this book, Sam's Club probably went through the most and biggest changes. Has it worked? While their employee turnover declined by 25% for front lines, even more for managers, the percentage of full-timers increased. The percentage of employees promoted from within, improved. Now their employees have stable schedules. So from an employee's perspective, things have gotten better. Pay raises have started around $5 to $7 an hour from a basis of $15 an hour for thousands of people. And now the minimum pay at Sam's Club is $15 an hour.

So it has worked from that employee perspective. Before they adopted this system change, they were really losing to their biggest competitor, Costco. They were way behind in terms of their same store sales growth. And since they started this implementation, they have experienced multiple quarters of double digit, same store sales growth. Their net promoter scores have increased, and their customers, their members are just much happier going to a Sam's Club.

And when you asked their leaders about what have been happening on the productivity front, efficiency front, one of the metrics that they shared recently was before they would be happy if they could have 1% or 2% increase in their efficiencies, they realized 20% increase. Their labor productivity improved. So there are a bunch of metrics that show success, and it's not just Sam's Club. Every other company that I describe in the book, what you'll find is employee turnover dropped, customer satisfaction, loyalty improved and productivity improved. Those are the three outcomes that we see over and over among the companies that adopted The Good Jobs Strategy.

Jessi Hempel: Well, it's interesting to me too that Sam's Club is a direct competitor to Costco, and it speaks to the impact that Costco has had, not just on the company, but on its vertical, on its industry. And so when business leaders choose to employ this, it seems like that at least is an example of how they're not just impacting the people that they will employ, but potentially the entire area in which they work.

Zeynep Ton: Yes. And companies tend to imitate one another. And humans imitate one another. So absolutely, those principles are not principles that I have found, those have been around for a long time. They're blindingly obvious principles, and just because they're obvious doesn't mean that they're going to be practice or just because they're useful, they're going to be practice.

Jessi Hempel: You know, not for nothing, Zeynep but my wife is from Tupelo, Mississippi, a small town, and her great-grandfather started the retail store there more than 115 years ago now, the store called Weeds, and this is how he did business, and it's why that store is still run by now her uncle, someone in their family, and that many of the employees have been there generationally for years and years and years. Are we just repeating a model that actually we learned in my great-grandfather's day?

Zeynep Ton: I mean, if your great-grandfather was focusing on the customers, if he was reworking on the fundamentals of giving the customers the right merchandise at the right prices in an environment with friendly people who know what they're doing, yes, those are the principles that we need to go back to.

Jessi Hempel: That was Zeynep Ton. Check out The Case for Good Jobs: How Great Companies Bring Dignity, Pay, and Meaning to Everyone's Work out now wherever books are sold.

So now it's time for our new segment. Again, quick tips from all of y'all, our listeners, and for that, I'm going to bring our producer, Sarah Storm back into the studio. Hey, Sarah.

Sarah: Hello again. How's it going?

Jessi Hempel: Well, it's going pretty well. I loved that conversation with Zeynep.

Sarah: I loved it. I'm a person who had a Costco membership for years, even when I would only go four times a year in the days before Instacart, and I gave them my 50 bucks a year because I thought the way that they conduct themselves as employers is so fantastic.

Jessi Hempel: Which is actually so smart to think about. In addition to being a fabulous employer and the way that that's good for your employees, it's also really good for marketing. I mean, you get people like Sarah to shop there. I mean, that's significant.

Sarah: Or just to give them money sometimes. I mean, it's an excellent marketing strategy, isn't it?

Jessi Hempel: Yeah.

Sarah: Yeah.

Jessi Hempel: Well, listen, this week's quick tip comes from a listener named Amy O'Donnell. Amy has been a listener for a good long time. I know that because she is one of the listeners who volunteered to talk with me about the show earlier this spring, and she's got some good thoughts, Sarah let us know.

Sarah: Absolutely. Amy says, "My original thought was that flexibility makes a job good. Now, with organizations routinely making the arbitrary decision to make their employees return to the office, it's not so much flexibility as it is trust. An employer who allows you to perform your best work wherever you are and within the desired parameters is one who trusts its employees." Boom.

Jessi Hempel: Boom is right. Amy is very qualified to offer this insight I happen to know. But this insight, it feels like something that we keep coming back to in this show. Dating back to our episode with Jamil Zaki, it turns out that when you trust people, more often than not, they try to do right by you. And yet we as humans, we fear that it will be the other way. But if we build our systems with the optimistic belief that people will come through, Sarah, they tend to come through.

Sarah: They really do. What's so interesting to me to bring up what you're talking about with Jamil is like you really get what you go looking for. If you're like, ugh, this person will never do X the way I want them to, you are probably going to be right. And if you go in thinking, Hey, I'm going to leave this door open, I bet they'll rise to the occasion, you will also be right. I like this version of work much better where we just believe that people will rise to the moment.

Jessi Hempel: Me too. Me too. Look, thanks Amy, for sending in your tip. And to all of the other listeners out there who just listened to Zeynep's amazing conversation, if you have thoughts to share, send them to us. We would love to include them in a future episode. This week on Hello Monday Office Hours, we're talking about Zeynep's good job strategy. What kind of investment do you look for in a company or an employer? We'll talk about it all on office hours at 3:00 PM Eastern on Wednesday.

We'll go live from the LinkedIn news page. If you're not sure where to find us, that's okay. Send us an email and we'll hit you back. [email protected]. That's [email protected].

Hello Monday is a production of LinkedIn News. Sarah Storm produces our show with help from Lolia Briggs. It's engineered and mixed by Assaf Gidron. Our theme music was composed just for us by The Mysterious Breakmaster Cylinder. Wallace Truesdale, Kaniya Rogers, and Michaela Greer invest in each other and our team. Enrique Montalvo is our executive producer. Dave Pond is head of news production. Courtney Coupe is head of original programming. Dan Roth is the editor-in-chief of LinkedIn. I'm Jessi Hempel. We'll be back next Monday. Thanks for listening.