On this episode of the Bring It In podcast, 1Huddle’s CEO and Founder, Sam Caucci, sat down with Zeynep Ton, author of The Case for Good Jobs: How Great Companies Bring Dignity, Pay, and Meaning to Everyone’s Work. Zeynep Ton is a professor of the Practice and Operations Management at MIT Sloan School of Management and president of the nonprofit Good Jobs Institute. She has acquired many awards and was part of the faculty at Harvard Business School.
Zeynep highlights the idea that operating with low pay is ultimately costly due to high turnover and related challenges to the company. She argues that the key to success is winning with customers, which requires a strong team. To build such a team, companies should invest in their employees through higher pay, more benefits, and increased training. Ultimately, she concludes that creating a competitive organization is impossible without addressing issues like high turnover, low pay, and a lack of meaning in the workplace.
Audio available on Apple Podcasts, Google Podcasts, and Spotify.
Below are some of the insights Zeynep shared during our chat, edited for length and clarity. You can find more Bring It In podcast episodes here.
Sam Caucci: Zeynep, I guess a question you probably have gotten a few times, like what made you write the book, The Case for Good Jobs?
Zeynep Ton: Yes, I’ve received this question many times. This is a, you know, this is a follow up to my first book, The Good Job Strategy. In that book, I talked about how even in industries like low cost retail, companies can win with a strong team that’s set up for success, because the conventional wisdom in industries like retail, hospitality, restaurants, call centers, et cetera, is that Companies cannot afford to invest in their workers.
And the choice is to operate with high turnover and poor service and poor performance. And the first book was against that commercial wisdom and said, no, there’s another way to operate and win with customers. That’s completely possible. And I call that the good job strategy. And in that book, I identified what are the elements of the good job strategy, because it’s a system that works together.
So that was the first book. And after that book, I started receiving requests from company leaders, from huge companies, their CEOs to dog walking businesses. And what I realized was so many of them felt like they were trapped in their system of high turnover and poor performance, but they realized they were trapped in that system and they didn’t know how to get out and they were asking questions like, How do we make the case for change?
What changes do we make first? And how do we sell this? How do we bring people together? So I wrote this book to help them answer those questions and it’s based on the work, my academic work and the work that I’ve done with dozens of companies now through the Good Jobs Institute, the nonprofit Good Jobs Institute that I co-founded in 2017.
Sam: What is a good job?
Zeynep: You know, a good job can mean different things to different people. We may weigh things like purpose, belonging, recognition, achievement, you know, learning and growth differently. But let me mention the minimum requirement for a good job. And in a good job, people should be treated like humans.
With respect, not a pair of hands and pay, and this is important, should be high enough so that we have control over our lives. And those minimum conditions, unfortunately, are missing for millions of people in this country. And when pay is low or inconsistent that employees are working multiple jobs getting very little sleep.
They’re stressing about how they’re going to pay for their rent, everything else. You know, the little perks, belonging programs, recognition programs, pizza parties, they’re just a bandaid on a wound and obviously pay is not the only thing that makes the job a good one, but absence of sufficient pay guarantees financial stress for workers and absence of sufficient pay guarantees high turnover.
And what we have found, Sam, over and over is that when turnover is high, then companies end up designing an entire system that treats people as a pair of hands, which makes the job a worse one. One executive in a workshop said, rebuilding systems, assuming people can’t do anything right. And that’s the consequence of low pay, high turnover system.
Sam: You know, it feels like, in this moment, and I’m interested because this book, you know, is basically brand new, right? Just came out in June.
Zeynep: In June.
Sam: Yeah. So it’s, you know, it’s hot off the shelf. I guess how are we doing as a society, you know, and I ask that from a position of as you know, better than anybody, Brookings has come out with reports over the years, talking about the number of jobs in America that are considered bad jobs, 1 in 2, where, you know, you could be a unexpected $400 expense from poverty.
You know, majority of, so many of these jobs are in frontline industries, like you mentioned. And I guess now you have other technology starting to creep even more quickly, whether it’s AI, ChatGPT, automation inside of the workforce. I guess with all of this occurring, and I guess what is your take in this moment around how we’re doing as a community when it comes to trying to create an environment where our people are not just paid well, but like you mentioned, felt belonging, achieving, recognized, getting the growth opportunities they need?
Zeynep: I think we’re not doing a great job. I mean, there are all sorts of surveys about how people are not, Gallup comes up with their results all the time, and sometimes there is some progress, but the progress is not, you know, strong enough. But I will say, Sam, you know, a good society has a strong middle class.
And a good society has a strong middle class who have hope. And with, you know, before the pandemic, there were 53 million Americans who worked in jobs where the median pay was 17, 950 dollars. Right? So as a society, 44 percent of the workforce didn’t even have enough pay to be able to take care of their families and low pay puts them in a vicious cycle of poverty.
And it doesn’t just affect them, it also affects their kids from their birth rate. You know, low wages are associated with low birth rate, child neglect, neglect children’s scores. So it prevents their children from moving up too. And upward mobility has declined in the United States. In the 1960s, you know, 90 percent of the kids did better than their parents.
This is when they, you know, when they were college age and in 1990s that went down to 50%. Like that’s not the America that attracts so many people, right? So we can do so much better as a society. And I think those of us who make enough to make ends meet oftentimes underestimate how important pay is for workers, for their well being, their dignity, and their ability to do a good job.
Sam: Yeah, I’ve heard you and listened to you on the Aspen Institute and some other discussions on your discussion on pay, on how, you know, it does feel like it’s a tricky topic when you’re trying to raise it. And the question is how do you raise it to an appropriate level while at the same time dealing with the challenge of, you know what the market or shareholders may or investors may think about it.
You know, we live in a world where it feels like maximizing profit is the focus. How did you think about investors’ role or speaking specifically to where business models are set up? How should how should see level executives be thinking about creating good businesses in spite of the fact they may be feeling downward pressure from investors to continue to just focus on margins.
Zeynep: Yeah, and let me first mention, you know, companies are already paying for low pay. Operating with low pay is really expensive. That’s what I have found during, you know, 20 years of doing research in operations management. So, low pay, as I mentioned, drives turnover. We have worked with companies where they changed their entire roster in a year.
So that’s 100 percent turnover. And with companies that we work with, we oftentimes identify what’s the cost of turnover, the direct cost of turnover. These are costs related to recruiting, hiring, onboarding, training, time to full productivity. And those costs can range from 10 to 25 percent of payroll dollars spent for most frontline organizations.
So, they’re already paying for low pay in terms of these direct turnover costs, but those direct turnover costs are tiny compared with the operational execution costs that come from high turnover. Lost sales from poor service, from slow service, from not being able to solve customer problems, mistakes that lead to higher product problems over time and low labor productivity.
And even those costs are small compared to the competitive costs associated with low pay and high turnover. Because when companies operate with high turnover, there are basic management practices that they just can’t implement. They are not able to hire the right people and train them well, because their managers are constantly fighting fires.
They have no time to hire the right people or train them well, even if they have great hiring practices on paper. When they haven’t hired the right people, trained them well, now they can’t empower them, which of course, lack of autonomy makes the job a worse job for the employee. But it also, we know from decades of research that not being able to empower workers is not a good business practice, and there are so many other things that companies can’t do when they operate with high turnover, and this ends up being an uncompetitive system.
So it’s an uncompetitive system because how can you create good service to your customers if your employees are not empowered, if your employees don’t make enough to be able to focus on the job and be able to do a good job. So these are the, you know, the direct turnover. financial and competitive costs that come from the strategy of low pay.
So, what I say to company leaders is you’re already paying for this. And from the investor’s perspective, let me offer just a scenario. And I’m going to call two types of companies, a good jobs company and a bad jobs company. And these are, I’m going to offer this as scenarios, Sam, but these are things that I have observed both empirically and also showed in and have paper, a theoretical paper that shows this.
Let’s assume there are two companies. Let’s call it Company A, good jobs company, Company B bad jobs company. Company A, and both of these companies offer their customers the same prices, same low prices, and they make the same amount of money.
Let’s make that assumption. Company A, the good jobs company, they operate with high pay, but low employee turnover. Company B the bad job company operates with low pay and high turnover, right? But at the end, they’re both achieving the same price outcomes and same profitability outcomes. Now, as an investor, which company would you rather invest in?
While the one that has a high pay and low turnover, they must have a higher productivity system. They must have a system where employees are constantly coming up with ideas to improve the business, lower cost everywhere else, or increase sales. This is the system that wins with their customers. The high turnover, low pay system on the other hand, is a system of low productivity.
So as an investor, which one would you like to invest in? And when I ask this question to investors, They oftentimes pick the good jobs company, which will be a company like Costco for example. Costco pays the average pay in Costco last year was 26 dollars an hour. The average pay in retail last year was 16 dollars an hour.
And Costco offers the customers lowest prices and it has been a darling in the eyes of their investors. And of course, it’s not that they just pay more, they design an entire system that makes their employees work worth more. And it’s not just Costco. I mean, I’ve observed this in a wide range of settings from convenience stores, to supermarkets, to call centers, to restaurants, and the list goes on.
Sam: I was going to ask you about the Costco example. So I’m glad you brought that up because I wanted to ask, you know, it may be thinking, you know, thinking Costco or some other examples as well when from a structural level inside of an organization you know. You look at so many companies who have these human resource job functions that have been around for a long time.
They’ve been built in a very specific way. I think a lot of data points in the direction of the overwhelming majority of workforce training dollars and investment within organizations is. Not at adequate levels and even where it is being deployed is being deployed towards things like safety and compliance, which although they’re important topics are not necessarily skill building by nature when you talk to workers who talk about what they want.
From career growth and development and pathwaying, what are you seeing the good job companies do around personal growth that is effective and sticky in a way that reinforces that investment in that area is the right thing to do?
Zeynep: Yeah. One of the things, Sam, that is oftentimes, confused about my work at Good Jobs Strategy is the Good Jobs Strategy is not about paying employees more or just investing in them. It’s about winning with customers. And what do you need to win with your customers? You need to have a strong team, and that’s why companies need to invest in their people with higher pay, more benefits more training, et cetera.
But you also need to set up your team for success. And the secret sauce of the ‘good job strategy’ is to make a series of operational choices that improve the contribution and productivity of employees and enable them to serve their customers well. So companies like Costco, like Trader Joe’s, Mercadona of Spain, Quick Trip, Four Seasons hotels.
These are all the companies that I’ve observed that deploy the strategy. If you look at them, everyone in the headquarters make decisions to respect employees time and abilities. They make decisions to improve their productivity and set them up for success. For example in a retail setting before introducing a new product or service, they consider how will this product or service affect the frontline work?
How is it going to affect the productivity of my frontlines? If that product or service drives sales, you think it’s going to drive sales, but if it ends up impeding service like coupons that slow the checkout line in a supermarket, forget about it.
They’re not going to do it. Truck deliveries are made to smooth the workflow. So frontline employees have time to stock shelves and help customers. So work is designed for high productivity. This is not just about investing in people and investing in their development and growth. This is an overall operational strategy.
That enables the frontline teams to serve the customer well and to be able to be productive so that you can invest in them. And unlike the low trust high turnover system, this is a system that’s built on trust and it’s a system that’s built on high expectations.
Sam: I want to ask what people can do today and I want to talk to you about like two audiences, just sort of a two part question here. For those that are on the front line as managers, you know, there’s so much, you mentioned Gallup earlier, there continues to be, you know, so much talk around the effect of the frontline manager on the employee experience of a frontline worker, not necessarily the C level executive or leadership who sits, you know, much further away from that customer and frontline worker interaction, but the frontline manager who may not have the autonomy or the ability to affect change within the culture at a high level, you know.
For the frontline manager at a Costco, for example, that’s listening, what can they do if they happen to be inside of a, you know, organization who has a lot of bad jobs?
What can the frontline manager do today that you could recommend in order to try to affect change from a different vantage point within the organization? And then the second question is, what should we demand of our government officials at this moment?
Zeynep: Yeah, I mean, these are both great questions and tricky questions in terms of managers, of course, you know, to be respecting, they may not have the autonomy to do so many things, but they could. All treat people with respect and dignity. And what I will say, Sam, though, about unit managers, like manager of a Costco store or a Trader Joe’s store or others, they may be the most important people in frontline businesses, every company that we work with stores with more tenured managers, more experienced managers have better performance.
But the problem is companies that operate with high turnover and a system of high turnover cannot consistently retain and develop strong managers because in these organizations frontline managers are burnt out. They’re firefighters. They’re constantly dealing with employee turnover problems, attendance problems, customer problems, equipment problems.
They’re firefighters and they’re burnt out. We work with companies where frontline managers asked to be demoted because they were having anxiety effects. So one of the things is don’t put this on frontline managers, fix the system. So fix the system so that you can create conditions for developing and keeping great managers.
In one of the workshops with a large retailer, they said we hired a store manager from Costco. And this store manager could not do well in their organization. Because at Costco, things, this was before COVID, things run smoothly, right? The managers, they have low turnover. So the managers have a team that they know, the people have been there for a long time.
You know what their strengths are, you know what their weaknesses are. You have time to do what you’re supposed to do, which is lead your people and develop people and improve performance. That was how the managers were, you know, becoming great managers at Costco. And by the way, they’re all internally promoted.
So they’ve been promoted from within. Now, when this manager went to another store where there are turnover problems, there are equipment problems, things that are not running smoothly. The managers could not be a good manager. It’s the same person. Performing very differently in two different settings.
So we need to fix the system in companies and not constantly think about how do we fix the people. And I think maybe that answer is also when it comes to the government, obviously company leaders alone cannot solve our big societal problems. Like so many millions of people who have been left behind and government leaders can try to do their part in creating a better system through higher minimum wages, through some stable scheduling laws and through, some other ways to encourage companies to do labor investments, as opposed to doing technology investments, perhaps.
So there are lots of levers that companies and the government can pull to make it more expensive to operate with a bad job system or to make it more appealing to operate with a good job system.
Sam: The U. N. Security Council, I think in their upcoming meetings, they’re going to be officially taking up the discussion. I believe the U. K. is leading the dialogue on regulation and the effect of artificial intelligence today, given the speed at which it’s moving. What do you think about AI’s effect on work and does it change any part of the good job strategy or make any part of it more important?
Zeynep: Yeah, AI and technology automation in general its effect depends on how we use these technologies. For companies where the leaders believe that employees are just a cost to be minimized, their approach to AI and other technologies will likely be that we are going to use technology to substitute people to lower our payroll costs.
Right? And that’s not consistent with the good jobs strategy, and that’s not a great approach. That’s a very limited approach. But if the objective of a company and the leaders of their company is to win with our customers, and to have a great team that’s set up for success.
Now, the question when it comes to technology adoption or AI automation is not, you know, how can we substitute labor to reduce costs? It is, how can we use this technology to win with our customers to create a much better service? How can we more productively use our employees?
And when seen that way, technologies could be a great compliment to the good job strategy. One of the companies that adopted this was Sam’s Club. And within a few years, Sam’s Club had increased their investment in people dramatically, did so many other changes. And this is a company that has very low profit margins.
And one of the enablers of good jobs for them was their investment in technology. For example, if you went to Sam’s Club five years ago. It would have taken you maybe half an– and you want to buy a tire for your car, it would have taken half an hour for the Sam’s Club employee to go through different manuals in a tedious way to figure out which tire fits your car well.
Now that process, thanks to technology, is just a few minutes. And now that they improved labor productivity that much, Sam’s Club can pay their associates a lot more. Now that the associates are not wasting their time doing tedious tasks, they can really be an advocate for the customer and focus on solving the customer problems versus doing some tedious tasks.
So when used that way, when used in a way that empowers associates, creates better service, technology, AI, is a great complement to the good job strategy.
Sam: Zeynep, I appreciate you taking time. I have one final question. I mean, the topics you raised in the discussion, and in your books all have to do with the future of work. What is your hope for the future of work?
Zeynep: My hope is that as a society, we get to respect the work of front lines a lot more. During the pandemic Sam, we called many people who work in restaurants, retail stores, caregivers, we call them essential workers because they are so essential to the functioning of our economy.
And my hope is that we all recognize how essential these workers are. We all value their work. We invest in them and we enable them to both thrive in front of their customers, be able to create value for their customers, but also take control over their lives and live with respect and dignity.
Sam: Zeynep, thank you for joining us.
Zeynep: Thank you so much for having me.
Topics Discussed: Future of Work, Leadership, Workforce, Education, Work, Tech, AI
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