Good Jobs, Greater Margins

Zeynep Ton offers investment advice during Super Session.

October 03, 2019

ATLANTA—Zeynep Ton has a keen sense of observation. When she steps inside a convenience store, the first thing she notices is the speed at which employees work in their effort to serve busy customers. Those keen observations, combined with her two decades of studying retail operations, captivated the crowd at Thursday’s education Super Session, “The Good Jobs Strategy.”

Ton, a native of Turkey, author, professor at the MIT Sloan School of Management and co-founder of the Good Jobs Institute, offered an impassioned look at why retailers should invest in their employees. It pays off financially, competitively and morally, she said.

“Regardless of company size, competitive advantage comes from creating a highly satisfying and loyal customer who has a compelling reason to shop at your store,” Ton said. “Operational excellence is the key to achieving this type of environment.”

Some barriers to operational excellence are due to the complexities of the retail sector. But the biggest barrier is people, specifically high turnover, insufficient training and being short-staffed. Thus, it makes sense to focus on your people.

Low wage is the most glaring cause of turnover. That’s a difficult pill for retailers who are concerned about profit margins to swallow. But Ton says research shows that putting your employees first positively impacts your bottom line.

According to Ton, 42 million people work in a service industry, such as retail, where the average hourly wage is $11.33. Beyond low wages, retail employees are subjected to unstable work hours, further putting a strain on personal and family lives. Turnover is inevitable, she said.

“If a person’s basic necessities aren’t met, they can’t put food on the table, they can’t count on a stable schedule, and they don’t feel safe physically or psychologically, they’re going to leave,” Ton said. “When you’re constantly hiring and retraining, you’re just fighting fires. You’re not managing your business.”

Ton hailed a number of retailers who have established reputations for providing decent wages and retaining loyal employees, including Quick Trip, Costco, Trader Joe’s and Mercadona, a retail chain in Spain. Mercadona, for example, pays almost double the average wage in Spain and has a turnover rate of 3.8%.

Ton doesn’t believe paying higher wages alone is the path to success. She offered other ways to achieve operational excellence, including focusing and simplifying your store’s products. That may mean offering fewer SKUs that employees can knowledgeably and compellingly sell to customers.

Operational excellence impacts more than the bottom line, however. Ton made her own compelling case for investing in good people.

“Your sector can make a huge difference for our society. There’s a healing power to retail. Every single day, 165 million customers visit your stores. People from all walks of life come to your store. Those 165 million could magnify our differences with negative interactions or bring us together through positive interactions. In this divided country, we need you more than ever.”