Treat me right!

I think the next big evolution in productivity is staring us in the face - will we be smart enough to see it?  The evolution I'm talking about is a complete reworking of the employment contract - we need to start treating our employees as valuable, important contributors rather than as costs which can be cut.  This concept is true regardless of the industry or the type of work accomplished.

Some good examples come from industries where high turnover has been the rule.  In industries like high volume retail or hotels, high employee turnover is baked into every plan.  Most firms enter the year expecting to replace more than one-half of their employees!  Why is this a problem?

1.  Constant turnover means the teams never achieve optimal efficiency.  You simply cannot be effective as a team if the members keep changing.  There's no common bond - no trust - built in a team in which the members constantly change.
2.  The team members are constantly on different parts of the learning curve - there's little expertise and most people are just learning their jobs.  Of course the fast food places have taken care of some of this problem - the people in many fast food places are merely transportation vehicles for food cooked and prepared by machines.
3.  Constant turnover indicates a lack of loyalty to the organization (and probably indicates that the firm expected and planned for high turnover).  However, this means that the employee has little or no incentive to go "above and beyond" to win or keep a customer happy.  Ever wonder what happened to customer service?  It left with the attempts to keep employees happy and loyal.
4.  Recruiting and training costs are higher than necessary.  In a firm with 50-100% turnover, someone or some group within the firm is constantly screening candidates and training those candidates.  These costs, and the mistakes and rework that these candidates and new employees make, are avoidable costs.
5.  Most of these folks are not happy and don't feel rewarded or challenged in their work, and it shows in their effort. 

Some firms have begun to take a different approach.

A recent article in the Wall Street Journal really rang true for me.  It argued that happy workers are the best workers - that treating your employees well, compensating them effectively and constantly encouraging them makes those workers part of the team.

Starbucks, for example, has one of the lowest turnover ratios in its industry, and high customer satisfaction.  Some might chalk that up to a dedicated coffee-drinking work force, but others in the know recognize that Starbucks pays very well and provides benefits and stock options for employees who work at least 20 hours a week.  Treating people well means they are willing to do more, work harder and endure more than when they are treated as just another hourly employee.

Costco, one of the mega-market giants, has a similar philosophy.  They intentionally pay higher wages and better benefits than their competitors.  Read a good article about them here.  There are a few other examples of firms that have begun to make a change in the way they view employees and the value they bring to the table.

Why is this important?  With the advent of technology and computerization, many jobs left in this country are service related positions.  This means that for many firms, compensation is the highest cost item they face.  Rather than simply "manage" that cost, I think they should flip the equation and ask - how do we get the most benefit and value from the people who work for us?

Don't get me wrong about this however - one of the big problems with constant turnover is that teams are by definition larger than they should be.  In many of these firms where better wages and better benefits are extended, more is expected of the employee, and the employee has a greater chance of advancement.  I think there's a balancing act - we employers should provide better wages, benefits and opportunities for advancement as employees provide more loyalty and longer tenure, with the willingness to do even more than we've asked for in the past - because now they have a stake in the outcome.  We've got to redefine the employment contract to expect more from employers and more from employees if we want to improve customer service, become more effective and efficient with the employees we have, and over the long run become more profitable.

The thing that makes me chuckle about the article on Cosco is the fear that "employees will be treated better than shareholders".  This opens up the expectation by the writer that employees aren't shareholders - that somehow the "employee" class is different from the "shareholder" class and that they should be treated differently.  Well, as someone who is often a "customer" I can tell you an improvement in customer service will lead me to spend more money at an establishment, which will increase profits and make both constituents happy.

Comments

[panasianbiz]

It really shouldn't come as a surprise to any employer that employees want to receive fair treatment. That's why Costco keeps getting cited as being superior to WalMart when it comes to employee relations; they actually value those who work for them and get loyalty as a result.