The Power of Good Jobs and Progressive Management
In August, we traveled to Hanoi for Bucket list visits to a group of progressive Vietnamese businesses that challenge the status quo. On the plane to Vietnam, I read The Case for Good Jobs: How Great Companies Bring Dignity, Pay, and Meaning to Everyone's Work by Zeynep Ton, a professor at MIT. The arguments Ton lays out in the book resonated greatly with me.
For starters, Ton argues that most traditional companies have a pay issue. That is, they underpay their people. Most notably, they underpay their frontline people. These are often the people closest to the customer or where the main value is created for customers (think factory floor, registers, etc.). So, most people are neglecting the people who have the most significant influence on their customers. And that's a big mistake.
Ton calls jobs that are underpaid "bad jobs." They are called that because they launch the companies (that underpay their people) into a vicious cycle of bad performance. In fact, Ton is talking about two interlocking vicious cycles (see below) that are connected via the organizational characteristics of "high turnover, understaffing, and low ability of staff."
The top cycle is related to the employee as an individual. It starts with employees receiving low pay. Because of their low pay, people can't meet their financial obligations. For example, they can barely pay their rent, medical bills, or tuition fees for themselves (or their kids). Plus, any unforeseen financial setback will cause major problems in their life and their family. This situation creates high levels of stress, health issues, and even lower cognitive abilities. It literally makes employees sick, which leads to high turnover, understaffing, and low ability of staff.
The bottom cycle is related to the organization as a whole. It starts with company leaders deciding they want to make low investments in their employees—which also means giving them low pay. We just saw that low pay leads to high turnover, understaffing, and low ability of staff. This, in turn, leads to poor operational execution of the work that employees are supposed to do. Low operational execution leads to low sales and low profit. As a result, because there is less profit, the company leaders decide to invest even less in their people.
And voila. The company is now in a vicious cycle to the bottom.
Pay as a hygiene factor
Bad jobs have bad pay, so good jobs need good pay, Ton argues. This makes sense. It is a no-brainer. However, she is quick to admit that simply offering employees good pay is not enough. Pay is a so-called hygiene factor.
That means that good pay is necessary for good jobs, but not sufficient. Good pay is needed for a good job, but its presence doesn't guarantee a high level of engagement and motivation.
More importantly, the absence of good pay guarantees high levels of dissatisfaction.
So, to turn bad jobs into good ones, you have to do more than just pay a fair wage. Ton argues that you need a whole work system centered around investing in people. That means that companies can break their vicious cycle to the bottom with a human-centered job system. These companies invest what it takes to attract and retain the right people and then expect high performance from them.
Amen to that.
Ton argues that these systems rely on four elements:
1. Focus and simplify
“Good companies” (with good jobs) have a strong focus on those things that add value to the customer. They maintain discipline in keeping things simple. They do not push employees to reach new customers and grow sales at all costs. They trust their employees to be productive and to serve the customer in the best way possible.
2. Standardize and empower
Good companies let go of command and control. Instead, they leverage front-line workers' knowledge, time, and ability. They standardize for consistency, productivity, and ease of empowerment—not just to minimize mistakes and bad decisions or to control risk. They invest in a structure that allows them to hear the voices of all front-line staff.
Good companies design the work so employees can balance specialization, flexibility, and motivation. They do not design work to minimize labor costs by forcing people to do the same things repeatedly. Instead, they allow people to craft their own jobs by taking ownership of an area of work that includes both customer and non-customer-facing tasks.
4. Operate with slack
Good companies ensure their employees have enough time to serve customers and do their work without mistakes. Moreover, they do not force staff to work at full capacity, so they also have time to focus on improvement and innovation.
Customer-centric = Frontline-centric
These four principles allow good companies to be extremely customer-centric. This is more than just a nice outcome—it’s a deliberate design. The leaders of such companies believe that their companies are most successful (and benefit financially) when they are as customer-centric as possible.
They also believe treating their front-line staff well is the key to being extremely customer-centric. In fact, they believe front-line employees are the most important people in the business. After all, they are the ones that are in the most direct contact with the customers.
When company leaders have this belief, they make different decisions. They prioritize the work of the front-line staff and allow them to continuously improve their work to better serve the customer. To do so, they empower them, provide them with high levels of autonomy and responsibility, and give them enough time to do their job.
They expect results from them but also pay them well.
Old-school principles of good management
Ton admits that there is nothing new under the sun here. She knows that she is advocating changes in corporate behavior that are really just a set of old-school principles of good management.
In Ton's own words, these principles include:
Focus on creating real value for customers.
Prioritize the work of those who serve the customer.
Take care of your employees' basic needs to allow them to focus on their work and have dignity.
Design the work so that employees are motivated, productive, and shine in front of customers.
Involve the people who do the work in improving that work.
Make a habit to do the right thing.
This all makes sense again. In fact, we work with a set of similar elements at our investment firm, Krisos. With this firm, we buy traditional companies and then transform them by creating good jobs via a system that has all these elements in place.
But that is the topic of another article.
Back to Vietnam
Now, back to our trip. In Vietnam, we visited several good companies that managed to beat their vicious cycles and created workplaces that thrive on good jobs.
Soon, we will share more details about what we learned on this trip and the progressive companies we visited. And we’ll do it via our newsletter. So, subscribe below to stay updated on all this and plenty more.