Zeynep Ton, professor of the practice in the operations management group at MIT Sloan School of Management, spoke with David B. Wilkins, faculty director of the Center on the Legal Profession, about her proposition to businesses to employ the “good jobs strategy.”
David B. Wilkins: Almost a decade ago, you wrote your first book—The Good Jobs Strategy: How the Smartest Companies Invest in Employees to Lower Costs & Boost Profits. Could you just briefly explain what you mean by a “good job”?
Zeynep Ton: I’ll start with some minimum conditions for a good job. At the lowest level, pay needs to be high enough so that people have agency in their lives. When pay is low—the case for tens of millions of workers in the United States working in retail, call centers, hospitality, restaurants, and so on—then workers tend to work in multiple jobs. They can’t sleep. They oftentimes have inconsistent schedules. They’re constantly stressing about whether they can put food on the table. Low pay guarantees a bad job.
I want to be very clear that sufficient pay doesn’t mean a job is a good job, but absence of sufficient pay guarantees high turnover. When turnover is high in organizations, people are treated like pairs of hands, not like human beings who have brains, who can make decisions, who can improve performance.
Pay is so fundamental for workers’ well-being, their ability to do a good job, and for their dignity.Zeynep Ton, Professor of the Practice, MIT Sloan School of Management
After pay, stable schedules and career paths are important, so you can move on to a higher-paid job. And then, feeling a sense of respect—respect for your time, respect for your abilities, and respect for your knowledge—is an important aspect of a good job. Then of course, a wonderful job will be one where we all feel a sense of belonging: a sense of achievement, meaning, and recognition.
But still, pay is so fundamental for workers’ well-being, their ability to do a good job, and for their dignity. Low pay is associated with heart disease, diabetes, opioid use, suicides. It even lowers cognitive functioning. Workers with low pay end up living in a vicious cycle of poverty. We oftentimes don’t talk about pay when we talk about a good job because company leaders think it’s too expensive to pay their employees more. They tend to offer a benefit that’s a lot less expensive than make sure everybody makes a living wage.
Wilkins: That’s a perfect segue, Zeynep, to what I want to ask you next, which is: You’ve now written a terrific new book called The Case for Good Jobs. First, what’s changed in the almost decade between the first book and the second book, and second, what are the ways you answer those CEOs who say things like, “I can’t do it. It’s too expensive. The world’s too competitive”?
Ton: Since my first book came out, I cofounded the nonprofit Good Jobs Institute and we worked with dozens of companies. At every company, leaders realize that low pay is even more expensive. When pay is low, turnover is high. The direct cost of turnover is significant. We quantify this with almost every company we work with. Some companies change their entire roster every year, and the cost of turnover can range from 10 percent of payroll dollars spent annually to 45 percent. So they’re spending 10 to 45 percent of their payroll dollars on the direct cost of turnover: hiring, recruiting, onboarding, training, and time to full productivity.
But direct turnover costs are actually small compared with the bigger costs associated with inevitable poor operational execution that takes place when there’s high turnover: lower sales from mistakes and poor service, higher costs from errors and overtime, and low productivity. And those costs are still small compared with the competitive costs. Because when companies operate in a vicious cycle of low pay, high turnover, poor performance, they end up creating a low-trust, low-expectations system, which is uncompetitive because it can’t serve customers well and adapt to changes.
The good jobs strategy is about winning. What do you need to win? You need a strong team that is set up to succeed.
But most companies have never examined the full cost of low pay. When they do, the conversation quickly becomes: “Competitively, can we survive with the status quo? We are already paying for low pay. Let’s redirect those costs into higher wages and into creating a better system.” But the good jobs strategy that I talked about and I wrote about in 2014 is not just about pay. Pay is, in fact, a very small component of it. It’s necessary. Without it, nothing works, but it’s a very small component of it.
The good jobs strategy is about winning. What do you need to win? You need a strong team that is set up to succeed. So, a key part of the good jobs strategy is about investing in people so that you have that team.
But you also need to set the team up for success. The secret sauce of the good jobs strategy is a set of operational choices that increase the productivity and contribution of workers so that their work is worth the higher pay, because their work is generating a lot more value. Let me give you an example.
In a good jobs strategy company like Costco or Trader Joe’s or Mercadona, everybody makes decisions to improve the productivity of the front lines and to set them up for success. For example, let’s say they are considering a new product or a new service that could raise sales. If that new product or service slows people down and reduces service—if it makes it hard for them to do a good job, like coupons at a checkout—they won’t do it. The good jobs strategy is a system where everybody makes decisions to set the front lines up for success. It’s an operational strategy. It’s not an HR strategy.
Your last question was about what has changed during the last couple of years. First, during COVID, we realized how important people who work in places like retail, caregiving, and restaurants are for the functioning of our economy. We started calling these individuals “essential workers” because what they do is essential for our economy. These workers risked their lives, and their health, to be able to serve us. Their jobs also became more complicated during COVID, for example, in being required to help enforce mask mandates. Inflation meant higher prices, and they were the front line for upset customers. Their jobs, which were already bad, became more complicated, and we’ve seen high quit rates during the last couple of years. Quit rates had already been increasing, but it really peaked in 2022.
If companies don’t change their system for higher productivity, for higher contribution, for better jobs, then they’re going to see increases in their labor costs.
The other thing we’re seeing in the labor markets now is baby boomers are retiring and people are having fewer children. That means that the tight labor market that we have right now is going to continue for a long time. It’s much harder for companies to attract and retain talent, especially lower-wage sectors of the economy. Meanwhile, minimum wages are increasing in many states.
Given these trends, if companies don’t change their system for higher productivity, for higher contribution, for better jobs, then they’re going to see increases in their labor costs. Their cost will rise, but they’re not going to reduce employee turnover. They’re not going to have a higher productivity. After all, the job is the same job. But if they adopt the good jobs strategy now, the people that they invest in more, and pay more for, will generate more. That’s the real competitive advantage.
In The Case for Good Jobs, I provide examples of companies that adopted the good jobs strategy to significantly improve employee turnover, productivity, and competitiveness. Those companies include Sam’s Club, call centers at Quest Diagnostics, and a small restaurant chain. A one-sentence summary of The Case for Good Jobs is: the status quo with low pay and high turnover is more expensive than you think, and making system change is easier and less risky than you think.
Wilkins: This is connected to the main theme of the issue around diversity strategies. One of the arguments that people make around DEI is that if you adopted a good DEI strategy, you would increase productivity—you would take advantage of the fact that the workforce is changing, the demographics are changing. I wonder, as somebody who’s familiar with DEI, but really has been working primarily on the low-wage sector around good jobs, why would adopting a good jobs strategy also help with diversity?
DEI should include economic justice.
Ton: When I present to large groups, I sometimes ask the audience, ‘How many have a DEI committee or do work related to DEI?’ Everybody raises their hands. Then I ask them, ‘How many have conducted an assessment of the financial health of their workers?’ Very few hands, if any, go up. DEI should include economic justice. Martin Luther King Jr. always linked racial justice with economic justice. Frontline jobs are the ones where people are not making it. They’re living in that vicious cycle of poverty, and that work is disproportionately done by people of color, immigrants, women. The good jobs strategy is about elevating that work and creating high productivity so that people can have jobs with meaning and dignity and that they can be empowered to make decisions and they can move up in an organization.
There are metrics that I wish DEI efforts considered. For instance, what percentage of your frontline workers are making a living wage to be able to take care of their families? We should be measuring that—and measuring it by race and gender so we can see if there are any discrepancies between race and gender. What percentage of managers have been promoted from within, by race and gender? In the DEI space, we think about how many people of color and how many women are at the top. But how many people are we bringing up from the bottom to the middle level?
Wilkins: Another interesting connection is one of the main themes of Frank Dobbin and Alexandra Kalev’s book, Getting to Diversity, which is companies do a lot of things like diversity training, but many of the things people think are going to improve DEI don’t actually work and could actually be counterproductive. I wonder if you’ve seen parallels in the good jobs space and what we might learn from that.
Ton: There are strong parallels. When you think about DEI, issues of inequity, racism, sexism are systemic issues that require systemic solutions. An online training program that we had to take is not going to solve systemic problems. In so many organizational change programs, oftentimes the tendency is to say, “Oh, let’s just train the managers so that they can create the conditions for their front lines to do a better job.” But training is not the solution. The solution requires changing the work that people do and the investment in those people. And that requires a systemic approach. Functions in the headquarters need to make decisions differently. It’s a whole system change that’s required, and that system change requires organizational urgency and alignment around the need for that system change.
One of the things that’s surprising when we work with companies is how much people’s decisions who have nothing to do with people management have the biggest impact on the company’s ability to provide good jobs. People in logistics who are scheduling deliveries have no idea that when they don’t consider the frontline workers, they reduce productivity and make it impossible to provide higher pay and good jobs. People who are working in product design—for instance, menu design at a restaurant, when they add so many different items and make it impossible for the front lines to do their work productively—often have no idea that their decisions are having big frontline impact.
The good jobs strategy is a combination of investment in people and four operational choices: focus and simplify, standardize and empower, cross-train, and operate with slack.
Wilkins: This is a perfect segue to the last thing I want to ask you. But your emphasis on systemic change and systemic issues brings front and center our core constituency, which are lawyers. Lawyers are oftentimes the ones who are both designing systems, but also who are the breaks on systemic change. They say, “You can’t do that. It’s too risky. It’s a problem.” I wonder, in your work with the good jobs strategy, do you encounter lawyers? What advice would you have for lawyers about what they could do inside these organizations? After all, the general counsel’s office, in one way or another, is going to be sitting on top of or play a role in any decision that’s made that could affect liability, HR, or system processes. I wonder how you have encountered lawyers and what advice you would have for them around these issues.
Ton: To be honest, we haven’t encountered lawyers all that much except for one organization where it was just so difficult to make changes because everything had to go through a lengthy legal process, which was frustrating because when you have momentum, you want to be able to make changes as quickly as possible. But it took us so many months to change an attendance policy because their legal department just didn’t agree with it. Perhaps if they understood how the good jobs strategy worked even in their own system, then maybe they could have more empathy toward it.
The good jobs strategy is a combination of investment in people and four operational choices: focus and simplify, standardize and empower, cross-train, and operate with slack. Those four choices apply to many different organizations. Let’s take slack. Operate with slack means schedule more hours of labor than the expected workload so that people can do a good job, serve the customer well, come up with ideas for improving their work, have time for creativity and for problem-solving so that there’s no burnout. When I teach the good jobs strategy to executives, they oftentimes look at their teams and they realize, “We need to operate with slack.” Not having enough time is also hurting them, even though, of course, they’re all paid well, so the investment in the people part of the good jobs is there. But the operational elements that enable them to do good work and have good work-life balance and to be able to have a healthy life are oftentimes missing for higher-wage workers, too.
Wilkins: Zeynep, that is such a powerful point, and it just shows how important the lens you are looking at is. My colleague, Lani Guinier, wrote this wonderful book years ago about why you should care about diversity. She said (and I’m paraphrasing): Women and people of color are like canaries in the coal mine. What happens to them happens to them first and they’re the most vulnerable, but eventually it happens to everybody. If there’s methane gas in the mine, it doesn’t just kill the canary; it kills everyone.
The good jobs strategy you are talking about is something that we can all learn from. More than anything, you have made the case for reading your book. I hope all our readers will do so, and I hope we’ll have opportunities to engage with you on these important issues for many years to come. Thank you for taking the time.
Zeynep Ton is professor of the practice in the operations management group at MIT Sloan School of Management and president of the Good Jobs Institute. She is the author of The Good Jobs Strategy: How the Smartest Companies Invest in Employees to Lower Costs and Boost Profits (2014) and The Case for Good Jobs: How Great Companies Bring Dignity, Pay & Meaning to Everyone’s Work (2023).
David B. Wilkins is the faculty director of the Harvard Law School Center on the Legal Profession.