The Case for Good Jobs and How Great Companies Bring Dignity, Pay & Meaning to Work – A Conversation with MIT Professor, Zeynep Ton.

The Case for Good Jobs and How Great Companies Bring Dignity, Pay & Meaning to Work – A Conversation with MIT Professor, Zeynep Ton.

Professor Zeynep Ton is the driving force behind the Good Jobs movement. She’s a leading advocate for excellence in leadership and the creation of ‘good jobs’ – those that offer a decent wage, dignity, and room for career advancement. She is the author of The Case for Good Jobs and The Good Jobs Strategy.

Employees are crying out for ‘good jobs,’ and many business leaders genuinely want to provide them. But there’s a catch-22 – they believe that offering better pay and more engaging work will harm profits. They want to win with customers, but service and operational issues, largely caused by high employee turnover due to low wages, are pulling them down. This destructive cycle is where Zeynep Ton steps in. She believes in the power of good jobs combined with robust operations to boost productivity and make businesses more competitive. In an increasingly tight labor market, failing to offer good jobs can harm your business, and Ton is here to guide you out of that danger zone. As the president of the Good Jobs Institute and a leading academic in this field, Ton has helped numerous business leaders implement a good jobs system. Her hands-on experience working with frontline workers and managers gives her a unique insight into the challenges that keep businesses stuck in mediocrity. Implementing a good jobs system, she argues, not only makes businesses more resilient and competitive, but also helps them attract and retain dedicated employees and loyal customers. Stay tuned as we delve deeper into Ton’s insights and strategies.

In this interview I speak to MIT Sloan Professor, Zeynep Ton. We discuss the need for a fundamental rethink on the nature of today’s jobs, and how adopting ‘Good Jobs’ can make our businesses more profitable and improve millions of lives in the process.

Q:  What’s wrong with jobs today?

[Zeynep Ton]: Your point about the state of work, particularly as it applies to the average American citizen, is eloquently made. For four decades, real wages for Americans haven’t experienced any significant growth. Prior to the pandemic, it was reported by the Brookings Institute that 53 million Americans were trapped in low wage jobs, where their earnings failed to adequately cover their needs.

This situation, by its very nature, presents a grave issue, not just for the affected individuals, but also for the broader society. Workers enduring low wages often find themselves trapped in a relentless cycle of poverty. This cyclical deprivation extends beyond monetary constraints, manifesting in heightened levels of stress, health concerns, and impaired cognitive functioning. These factors invariably decrease their capacity to focus and perform on the job, further perpetuating their plight.

Simultaneously, low wages are a costly affair for companies as well. My research over the years has made it clear that companies pay a high price for maintaining low wages, primarily in the form of employee turnover. This turnover can account for 10-25% of a company’s total expenses, in relation to payroll in a common setup, with some cases even witnessing figures as high as 45%.

But it’s not just the turnover costs we should be concerned about – hiring, onboarding, training, and the loss of productivity. These factors, substantial as they are, pale in comparison to the operational errors, lost sales, increased product costs, and reduced productivity that result from an inexperienced and demotivated workforce. These costs are further dwarfed by the competitive implications.

Consequently, from the workers’ perspective, the low wages are untenable; they simply cannot sustain a reasonable standard of living. From the company’s perspective, they’re paying a heavy price for the associated issues of maintaining low wages. The dual-fronted challenge is as much a social issue as it is a corporate one.

[Vikas: does this link to de-industrialisation?]

[Zeynep Ton]: Henry Ford is often attributed with the remark, ‘Why do I need a whole person when all I need is a pair of hands?’ While this is not an exact quote, it encapsulates the mentality prevalent in many businesses. However, I believe we’ve grown to better understand the importance of human ingenuity and the value of harnessing human potential in the workplace.

Most business leaders innately understand that success hinges on a well-equipped, capable team. Despite this, many find themselves hesitant or unable to afford such a team across varied settings. This hesitation stems from the longstanding belief that labor is just another component of production, that market pay equates to fair pay, and that efficiency is achieved through a lean and mean approach. Such paradigms often lead decision-makers to prioritise data in spreadsheets over their workforce.

This pattern of thinking, unfortunately, has bred a considerable amount of mediocrity within businesses. It’s time to reassess these beliefs to fully leverage human potential, transforming not only our businesses but also the lives of those who contribute to their success.

Q: What is a good job?

[Zeynep Ton]: Firstly, pay has to be high enough to give people agency in their own lives and secondly, humans have to be treated like humans. Those are the minimum conditions for good jobs – there also needs to be a career path that enables people to learn and grow in their jobs. When pay is low, and turnover is high, you end up designing a system that doesn’t treat people with dignity – as humans – but rather, you are treating them as a pair of hands.

Q: How can focus and simplification enable good jobs?

[Zeynep Ton]:  For leaders who have either founded companies with this mindset or made recent changes, their initial motivation isn’t necessarily a keenness to offer jobs, albeit this remains significant. Their starting point hinges on a single, fundamental desire – to triumph in serving their customers. For this to occur, they must represent something distinctive, something that creates a unique bond with their customers. They must devise a strategy, understanding that trying to be everything to everyone is not strategically viable.

This concept of focusing on a certain area, of selecting specific elements to distinguish your business in the eyes of your customers, is fundamental. Determining what your business excels at and what it is prepared to relinquish is key. In conjunction, simplification plays a vital role in preventing frontline employees from being overwhelmed, thus setting them up for success and improved customer service.

However, the linchpin remains the customer. The drive to generate value for them informs the decision to focus and simplify, ultimately enabling your employees to prosper. Let’s consider an example: A company decides to offer fewer products and services. This may seem counterintuitive at first – wouldn’t it limit options for customers? But, research demonstrates that this can actually enhance customer satisfaction. Fewer products and services allow employees to achieve mastery more easily, boosting their productivity. As they become more productive, the company can afford to remunerate them better, reducing turnover and enhancing customer service even further.

Thus, the various aspects work together in a synergistic manner, creating a system that is highly focused on customer satisfaction. It’s about understanding that all elements – focus, simplification, customer value, employee success – are intrinsically connected and function best when optimised together.

Q: How can standardisation enable good jobs?

[Zeynep Ton]:  Absolutely, this approach is effective across various industries, from luxury establishments like Four Seasons hotels to manufacturing powerhouses like Toyota. We all have cognitive limitations – there’s only so much we can focus on at a time. Hence, it’s beneficial to standardise all aspects that can efficiently run on autopilot, eliminating the need for constant reconsideration.

Simultaneously, it’s crucial to empower your employees not just to enhance these standards, but also to resolve customer issues and drive customer satisfaction and sales. This combination – standardisation and empowerment – forms a potent blend in job design.

Often, companies struggling with high turnover rates tend to overemphasise standardisation and neglect the vital role of empowerment. Standardisation devoid of empowerment can rob individuals of their dignity and prove counterproductive. It’s the balance between the two that brings about optimal results.

Q:  Why is slack important; it strikes fear in the hearts of many industrial business leaders!?

[Zeynep Ton]: Top-tier companies, Toyota being a prime example known for its operational excellence, are well-acquainted with the value of slack. A fundamental lesson taught to MIT Sloan students in operations classes is that in any system with variability, it’s not ideal to operate at 100% capacity utilisation. This is due to the simple fact that things can and will go awry, especially in service businesses that inherently possess a significant amount of variability.

In order to effectively cater to customers, mitigate errors, hire the right talent, and allot time for improvements, it’s essential to maintain a staffing level that exceeds the anticipated workload. There can be no continuous improvement in an industrial setting if there is no time allotted for it. In our personal lives, we’ve all experienced the stress and burnout that can arise from operating without any slack. Conversely, when we operate with an adequate amount of slack, we become markedly more productive and creative.

The same principle holds true on the front lines of business. However, it’s important to note that operating with slack is only feasible if there aren’t any slackers on the team. This brings us back to the idea that this isn’t simply a list of standalone options but a system where all components work in synergy. Among the key enablers of slack are the principles of focus and simplification. By simplifying processes and reducing workload variability, you create space for tasks that genuinely matter.

Q: How can we make cross-training work, and why must we? 

[Zeynep Ton]: Cross-training stands as a key mechanism to balance mastery and specialisation with flexibility and motivation. In a setting where you encounter a diverse range of customers, maintaining some level of flexibility becomes paramount. Even a touch of cross-training can significantly enhance this flexibility, enabling you to address customer needs more effectively.

However, this doesn’t mean that you should cross-train every employee in every task. Such an approach would invariably lead to mediocrity. Instead, a measured dose of cross-training allows team members to step in for one another during busy periods or absences, and to respond to shifting customer demands.

Cross-training, even in small doses, yields significant benefits in terms of flexibility. Furthermore, despite the importance of specialisation, doing the exact same task repeatedly can become monotonous. Research spanning decades has demonstrated that cross-training also serves as a motivational tool for employees, imbuing their work with greater meaning and diversity.

Q: How can we operationalise these changes?

[Zeynep Ton]: Greg Foran, the former CEO of Walmart USA, read my first book “The Good Job Strategy” and found it to be strikingly clear and evident. As he put it, the book’s four pillars and the emphasis on valuing people were “blindingly obvious.” These principles have been recognised as good practices for a long time. I didn’t invent them; I merely observed them and created a framework around them.

So, how does one realise these truths? That’s a valid question. We conduct two-day workshops within organisations, introducing them to the Good Job Strategy. In these sessions, about 30-40 cross-sectional representatives from the organisation quickly identify the systemic issues they face. This process isn’t overly complex. By fostering open discussions, particularly with frontline staff, they can discern what’s going wrong and devise strategies to overcome these challenges.

The trickier aspect lies in implementing these diverse changes. It’s not about making numerous disjointed adjustments, but rather executing one or two changes that effect systemic transformation. This is the challenging part. We’ve never had companies struggle with the realisation that change is needed. However, they often find themselves overwhelmed by the multitude of necessary alterations, asking questions like, “How do we tackle this colossal task?” or “How do we justify the need for change?” Overcoming these hurdles forms the more complex part of the adoption process.

Over the past seven years, I’ve been privileged to engage with numerous business leaders and I’ve been continually struck by their desire to make ethical decisions. Contrary to some narratives you might hear in political circles or from NGOs, CEOs and executives aren’t universally driven by greed or fixated solely on their financial gains. They genuinely care about their reputation and strive to do the right thing.

However, they operate in highly competitive industries, often making decisions amid uncertainty, facing intense competition, and dealing with numerous constraints. It’s not that these leaders have malicious intent, it’s often simply that they’re not fully informed. Investment in people is often perceived as less credible or legitimate than investment in technology or equipment.

If I were a business leader with a decreasing tenure, as is the trend for CEOs today, I might choose to pursue what appears to be the simpler course of action, not out of any nefarious motive, but because it seems more feasible in the current climate.

Q: To create good jobs, it seems we need to think much more widely about our stakeholder group?

[Zeynep Ton]: The workload that employees handle is dictated by numerous functions and departments within an organisation – ones that might not realise their impact on people, strategy, product design, or logistics. These entities make decisions that significantly influence frontline workers’ ability to serve customers, be productive, and consequently earn an adequate income.

When we conduct workshops, we gather representatives from these varied departments and discuss the necessity of altering the perceptions of these upstream functions. This includes not just HR, but also operations, logistics, product design, strategy, marketing, and finance. It’s the decisions made by these departments that truly drive the organisations direction.

That’s why companies that aim merely to provide good jobs struggle to implement systemic change. The ones who have succeeded are those who recognise that this change is integral to their survival and growth. If they don’t adapt, they risk losing out to their customers and stunting their growth – it’s an existential crisis. Embracing a holistic system is paramount to survive and grow, and this realisation empowers them to implement comprehensive changes.

Q: Have you seen practical success stories from applying the Good Jobs methodology?

[Zeynep Ton]: Success stories of implementing this strategy span a broad range, from a $60 billion retailer to the owners of two niche restaurants, and even the call centres of a major public company. Quest Diagnostics implemented this approach in their call centres, Sam’s Club, a $60 billion retailer, integrated it into their stores, and Moe’s Original BBQ incorporated it across their restaurant chain. The scale of these businesses varies widely, yet they all share common outcomes.

Three primary results have been observed: 1) a decrease in employee turnover, ranging from 25% to an impressive 60%, 2) a significant boost in customer satisfaction and sales, and 3) a substantial increase in productivity. These outcomes speak volumes about the effectiveness of the strategy.

There is, however, another equally important but less quantifiable result – the provision of jobs that pay a living wage, granting employees dignity and respect. While difficult to measure, this aspect has a profound impact on these companies, allowing them to positively influence the lives of their workforce and, by extension, their customers.

Indeed, our primary focus tends to revolve around pay, stable schedules, career progression, and respect. Making a job more meaningful isn’t usually a challenging task. By nature, cross-training provides a sense of purpose, and the direct impact an employee has on customers fuels that sense of meaningfulness.

However, the type of jobs we’re discussing require us to address people’s basic needs first and foremost. If we fail to meet these fundamental requirements, we can’t possibly hope to create a meaningful job environment. Hence, our initial point of emphasis isn’t necessarily on making jobs meaningful, but ensuring they provide sufficient pay—enough to create middle-class jobs that people can depend on for their livelihoods.

Q: Do business leaders need to engage more politically?

[Zeynep Ton]: Business leaders are part of a system, and if we could structure that system such that adopting a good jobs strategy becomes more of the norm, or it becomes costlier not to adopt such a system, that would indeed be fantastic. Potential strategies could involve implementing a higher minimum wage, enacting stable scheduling laws, maybe even providing incentives for employee investment, and promoting transparency in pay. These are all measures that could be addressed through policy.

However, it’s crucial to remember that business leaders also have choices within their system. Offering good jobs is not only just as profitable as the alternative, it also comes with a plethora of benefits. Thus, it’s my hope that more business leaders will opt for a strategy that promotes good jobs rather than choosing the alternative.

Q: How do shareholders respond to Good Jobs methodologies?

[Zeynep Ton]: While it’s true that shareholders can vary in their perspectives, it’s important to recognise that not all are exclusively focused on short-term gains. In fact, many adopt a long-term view. We often overemphasise the notion that shareholders are predominantly concerned with short-term returns, yet I’ve observed small, private companies also grappling with considerable short-term pressures. The challenge lies not in disregarding the short term completely, but rather in maintaining a long-term outlook whilst concurrently meeting short-term obligations as far as possible.

The primary focus should always be on the customer and on building a sustainable business over the long term. Companies like Costco, one of the world’s largest retailers, and Toyota, are both public entities and have been successful in adopting this perspective. Four Seasons, which used to be publicly traded and is now owned by Bill Gates, also fits into this category. Sam’s Club, a substantial public company, provides another example.

Undoubtedly, these organisations are subject to greater scrutiny, and yes, there are short-term shareholders. But it’s crucial to remember that long-term shareholders exist too.

Q: What does legacy mean to you?

[Zeynep Ton]: To be candid, the concept of my personal legacy doesn’t often occupy my thoughts. Rather, I place my focus on the collective goals we’re pursuing at the Good Jobs Institute. Our team is dedicated to the mission of enhancing 10 million jobs in the United States by 2027, and we might soon extend our efforts to UK companies as well.

Furthermore, I hope to bring up children who make positive contributions to society, and I’m inspired by the potential of my students to create significant impact in the world based on what they’ve learned. Ultimately, my desire is to leave the world a bit better than I found it, rather than being primarily concerned with how I’ll be remembered.

Thought Economics

About the Author

Vikas Shah MBE DL is an entrepreneur, investor & philanthropist. He is CEO of Swiscot Group alongside being a venture-investor in a number of businesses internationally. He is a Non-Executive Board Member of the UK Government’s Department for Business, Energy & Industrial Strategy and a Non-Executive Director of the Solicitors Regulation Authority. Vikas was awarded an MBE for Services to Business and the Economy in Her Majesty the Queen’s 2018 New Year’s Honours List and in 2021 became a Deputy Lieutenant of the Greater Manchester Lieutenancy. He is an Honorary Professor of Business at The Alliance Business School, University of Manchester and Visiting Professors at the MIT Sloan Lisbon MBA.