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BOOK/VIDEO: Zeynep Ton’s “good jobs” strategy attracts mainstream attention to four key aspects of operational excellence

VIDEO: Zeynep Ton TEDx talk at Cambridge, 2013

Ton, Zeynep. The Good Jobs Strategy: How the Smartest Companies Invest in Employees to Lower Costs and Boost Profits. N.p.: Amazon, n.d. Print.

In her book The Good Jobs Strategy, MIT Sloan Professor Zeynep Ton seeks to put a dagger in the shareholder value maximization ideology prevailing at companies today. She suggests that switching to a stakeholder, employee-centered model is not only better for inclusive prosperity,zeynep-ton-mit-06-29-11-HEADbut also better for shareholders and long-term profits as well.

Her argument is attracting mainstream attention, including a complimentary Joe Nocera column in The New York Times.

Ton explains that treating employees well leads to what she calls the virtuous cycle of retail. A high budget for labor leads to good quantity and quality of labor. This in turn allows for good execution of operations, which she defines as the process of getting products from the factory to the where customers can buy them. Good operations lead to higher profits, which in turn allow for a greater budget for labor, and so on.

Ton identifies four main companies to analyze that have entered into this virtuous cycle: Trader Joe’s, Quiktrip, Costco and UPS. This is a small but diverse sampling of companies, and accordingly they all implement the virtuous cycle in different ways. However, Ton identifies four ways in which their strategies overlap, and she calls this the “Good Jobs Strategy.”

These companies maximize operational excellence by doing four main things: offering less, standardizing operations and empowering employees, cross-training employees, and erring on the side of overstaffing, not understaffing.

By offering less, companies are able to lower costs and increase efficiency. Having fewer choices also allows employees to better know the company’s products. Standardizing also increases efficiency, but it is most effective when paired with empowering employees. Empowered employees can use their judgment in certain scenarios and contribute to improvement of operations through innovative ideas. Cross-training employees to perform different tasks allows for the tasks that are being performed, not the employees’ schedules, to be the thing that changes depending on labor demand. In this way, employees’ working hours can remain stable, leading to happier employees that better contribute to the virtuous cycle.   Lastly, companies engaged in the good jobs strategy know that it is better to lose costs in overstaffing than in understaffing. This is because overstaffing costs are easily calculated and short-term, whereas the cost of understaffing may not felt at first but can dangerously build up over time.  Poor customer service and operational weakness can lead to long-term customer loss.

Ton’s good job strategy companies are extremely profitable and successful. They stand as powerful evidence for Ton’s radical idea that shareholder value maximization isn’t the actually the best way to get the most value for shareholders. Instead, there is a way not only increases profits for shareholders, but for all stakeholders – “the Good Jobs Strategy.”

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