Treating Employees Well is Good for Business

At a recent trip to my local supermarket, where I have shopped for over 28 years, I was pleased to see the cashier respectfully ask the elderly customer in front of me if she wanted a drive up after she asked him for two 40 pound bags of salt.  Initially, she declined the offer.  The cashier then asked her if she would like him to put these heavy bags of salt on top of the cart, instead of the bottom, and she accepted that suggestion. He could have stopped there, but after he finished checking her out and gave her the receipt for her groceries, he asked her one more time if she would like a drive up, informing her that it was no trouble.  Looking at her multiple bags of groceries and the heavy bags of salt, she finally accepted his offer.

This interchange was so kind and respectful that I told the cashier that it really pleased me to see.  His reply was that he had been working at the supermarket for 28 years and they give him stock in the company, so he wants to see it do well.  I remarked that I had noticed many employees who have worked there for the nearly 30 years and wondered if it was because it was a good place to work, and he replied that it was.

Perhaps the most famous example of how treating employees well is good for business is Costco, which pays better than average wages and therefore attracts a high volume of applicants for every available position, allowing it to choose the best possible employees.  Indeed, management spends no money on recruiting employees due to Costco‘s well known reputation for treating its employees well.  The company provides generous raises in order to retain its employees as it understands that employee turnover is costly and bad for business.  Indeed, it goes one step further and trains entry level employees for eventual management level positions as it realizes that the best managers understand how the whole store operates from the bottom up.  A remarkable 68% of warehouse managers started as hourly employees.  Costco’s 1st year employee turnover is only 6%, one of the lowest in the industry.

As reported in the 2010 in the Ivey Business Journal,

Costco had higher annual sales per square foot than its most direct competitor, Wal-Mart’s Sam’s Club,  ($795 versus $516), and higher annual profits per employee ($13,647 versus $11,039) even though Costco’s average wage was 42 percent higher. Over 16 years, Costco grew from 206 warehouses and $16 billion in sales to 554 warehouses and $69.9 billion in sales.

Of course there are other ways of treating employees well, including profit-sharing,  and including all employees in decision making using open book management practices.  A Canadian packing-supplies manufacturer, Great Little Box Company uses these tools and has achieved outstanding results.  Per the Ivey Business Journal

Great Little Box has reaped substantial gains from the policies that fueled employee input. Over the past decade, sales have doubled from $17M to $35M.  During the past seven years the company’s success has enabled it to purchase the assets of six companies. Two more acquisitions are pending.

Business authors and researchers Jody Heymann and Magda Barrera conclude their report with the following excellent common sense suggestions for business leaders.

1. Understand who performs the majority of the essential work. At professional services firms, this may be lawyers or paralegals; in surgical clinics, this could include surgeons, nurses, technicians, paramedics, and individuals preparing the operating room; and in manufacturing, those working on the factory floor clearly carry out most of the essential work.

2. Realize that the firms’ success depends on the quality of the work performed by the majority of workers. Remarkably, few firms currently design their organizations to optimize the efforts of employees at the bottom of the corporate ladder—even when these employees are central to the firms’ ability to add value. At Costco, the sales staff was instrumental in ensuring the high-quality shopping experience that would draw customers to return. At Great Little Box, the company beat competitors because of its ability to respond rapidly to customized orders.

3. Recognize that the quality and productivity of employees at the bottom of the ladder depend on whether these employees are motivated, healthy, adequately rested, and well-prepared to carry out the tasks they are asked to perform.Employees at Costco were motivated to work harder and perform better by a combination of higher wages and opportunities for promotions. Great Little Box employees had a direct financial stake in the company’s performance.

4. Realize that line workers are often the ones who know best how to increase efficiency. Great Little Box benefited from suggestions from line workers that led to cost savings and greater flexibility in production. Managers at Costco had a better understanding of how to improve production because most had served as hourly workers.

For more information on how I can help you accomplish effective, progressive systems change e-mail Jeff Spitzer-Resnick or visit Systems Change Consulting.


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