Magazine article The Wilson Quarterly

Ringing Up Better Pay

Magazine article The Wilson Quarterly

Ringing Up Better Pay

Article excerpt

THE SOURCE: "Why 'Good Jobs' Are Good for Retailers" by Zeynep Ton, in Harvard Business Review, Jan.-Feb. 2012.

CASHIERS HAVE TO BE SKILLED at counting nickels and dimes for more than one reason: They brought home less than $20,000 in pay on average in 2010--if they were lucky enough to work 40 hours a week. Cutting hours and workers is one of the first steps many retailers take when sales slow.

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Some retailers have bucked this trend, however, while still managing to offer low prices, good customer service, and impressive financial returns. What's their secret?

Zeynep Ton, an operations management specialist at MIT's Sloan School of Management, studied four highly successful retail businesses: Costco, the retail giant; the specialty grocery chain Trader Joe's; the convenience store line QuikTrip; and Mercadona, the Spanish supermarket chain.

Common to all is what Ton calls a "virtuous cycle" of success, which begins when a store opens with adequate numbers of decently paid staff. Starting wages at Trader Joe's amount to $40,000 a year, and Costco pays about 40 percent more than its leading rival, Sam's Club. Mercadona hires all staff on a permanent basis. Coupled with generous pay are training and promotion opportunities that give employees a way to see a future for themselves. Not surprisingly, these chains' stores boast some of the lowest turnover rates in the industry. "Investment in employees allows for excellent operational execution, which boosts sales and profits, which allows for a larger labor budget, which results in even more investment in store employees," Ton explains. …

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