Interview With Prof. Zeynep Ton On “The Case For Good Jobs”

42
0
LBI Prof. Zeynep Ton | Good Jobs

Joining us for Episode #477 of the Lean Blog Interviews Podcast is Zeynep Ton. She is a professor of the practice at the MIT Sloan School of Management. Previously, she was on the faculty of the Harvard Business School. Ton received numerous awards for teaching excellence at both schools.

She was previously a guest in Episode 228 in 2015, discussing her first book The Good Jobs Strategy. Her new book, released in June, is The Case for Good Jobs: How Great Companies Bring Dignity, Pay, and Meaning to Everyone's Work.

In today's episode, we discuss what's meant by “good jobs” — and how it's not just about compensation. What are good jobs and what's the case for them, in both human and financial terms? Among other topics, we discuss how it's a system, the “good jobs system,” and there is risk in trying to just copy a piece or two that sounds good (which reminds us both of issues around adoption of the Toyota Production System).

Questions, Notes, and Highlights:

  • What are “good jobs”?
  • Has this definition evolved at all?
  • “Operate with slack”
  • Nursing shortages — the effect of not operating with slack
  • Improving call center jobs — reducing the need for calls to begin with
  • HBR piece — mental models of customer-centric vs. financial-centric
  • The new book — “the case” for good jobs?
  • Benefits of lower turnover
  • Simple thinking vs. systems thinking — 2% margin business “can't afford” higher wages… or can't afford NOT to?
  • 5 Corporate Disabilities when you have high turnover
  • Tight labor markets — a greater need for companies to adopt “the good jobs strategy” or at least some practices?
  • Sam's Club — competitive pressure to catch up or emulate Costco?
  • The good jobs SYSTEM — risk of copying just one piece, such as higher pay?
  • Cost of Poor Quality vs. Cost of Bad Jobs — not on the financial statements
  • Operational Indifference… vs operational excellence
  • “There's a grave disconnect between what's happening on the front lines and what executives think is happening.”
  • Finding balance? “standardizing processes when that makes sense and empowering employees to help customers”
  • Obstacles to creating good jobs? The logical evidence-based case to be made vs. habits and beliefs of executives (mental models)?
  • “Many leaders don't even consider frontline work critical to company performance.”
  • Cost-benefit analysis — easy to calculate the cost of higher pay… predicting the benefits is seen as a leap of faith?

The podcast is sponsored by Stiles Associates, now in its 30th year of business. They are the go-to Lean recruiting firm serving the manufacturing, private equity, and healthcare industries. Learn more.

This podcast is part of the #LeanCommunicators network.



Watch the episode here


Listen to the podcast here


Interview With Prof. Zeynep Ton On “The Case For Good Jobs”

LBI Prof. Zeynep Ton | Good Jobs

Our guest is Zeynep Ton. She's a professor at the MIT Sloan School of Management and the author of a new book, The Case For Good Jobs. You'll know more about her background and her previous appearance here on the show.

My guest is a returning guest. Zeynep Ton is a professor of the practice at MIT Sloan School of Management. Previously, she was on the faculty of the Harvard Business School. She has received numerous awards for teaching excellence at both schools. She was previously a guest in Episode 228 in 2015. We discussed her first book then, The Good Jobs Strategy, and she has a new book released called The Case For Good Jobs: How Great Companies Bring Dignity, Pay, And Meaning To Everyone's Work. Zeynep, thank you for being back here. It's great to see you again. How are you?

Thank you so much for having me. I can't believe from 228th episode, where are we now?

Four hundred eighty.

Congratulations on having such a successful show and numerous books.

Thank you. Congratulations on the release of your latest book. There's a lot to dig into and to ask about what you've learned and what companies are doing since the publication of the first book, which made a compelling case for good jobs, and that's the title of the second book. For people who aren't familiar, if they didn't read the first episode, not to repeat the whole episode, but how would you summarize first what good jobs means?

I can maybe give a quick summary of what was included in that first book. I'm from the operations management world. I started doing my research looking at retail supply chains. I was focused on retail as an industry. In that particular industry, I saw two different approaches to profitability. The very dominant approach was to see employees as a cost to be minimized.

Constantly focusing on low pay for as few people as possible, getting as much work done as possible, and that emphasis on low investment in people resulted in high turnover, which then resulted in many operational problems, which of course, then hurt sales and profitability, which then made it very difficult to invest in people then this vicious cycle continued. That was the dominant approach.

There was another approach which was to see employees not as a cost but as real human beings who can drive performance, profitability and growth and invest heavily in them. These companies, because they invested heavily in their employees, operated in a vicious cycle of low turnover, strong operational performance, strong sales and profitability, which then allowed them to invest further in their employees, but this vicious cycle didn't work on its own. When I examined these companies, they were Costco, QuikTrip, gas stations, Trader Joe's, and a Spanish retailer. I found that the key to their success was a set of operational choices and designs that increased the productivity and contribution of their employees.

When that first book came out, I expected pushback from a lot of executives saying, “That's not true. We can't afford to pay more. We can't do this and that,” instead, what I got, which was a hugely pleasant surprise to me was many leaders reached out from largest companies to dog walking businesses saying, “That vicious cycle you described, that's us. We want to get out. The other system yet that you described, we believe that's a better system, and we want to get there,” but they felt like they were trapped.

They didn't know how to make a case for it and how to implement system change. I wrote the second book. Since then, I started a nonprofit called Good Jobs Institute. We work with more than two dozen companies in a wide range of industries. One of our advisors is Jamie Bonini from Toyota. Your readers might find that interesting because I'm an operations person, so I have roots in TPS. This book tells what we learned at Good Jobs Institute.

Before we talk more about trying to make that case and drive system change, first off, I was wondering, has the definition of good jobs evolved or is it still pretty consistent with what the principles and practices are in that system?

It hasn't evolved. When I studied low-cost retailers and found those four operational choices that enabled this high-performance system, I called them to focus, simplify, standardize, and empower cross-train and operate with slack. I started seeing that they apply outside retail. We've seen them work at call centers, senior living facilities, restaurants or pest control. There is so much wider range of context. This is something that I've learned since the first book came out.

In particular, as industrial engineers, we start thinking about queuing theory and operating with slack, like how necessary that is. If you think of factory flow in machines and what Toyota would teach us. Not the goal is not to keep every machine 100% utilized. You need to be on flow. You need to have slack and the same thing. Tell us more about how that applies to people or in different types of jobs. Why it's misleading if people think, “100% utilization should be the goal?”

First, if you don't want your machines to be 100% utilized because they need maintenance, this and that, imagine your people. We need even more. If you remember your queuing theory, the more variability there is in your system, the more slack you need. My world is largely service operations, and in the world of services, there is much variability that comes from your customers.

LBI Prof. Zeynep Ton | Good Jobs
Good Jobs: If you don't want your machines to be 100% utilized because they need maintenance, imagine your people. We need even more.

What I have also found is that because these companies are not truly operations focused, they have a ton of self-inflicted variability too, which makes the slack even more important. When humans do not have slack, they make mistakes. They are burned out, have anxiety and quit. Their managers quit. They can process an improvement. They can be involved in improvement.

There are all sorts of costs associated with it. You mentioned how this is obvious to someone who studied operations or studied Toyota. One of the leaders who reached out to me after the first book came out was Greg Foran, who was at the time the CEO of Walmart USA and is now the CEO of Air New Zealand. He had an interview with Howard Business Review. When he was referring to The Good Jobs Strategy, he said, “It's blindingly obvious.” These things: operate with slack, standardize, and empower, I didn't invent these things. They've been around as best practices for decades.

I managed to graduate from MIT Sloan without taking any Finance courses, which was surprising to a lot of my classmates. A lot of people can graduate without getting deep into operations or queuing theories. It may be blindingly obvious, but people, it seems like, don't get exposed to a lot of these concepts. I've found that's particularly true in healthcare if we remove even the MBA question out of it. People aren't taught these things, and there are other disciplines.

At the same time, what they're taught is, “You pay market pay.” When you look at your employees, what is right is to treat them as any other input to your production and pay market rates. One of the things I've learned about Good Job is how important pay is. I wish I talked about it even more in the first book because pay alone doesn't make a job a good job, but when you don't make enough, and you don't have agency in your life, nothing else works.

We've seen people working multiple jobs. We've seen people who are constantly thinking about, “Do I put food on the table? Can I take my child to the doctor when she is sick? I don't have enough money. I can't pay my rent. I can't pay this or that.” They're constantly thinking about money. That creates stress. That stress hurts their physical health, it hurts them mentally, it lowers their cognitive functioning, and then these workers can't perform very well. There's a ton of research that shows how low pay drives more mistakes and lower productivity. Workers find themselves in a vicious cycle of poverty. Low pay causes per performance, and then poor performance means they can't get out of prepay. That vicious cycle was striking.

Low pay drives more mistakes and lower productivity. Click To Tweet

That vicious cycle is often there, unfortunately, in healthcare organizations. I don't want to take necessarily the whole conversation to healthcare, but I can't help doing that, having done a lot of work in healthcare for many years. First off, before coming back to pay, agency, engagement and respect or dignity, the question of slack.

People in healthcare on one side will say correctly, “We are not an assembly line. We're not trying to turn you into a factory. We're trying to help you be a better hospital.” They'll say, also true, “We have so much more variation,” as you pointed out, but then they'll say, “We want these beds, the MRI machine and everything to be 100% utilized.” Your point about their increased variation, the need for slack in healthcare is so much higher. Have you been able to open people's eyes to that in healthcare?

You wonder why there's a nurse shortage. It's not because there aren't enough nurses. It's because we nurses are not willing to work under those conditions where they can't take care of their patients. We worked with a few senior living organizations. That's the closest that I got to healthcare. I saw the effect of not operating with slack in devastating ways.

What is difficult is many of these organizations are run like businesses. The reason I say that is because they look at spreadsheets and make decisions based on looking at spreadsheets. You might say, “You don't have enough nurses,” but the leaders of these organizations might say, “We're looking at our numbers and workload. We have more than enough nurses. In fact, we do have some slack.”

The reality is they don't have any idea how much workload there is and how much more people might need time to be able to take care of patients. I've seen caregivers who want to do a good job not being able to take a resident to the bathroom for 45 minutes. These are older people who are the most vulnerable in these senior living facilities. When you're understaffed, yes, you are looking at your numbers. You can see that. Maybe it doesn't make sense to add more labor, but when you look at what is happening to people, caregivers, and residents, this situation is terrible.

It is in a lot of settings, and there are a couple of things that come to mind when you talk about spreadsheets. From what I've seen and hear from people, it seems that staffing levels are more likely to be set by some benchmark comparison than based on knowing and understanding. As an industrial engineer, I have my bias of, “You need to understand the actual work.” How long does it take to do it well and to look at variation?

I think of one example we went through and listed out all of the tasks a nurse and an inpatient hospital were supposed to do in 1 hour, and it was 80 minutes' worth of work, and then it's putting the nurses in an unfair position of, “Now you decide which tasks you're going to skip.” If they guess wrong and there's a bad outcome, they get blamed, which is unfair.

Those models underestimate the amount or average workload but also the variability in workload. They think that the variability is a lot tighter than it is. When you have more variability, you require more slack in your system. What we advise companies to do is if they don't feel like they can increase staffing levels, we say, “Take out all that unnecessary, wasteful work from the front lines.”

LBI Prof. Zeynep Ton | Good Jobs
Good Jobs: When you have more variability, you require more slack in your system. If you don't feel like you can increase staffing levels, then take out all that unnecessary, wasteful work from the front lines.

In so many settings, including senior living, we have seen the front lines to be bombarded by many requests from the home office. Finance, HR, logistics and merchandising asked them to do something. The workload on the front lines is much higher than anyone had ever estimated. We say, “Be customer-centered and ask yourself which of these tasks don't add any value to the customer and make your employee's life difficult?'”

To move away from healthcare a little bit, we've seen instances in retail, for example, or a merchant we'll say, “I want you to create this display,” and then the next day, ask them to redo that display. The workload calculations do not take into account that extra work. By the way, that's not even an extra workload, but it's demoralizing when your work is wasted that way. I said one of the most powerful ways is subtracting workload variability as much as possible. Oftentimes, the best way to do this is to involve upstream functions in product design, marketing, sales, logistics, etc.

There was one upstream example, an interview that I read that you did about the book looking at call centers. There's the opportunity to make sure you've got the right staffing level, that there's enough slack for the sake of customer service, call waiting times, and not stressing out employees who are getting yelled at by people who've been waiting too long. There's that element of it, but then there's this question of this might be the upstream you're referring to going and addressing some of the reasons why customers are having to call to begin with. Can you share an example of that dynamic?

The reason that this example gets to me is because of how little many companies prioritize operations and operational excellence. There are some upstream fixes that could be implemented that improve the life of workers, customer satisfaction, and improve productivity. People are aware of these problems. No one does anything about them because that's not a priority for these businesses. They have many other things that get in the way.

In one company that we work with, close to a third of the calls came because of mistakes in billing. Fixing this would've substantially reduced the workload. Fixing this would substantially improve the customer experience, and it would've enabled the company to pay their workers a living wage because when you increase productivity, now you can also pay people more. It was such a low-hanging fruit. It never got done because it was never prioritized.

I was thinking of an interview. It was an excerpt from your book that was in Harvard Business Review. It was somewhere between sobering and disheartening, your assessment of how little attention executives pay to the frontline work or their perception of how that doesn't matter for company performance. It seems like that's back to two different mental models of workers as a cost versus workers as someone a partner and invests in. There's a different mental model of saying, “The frontline work is everything,” versus thinking somehow, “The frontline work isn't worth looking at.”

If you start as a higher level, the mental models are between being customer-centric and financial-centric. Financial-centric is, “I want to improve sales. I want to improve profitability. I'll do whatever it takes.” Customer-centric is, “I want to win by constantly improving the value and service that I offer to my customers.” Once you have that as your compass and say, “That's my ultimate objective,” then you don't want to live with high turnover. You want to prioritize operational excellence and invest in your people.

If that's not your mental model and your mental model is, “I'm going to increase sales and profitability, whichever way it is possible,” then you can buy other companies, add more products and services, open more units. Many companies do live with operational mediocrity. As an operations person, this is disheartening to me.

There's that same battle or struggle in healthcare. Is it patient-centric, staff-centric at the same time, or financial-centric? There are a lot of people who you read stories about, people who get burned out and decide to leave healthcare. I heard that sometimes healthcare executives are dismissive about, “Our nurses will leave for $0.25 an hour more.” I don't know if that's why.

I believe that because we've seen this in company after company. This is why pay is important. If you don't make enough money to take care of your family, then high turnover is guaranteed. Just paying enough doesn't make the job a good job. If you're a nurse and you can't take care of your patient, then, of course, that's not a good job. If you find something that pays the same, but better work, you'll go someplace else. I wouldn't be surprised with that because I've seen many examples, not in the healthcare setting, outside nursing homes and senior living, but in many other contexts.

Going back to the subtitle of your new book here, when you talk about dignity, pay, and meaning in whatever order that needing all of those healthcare has inherently high meaning, hopefully, has high dignity and good enough pay. There's a difference between somebody looking for the difference between $9.25 an hour and $15 an hour, if that's even a living wage, depending on where they are, versus a nurse with a difference that might be incrementally small from $35 to $25. I've talked to executives in healthcare, and they're doing a great job in reducing turnover. They're not looking to underpay people, but I think they're realizing that when there's dignity and the ability to provide care the way they want to provide care, they're not looking to leave.

If I could put a more holistic subtitle, it would've included respect and opportunity for success like Thriving In Front Of Your Customer Or Patient All The Time. I put them all into meaning and dignity.

In making The Case For Good Jobs, you've mentioned, in particular lower turnover. In healthcare, in particular, the cost of turnover is extremely high, and there's a great business case to be made. There seems to be a difference between MIT and the thinking system and system dynamics. Some of this doesn't seem like the world's most complicated system dynamics model, comparing systems thinking to simple thinking. As you write about, a retailer only got a 2% margin, and healthcare might have a low margin like that. If they say, “We can't give up that margin. We can't afford it,” versus thinking, “We can't afford not to.” Have you helped organizations kind of test this idea that increasing wages then have this return?

LBI Prof. Zeynep Ton | Good Jobs
The Case for Good Jobs: How Great Companies Bring Dignity, Pay, and Meaning to Everyone's Work

Yes, and it's not just increasing wages. It's implementing a whole system. We oftentimes run two-day workshops with companies, and very quickly, they realize that they're already paying for low pay and high turnover. They're paying for it with turnover costs, lost sales, higher product costs, overtime costs, mistakes, and low productivity. They're already paying for that financially. Even more than that, when they design a whole system based on turnover, then it's an inhumane, vulnerable system. It's an uncompetitive system. The competitive costs are even bigger because when they operate with high turnover and low pay, and this is the system dynamics part, perhaps, but they end up making many interrelated decisions that make their system weak.

For example, I call this in the book, The Case For Good Jobs, corporate disabilities. I mentioned five corporate disabilities. These are the things that you just can't do when you operate with high turnover. You can't hire the right person and train them well because your managers are constantly fighting fires. You can't empower people and create trust because when you haven't hired the right people, and you haven't trained them well, you don't want to empower them. You put in many controls and remove decision-making as much as possible, which some of the decisions end up being bad decisions.

The third is you can't match capacity. You're constantly understaffed, or you go back and forth between being overstaffed and understaffed. The fourth disability is that you can't consistently have strong managers and unit managers. From our LFM program, you would've seen that factory, store and restaurant managers are arguably the most important people in the organization.

You can't have strong managers in a high turnover system. The fifth disability is you can't have high expectations. This entire system companies see, “This is not a system that's designed to help us win with our customers and adapt to changes in the future.” It's not fit for what's coming up with demographics and labor shortages and higher minimum wages and increase labor costs that companies will have to end up incurring anyway.

You can't have strong managers in a high-turnover system. Click To Tweet

You touched on something I was going to ask you about. With tight labor markets, greater competition for talent and people to fill jobs of different types, it seems like there's a greater need for a good job strategy. Is there greater interest being driven by some of these changes of people leaving the workforce because of COVID times or other reasons and the battle for talent?

Now, Baby Boomers are retiring. People are having fewer kids. Economists are expecting that there to be more jobs than there are people who can take them. Minimum wages are increasing in the loss of cities and states, labor and wages will rise. If companies don't end up changing their system, they're going to have to have higher labor costs but no drop in their turnover and no improvement in their productivity. If they adopt a Good Job System and strategy, then those higher people costs are investments with a very strong return. That's what you see in a company like Costco, H-E-B, or QuickTrip. They pay more, but they have a heavy return on that investment because they redesigned the job for high productivity and high contribution.

In the HBR article and in the new book, you mentioned Sam's Club, compared to Costco, was featured in the first book. When I started my career at General Motors in the mid-90s, they were playing catch up to Toyota. I don't know how strong the parallel would be. Is Sam's Club awakened some of these ideas? Are they noticing Costco as their prime competitor and trying to catch up or emulate them?

Feeling that competitive pressure is a lot more obvious when you have such a strong competitor in your market. Costco is one of the best companies and retailers in the world. When you have them as a competitor, you feel the pain in terms of your sales loss and how you look in the eyes of your customers and investors. I imagine that having such a strong competitor awakened them, but they were also seeing poor performance in their stores. Productivity was low. They didn't know where their inventory was.

They had all sorts of inventory problems. They wanted to win in the omnichannel world to be able to provide their customers with a frictionless experience, whether they buy online or in the store. To create that frictionless omni experience, you need your inventory data to be accurate. You need your products to be in the right place. You can't have that strong execution again if you have a high turnover. Once they decided that, “We want to focus on our customers and members, and we want to be the best,” then it was obvious for them to make the types of changes that they had to make. They made some huge changes.

You said in that HBR article, which was an excerpt from the book that the company announced some changes, and the stock price took a pretty big immediate hit.

It wasn't Sam's Club changes, but it was their parent company, Walmart. In 2015, they told that they were going to raise pay, but then several months later, they told how much that increase would cost them, and then there was an immediate drop in their stock price. Now, that drop didn't stay a long time, but can you imagine being the leader of that company and you think you're doing the right thing for your customers, performance and employees, and your investors' reaction is, “We're going to penalize you.”

To others, that might have seemed like a buying opportunity.

I tell my students and others, “Investors don't run your company. Leaders run their companies.” The investors let them know what's important to them, but there are also many different types of investors. There are those who are there for the long-term. Not all investors are alike.

Investors don't run companies. Leaders run companies. Click To Tweet

Some CEOs are more willing to try to ride out that storm by saying, “I'm doing what's best for the long term. You might come back to us someday.”

Who was the best at that was Jeff Bezos. He may not be the best, but he was great at telling investors, “I'm doing what I think is the right thing for Amazon in the long-term, and if you don't like it, then go buy another stock.”

I know I've asked a little bit about pay, and you are right to point me back toward the good jobs system and thinking of that maybe along the lines of the Toyota production system. These are each a system. We know with Lean and TPS, there are many examples that illustrate the risk of trying to copy one or two pieces of a system. It's probably inevitable that some of that happens around the Good Jobs Strategy. People say, “That sounds good, but I don't like that.” It's not going to have the same effect.

You have a show about mistakes. We made lots of mistakes along the way when we started helping companies too. One of the things that I've learned was that you also can't copy Toyota's production system implementation for any other system implementation. One of the companies that we worked with early on was a supermarket chain. The way that I learned about system implementation is you do a model line. You go into an area, and you try to implement that system in an area. You start with small changes that create momentum.

First, we saw the power of small changes and how they could motivate people, but we also learned that in these very high turnover environments, there's much instability in people and there's so much instability in workload because of all the upstream functions and the decisions that they make. That type of small incremental change is not the way to start this transformation. One of the things that we learned was to make big upstream changes as quickly as possible to get out of the vicious cycle as quickly as possible.

That's an interesting insight and reflection on the difference between knowing what the system is and how to bring the system to be bringing it back to system dynamics language. It seems like it's a matter of finding the high leverage point is what you're describing with that big meaningful change.

We found those. Interestingly then, because now we've worked with over two dozen companies, we have been able to see that there are similar high leverage points. We work with companies that find themselves in this environment, this vicious cycle, with all those corporate disabilities and many things that they can't do. We say, “What are the first set of changes that you can do to get out of the vicious cycle?” We group them under two.

One of them is around subtracting workload and subtracting workload variability. What are those upstream changes you can make in product design, logistics, sales and marketing? To give you an example, Sam's Club reduced their product variety by about 25% pretty early on in their journey. When you can make that type of subtraction, now that improvement in productivity enables you to make big pay raises.

LBI Prof. Zeynep Ton | Good Jobs
Good Jobs: When you can subtract from the workload or workload variability, that improvement in productivity enables you to make big pay raises.

That's the second set of changes that we recommend. We say, “Make pay increases as much as possible, as early as possible.” For Sam's Club, their initial pay increases were from $5 to $7 an hour, from a basis of $15 an hour. Can you imagine? You're a bakery specialist. You used to make $15 an hour. Now, you're making $22 an hour. Your life is different. They also increased the predictability and stability of schedules so that people knew they could count on the hours.

It's not just Sam's Club. One of the companies is Mud Bay. They had 2% profit margins. Their labor costs were almost 15% of their sales, and they increased pay by 24% over 3 years. Make that pay investment as early as possible, as much as possible. The way that they paid for it is they also subtracted a ton of workload and workload variability.

Those pieces of the system are not just labor rates, but it's the productivity question that labor cost per unit of work is not going to go up as much as the per-hour pay rate. It seems like another example where a company would get in trouble for seeing headlines to say, “We're going to boost pay as well, but not embrace the rest of the Good Job System.” They wouldn't expect to see the same results. They might give up on it. Organizations maybe try to copy part of the system, and then they give up on it, and they draw, which is an incorrect conclusion of, “We tried Lean, and it didn't work.”

Bringing this to Lean and employee turnover instability, if you remember the Toyota House, there are two pillars. There's the Jidoka and Just-In-Time and underneath there is Kaizen, Standard Work and Heijunka. Underneath all of that is stability, the foundation is stability, and there are machine, materials and process stability, but there's also worker stability.

TPS doesn't work if you have a high turnover. Jamie Bonini oftentimes discusses these environments, and Jamie says, “You can't operate with 30% turnover.” I say, “In this world, we deal with 100% turnover, and we're trying to bring it down to 50% or 40%,” but TPS or Lean doesn't work with high turnover. You will see fulfillment centers and famous companies saying, “The reason we can do all of this is because we practice Lean.” I'm like, “You're not practicing Lean. Lean is not lean and mean. Lean is different.”

There's always that question of which version of that word they're using because that word gets in the way. The more important thing is to go back to these practices of a case study that I wasn't involved in but have heard about and helped write about. It was a home healthcare organization and a home hospice. It was part of a larger health system.

Their starting annual turnover rate was 80%. They realized how many problems that was causing. It would be reminiscent of a good job strategy because it involved looking at pay, but more importantly, it was looking at Lean and workloads. I think back to the word dignity and the subtitle of your book, they had a very strong emphasis on safety. Going into people's homes can be a very dangerous, unpredictable environment, whether it's dogs or a dangerous family member.

They put this emphasis on understanding and addressing safety risks and making that commitment, and they got their turnover rates down to 20% within a year. They realized that the ROI, if someone was forced to calculate it on that, is enormous, even looking at the cost of turnover alone, but as you've touched on, there are all these other ripple effects and benefits.

The cost of turnover, what we have found, at least in our work, is it can range from 10% to 25% of payroll dollars that companies spend. There's one context where we saw turnover to be as high as 45% of payroll dollars, but that was because it was a financial service setting. These call center employees had to be licensed. It was high, but the biggest things were the lost sales and productivity, etc. Home health is an interesting setting because regulations probably could be improved to make it easier for home health aids to be cross-trained and to do more for the people they're caring for as well.

There's the question of not just subtracting workload but also looking at who is doing what. I'm more familiar with the hospital setting of looking at what nurses are doing. Nurses are a very limited and expensive resource. Look at what nurses are doing versus what techs and housekeeping are doing. I mean no disrespect to people in lower paid grades or lower licenses and certifications, but it seems like part of it is, it's not subtracting workload, but subtracting non-nurse workload from nurses so that they can feel more fulfilled and satisfied with what they're doing.

I will say yes and no at the same time because one of the things that we also see is how important ownership is. I had experiences in hospitals where I've been handed over to many different people and reduced my experience as a patient. I imagine for nurses too, when there are many handovers, maybe they don't mind some of the work. They would be okay if they felt like they understood the patient, their needs and could take care of them.

In the Good Job System, one of the four operational choices is cross-training. That is cross-training to do more customer-facing tasks and non-customer-facing tasks so that, depending on demand, you have basic flexibility stuff, but it also creates ownership in an area that provides more meaning to people because they're owners of that area. They keep up with the performance. They constantly think about improving performance. That type of ownership creates more meaning in their work.

There's balance when you look at teamwork versus division of labor. There's a difference between jumping in to help out versus being continually overburdened with tasks that somebody else should be doing. It's a problem if looking at system design, if a hospital is saving money by not having enough support staff, I don't know if that's saving money, especially then when nurses start feeling being overburdened, burned out, quitting and leaving. It seemed like the cost of some of these strategies might be a little bit hidden. When I think of parallel, when I was at Sloan, a couple of LFM students got a surprisingly heated debate with an economics professor about the quality and cost of poor quality. He was making an argument like, “At some point, there's an optimal quality level.” We were not the audience for that.

Have you not read Charlie Fine's paper about improvement?

Probably down the hall, but it's different academic silos. The cost of poor quality is not a single line item on the financial statement, the parallel that I was going to ask you about then, it seems like the cost of bad jobs is similarly sprinkled all throughout the financial statement as opposed to being a single obvious line item. Is there anything to be done to create better visibility to that, or is it more about coaching the executives to look for the hidden costs?

We work with companies where we quantify all the financial costs associated with bad jobs from turnover to all the operational mistakes, law, sales, etc.. To our surprise, the financial cost alone wasn't enough for them to start a journey. I don't know if you remember the work at Starbucks with Karen from Lean Enterprise Institute. She was in a region and there was a significant improvement in performance in that region.

They reduced turnover and improved customer satisfaction and productivity, yet that wasn't enough for Starbucks to embrace operational excellence across the system. What we have found is for companies to be able to adopt this, they have to feel not doing this is going to threaten their business, their survival. Sam's Club said, “If we don't do this, we are going to lose.” Mud Bay, a pet store chain based in Washington State, said, “Amazon and eCommerce are eating our sales. If we don't provide a compelling reason for our customers to come to our stores, we will not be able to survive.”

It's that competitive threat that enables companies to prioritize good jobs, which is prioritizing operations. In fact, the Good Job System and Toyota production system are similar. In chapter one of this book, I say, “You might think that this is like the Toyota production system, and it is, but it doesn't require as much operational competence as the Toyota production system.” The Toyota production system is like the Michael Jordan of problem-solving.

It's that competitive threat that enables companies to prioritize good jobs, which is to say, operations. Click To Tweet

The way that Jamie and his colleagues at Toyota define it is in a culture of engaged people improving performance all the time, and they're solving problems one at a time. Now, there are tremendous technical things that go into the Toyota production system, the JIT, Jidoka and standardized work. Some organizations are not able to get to that level of operational excellence or problem-solving, but they still have some continuous improvement systems. The Good Jobs Strategy is like level one for the Toyota production system. You have a stable enough workforce, work and operations that now you can get to that higher order problem solving if you aspire to.

It seems like before organizations can even try to reach operational excellence, the starting point that you described in the article and a little bit of what you should hear, it's more like operational indifference of executives not valuing it and not thinking it's important. It's certainly not their job in a lot of cases is suddenly an article and final thing to ask you about here. You wrote that there's a grave disconnect between what's happening on the front lines and what executives think is happening. It seems like a huge opportunity to close some of that gap.

There are many disconnects, and there is research done by Harvard Business School scholars. They show that CEOs spend 3% of their time on the front lines, 6% with customers, and 72% in meetings. James Sinegal, who was running Costco and is the cofounder. When he was the CEO, he used to spend 200 days in the front lines because that's where you make the money, he would say. That's where your brand meets the customer.

When you don't spend time on the front lines, you don't know the work. You don't know what is preventing your employees from being able to do a good job. You don't know what is disrespectful to your employees because you haven't been there. We've also been surprised by how little executives know about the life of their employees.

When you don't spend time on the front lines, you don't know the work. You don't know what is preventing your employees from doing a good job. Click To Tweet

One of the companies that we work with was thinking about benefits for their caregivers. These are caregivers who many of them were single moms and had one or more jobs because they were making minimum wage. During one of their meetings, one benefit that they thought about was offering discounts on ski passes. It's demoralizing to hear something like this to even think that this would be a benefit.

It's one thing some companies partner up, and you can buy. That this might seem out of reach for some people like, “We've partnered up with this automaker because we're a supplier, and you can get a discount on a new car.” When people are like, “I can't even dream of buying a new car.”

We had companies have attendance problems because people ran out of money for the bus.

That understanding and empathy, something like that would go a long way to realizing what is required for a good job strategy.

Understanding empathy. What I have also seen is that when workers work in that vicious cycle of poverty, they live in that vicious cycle of poverty. Executives see these workers, they see that they don't show up on time. They can't even execute the easiest task. They can't serve customers well. Their conclusion is these employees are not worthy of higher pay. They attribute that in a very Toyota Lean or operational excellence, TQM type of way. They attribute it to the person, not to the system that drives that person's performance.

I ask my students, “During your last year at Sloan, get a frontline job. Work as a part-time frontline employee because then 1) You're going to understand all those upstream decisions that you are going to be making that make the front lines job harder, and 2) You have empathy for the people that you will be serving. You'll have humility because you'll see that they have many ideas to improve, and no one listens to them.”

I appreciate what you're doing to try to open people's eyes and influence companies through your books and the Good Jobs Institute. It's been nice following your progress, and I'm excited. Congratulations on the new book here.

Thank you for having me. It's always a pleasure to talk with you.

Hopefully, sooner.

I don't know if I'm going to write another book.

I'm sure there will be progress and some positive updates to come back to. Congratulations. I hope everyone goes and gets the book.

Thank you.

Important Links


What do you think? Please scroll down (or click) to post a comment. Or please share the post with your thoughts on LinkedIn – and follow me or connect with me there.

Did you like this post? Make sure you don't miss a post or podcast — Subscribe to get notified about posts via email daily or weekly.


Check out my latest book, The Mistakes That Make Us: Cultivating a Culture of Learning and Innovation:

Get New Posts Sent To You

Select list(s):
Previous articleWebinar Recording: “Psychological Safety as a Foundation for Continuous Improvement”
Next articleA Near Miss with Amazon’s Publishing Platform – Save Draft or Publish
Mark Graban
Mark Graban is an internationally-recognized consultant, author, and professional speaker, and podcaster with experience in healthcare, manufacturing, and startups. Mark's new book is The Mistakes That Make Us: Cultivating a Culture of Learning and Innovation. He is also the author of Measures of Success: React Less, Lead Better, Improve More, the Shingo Award-winning books Lean Hospitals and Healthcare Kaizen, and the anthology Practicing Lean. Mark is also a Senior Advisor to the technology company KaiNexus.

LEAVE A REPLY

Please enter your comment!
Please enter your name here

This site uses Akismet to reduce spam. Learn how your comment data is processed.