Investing in Employees?

This recent New Yorker financial column made me feel a little better about our economy.

According to a recent Wharton School study, retailers that invest in hiring and training more employees make back between $4 and $28 for every dollar spent. While Surowiecki says that “the reasons for this aren’t hard to divine,” he omits what I believe is a really powerful reason: employee satisfaction. While there is a clear bottom-line benefit to lower turnover (addressed in the article), there is a more powerful benefit to keeping one’s employees satisfied–whether by paying them well, refraining from overworking them, or training them well.

One of the reasons I liked shopping at Trader Joe’s (when I lived near one) was not simply the quantity of Hawaiian party shirts available to direct me to the capers. It was that they seemed to feel pretty good about their jobs. It was just nicer to be around them. Contrast this to, say, a Macy’s. Staffers are hard to find, sure. But they also tend to have so little energy. They are helpful enough, and they even smile. But there’s a big difference between that and the genuine enthusiasm I felt in a TJs. Or even a Starbucks (where even part-time workers famously get full benefits).

Is it really so revolutionary to say that happier customer service employees will provide better customer service?

Surowiecki writes that “there’s a strong case to be made that corporate America’s fetish for cost-cutting has gone too far.” While his article focuses on the retail space, citing Best Buy and Home Depot as examples, I would love this statement to be true across sectors. I have experienced first-hand the limits of overzealous cost-cutting, whether in universities or in private industry. I would be curious to see this research applied in other sectors. My hunch is that it will hold up.

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3 thoughts on “Investing in Employees?

  1. Howard Uliss says:

    I agree- unenthusiastic and bored employees make me want to shop elsewhere. Companies should realize that better paid and happier employees makes sense and is profitable.

  2. Marcie Sun says:

    So true – happy employees make the entire economic system work better. Happier employees work harder, create a better working environment, and also make the customers and clients happier, and more willing to spend money. Yes, they need the training to be able to handle their jobs, but who doesn’t? Why would a company waste money on hiring someone then not preparing them for the job? Good work, Ms. Fruedenthal.

  3. Inder says:

    My housemate and I talk about this frequently (she has had a string of corporate retail jobs lately). We talk a lot about how employers who treat their employees like they are lying, thieving, or cheating actually FOSTER those attributes in their employees. Because if my boss doesn’t trust me, why should I bother being trustworthy? Whereas employers who act as though they trust and respect their employees are more likely to get trustworthy and respect-worthy employees. So, for example, I currently have a boss who is generally very respectful and generous towards me, and I loathe the idea of letting him down. When I have had to deal with management that belittles me or puts me down, I am not motivated to do my best work. Generosity does not make you seem weaker – it can actually make you stronger. You can “lead” without having to instill terror.

    Of course, this is something that people have been talking about since Machiavelli and Montaigne, and I’m sure, long before that. I’m a strong believer that in giving people the benefit of the doubt, etc., we encourage the best behavior in return. Occasionally, yes, you will get walked all over by some opportunistic a-hole, but that is far preferable to breeding resentment and rebellion in otherwise good people.

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