Retail businesses are associated with low pay and high employee turnover–especially in the case of those retailers who offer low prices–and the same is largely true of customer-service call centers. It has been generally assumed that low wages in these operations are a necessary concomitant of low prices for consumers, and that only businesses serving a premium-price customer base can afford to pay high wages.
Comes now Zeynep Ton, arguing that the low-wage strategy is not the only one available to retailers and other customer-service businesses that need to offer low prices, and that indeed often–usually–it is not the best strategy. She draws connections between the pay and hiring strategy of a business and the operational basis on which it is managed. To wit:
Low pay and high turnover implies minimal employee training, because you can’t afford extensive training for employees who are going to leave in a matter of months. Minimal training implies less operational flexibility, because employees will not be cross-trained for other functions. An environment of high turnover and not-well-trained employees implies that employee functions must be strictly proceduralized, often to the point of excessive rigidity. And the lack of flexibility driven by minimal training and experience makes it harder to build in appropriate staffing “slack” to handle peak demand situations. The lack of slack and flexibility leads to endless emergency rescheduling of personnel, reducing morale and further increasing turnover. (She provides some vivid examples of what this endless and short-notice rescheduling can mean to the personal lives of employees.)
On the opposite site, higher pay can contribute to lower turnover, making more-extensive training economically viable. Better-trained employees can more easily perform multiple functions, so that absences or staffing imbalances have a less-harmful effect. Better-trained and more highly-motivated employees don’t need micromanagement, either by human managers or by systems and procedures.
Ho, hum, you say, what’s new?…people, especially consultants and professors, have been writing for years about why employees should be treated well and how it pays off to do so. How is this book different from a million of others?
The Good Jobs Strategy is, in my view, something quite different from the typical “just treat ’em right” sort of soft, warm, and cuddly advice often found in books and LinkedIn posts. The author ties the feasibility of the high-pay / high-expectations strategy to effective operational management, with the right systems, procedures, and incentives to enable such operational excellence.
An interesting example the author mentions is that of Home Depot. She credits much of the chain’s early success to its high-quality associates–“knowledgeable and helpful and willing to do whatever it took to help you, even if that meant explaining to you that you didn’t actually need what you came to buy.” The associates tended to be former plumbers, electricians, etc–and they were employed full-time. HD grew very rapidly–“customers were driving two hours to go to its stores and, once they experienced the service and great prices, they kept coming back”
But, with the growth came problems. There was a lack of discipline in the stores, in how the stores communicated with headquarters, how the company selected its products, and how it communicated with suppliers. “In 2000, bills and invoices were still processed by hand, and headquarters communicated to 1134 stores via fax because there was no companywide email.” In 2008, two senior IT executives (newly hired from Walmart) concluded that Home Depot’s IT systems were about where Walmart’s had been in 1991. In summary, HD had become “a classic example of a service company that did not fully appreciate the role of operations in making customers and investors happy…Operations are all those factory-like activities that a business has to carry out in order to provide whatever it is that it sells. ..In a retail store, for example, operations involves things like having the right product in the right place, having a fast checkout, and having a clean store.” Zeynep Ton says that internal measurement systems often don’t focus on such matters–at one retailer she worked with, “Twenty percent of the (store manager’s) score had to do with the store’s customer interactions.” In this chain, “mystery shoppers” would score the store on things like how the employees greeted customers and made eye contact. But, she notes, “kindness or friendliness won’t make up for operational incompetence. ..It is hard for your dry cleaner to make you happy if you can’t wear your favorite suit to an important interview because they didn’t get it cleaned on time.”
When Robert Nardelli became HD’s CEO in 2000, the systems and procedures problems were rapidly addressed. Gross margins and net profit margins increased substantially.
BUT, “the culture of cost-cutting was soon felt at the local level, where store employees, who were once at the center of Home Depot’s success and at the top of Home Depot’s inverted pyramid, became a cost to be minimized.” The company started hiring part-timers, in the name of both staffing flexibility and cost…the knowledge level of the typical employee encountered by a customer fell noticeably. By 2005, HD was ranked lower in customer satisfaction than was K-mart. Same-store sales growth fell and even became negative. Nardelli left the company in 2007.
Zeynep Ton summarizes: Operational designs don’t execute themselves. They depend on having the right people, and having those people motivated to do the right things.
The book discusses the actual complexity that exists in many seemingly-simple businesses, and the fact that individual employee decisions do make a difference. “If you are a supermarket employee shelving a case of toothpaste and all but two of the tubes fit on the shelf, should you take the two extras back to storage or would it be better to squeeze them onto the the shelf, even if it doesn’t look so good? If a tomato looks just a little soft, should you take it to the back room now or wait until it looks worse? Maybe it will be just fine for a customer who wants to make tomato sauce…it is hard, if not impossible, to make such work so simple and simple and standardized that anyone can do it without exercising judgment. Things happen in real time at retail stores, and employees have to learn to react.”
(It is incredibly refreshing to see a B-school professor thinking and writing at this level of detail and specificity)
One interesting company discussed in the book is QuikTrip, a large chain of convenience stores combined with gas stations. The company is very selective in its hiring….the author compares getting hired there with the difficulty of getting into an Ivy League college. In the Atlanta area, 90% of applicants don’t even quality for an interview, and of those who do, only one out of five is selected. Turnover rate among QuikTrip employees is only 13%, far lower than the industry as a whole. The chain emphasizes speed and flexibility…”QuikTrip’s fast checkout is a site to behold. One thing that makes it so fast is that any employee can use any register at any time without making the customer wait. If you regularly shop at a supermarket, you know it’s no fun waiting for the cashier do a changeover. The other thing that makes QuikTrip so fast is that employees have been trained to ring up three customer per minute.” She says that the employees can even calculate change in their heads!
Other examples discussed include Costco, Trader Joe’s, In-N-Out Burger, and the Spanish supermarket chain Mercadona.
At Mercadona, there is a formal process improvement program: for example, an employee suggested that vegetables used in stew should be displayed near the stew meat, so that customer could find all the ingredients they need for stew without heading over to the produce section. Like all such proposals at Mercadona, the proposal was first tested in a single store, then in a region, then finally rolled out to the entire chain. (I have some questions about how this actually worked in practice: what about the customer who wants, say, carrots or celery for some purpose other than stew-making? I’d think you’d have to stock the vegetables in two areas, requiring double restocking activity…whatever the solution, apparently Mercadona found the change to be worth it.)
The author devotes much attention to inventory management and its pathologies. Wal-Mart and Target are both famous for the amounts of data they collect and the uses to which they put it…but:
A former Target cashier said she was under so much pressure to ring up sales as quickly as possible, so if a customer bought 10 bottles of Gatorade–in two flavors–she would scan the first one and then hit the quantity key for ten. The inventory system thought the store had sold 10 lime-flavored Gatorades and no cherry-flavored Gatorades, rather than the mix that had actually just been sold. And the cashier, who had received only 8 hours of training before starting work, probably wasn’t even aware of the problem she was creating via this shortcut.
The author cites a study of another company ($10 billion in sales) which found that the system had the right information for only 35% of the products…for the other 65%, the discrepancies between the system inventory balances and the actual quantities available averaged 5 units…a third of the target stocking levels. In one case, a certain item was continually out of stock, to the frustration of a regular customer. It turned out that the inventory system thought there were 42 of these on hand, whereas there were actually none. AND, since this particular store hadn’t sold any units in several weeks (because they didn’t have any to sell), the system automatically reduced the target stocking level for that item!
(Faust, in Goethe’s eponymous play, asserted that “One mind is ample for a thousand hands”…an approach that has definite limitations, even/especially when the mind is an electronic one.)
Poor inventory data can lead to strategic constraints as well as to operational inefficiencies: In the case of Borders Books, it was not feasible to integrate online shopping with delivery from the then-existing stores, because the “phantom stockout” level was so high–“Imagine what would happen if, say, 18 percent of time time, online customers who zipped over to a store because the book they wanted was supposed to be there wasn’t–or at least found that no one could find it.”
Zeynep Ton believes that retailers tend to get caught in a vicious downward cycle:
“At most retail chains, payroll budgets are determined as a percentage of sales. For each month or week, store managers are given a target for payroll as a percentage of sales. So when sales drop, store managers will do whatever they can to bring their labor budgets down in proportion. They will schedule fewer hours or shift the mix of employees toward more part-timers.” But if the reason for the drop in sales is that customers are responding to poor customer services, then cutting employees will likely make things worse…leading to still further drops in sales and consequent further drops in customer service levels. This is a malign positive feedback loop, aka a vicious circle.
In manufacturing, productivity improvements allowed broad-based increases in wages and standards of living, a famous example being Henry Ford’s five-dollar day. Indeed, some of these productivity improvements demanded higher wages…one reason for Ford’s pay increase was that workers found assembly-line work so unpleasant that they wouldn’t put up with it, otherwise. Can something of the same sort happen in the lower-paid realms of the American service sector?
Certainly, there are millions of people who can perform well at a higher level and in a more flexible environment than their jobs now provide–and certainly, there are a lot of mediocre-to-outright-terrible systems and procedures in American retail and service operations. And with an improving economy, higher wages and/or better work environments are going to be required to retain employees who do have alternatives, just as Henry Ford had to pay his workers more to keep turnover within manageable levels.
Not everyone can perform in the environments represented by the companies presented as positive examples in this book, of course. Some individuals have severe educational deficiencies…what % of American high-school graduates could do change-making in their heads, as is apparently expected of QuikTrip people?….and some have unfixable attitude problems, such as a strong dislike for making decisions and taking responsibility. But such people are hopefully a considerable minority.
Overall, a valuable and thought-provoking book. Highly recommended.
Your thoughts?
Thanks for the review. The book sounds interesting, especially given its author’s association with a university (usually a negative, these days, unfortunately).
The low wage business may be an example of a broader phenomenon — the difficulty of measuring value added. The intuitive optimum would be to use the entity (employee, machine, software, whatever) which delivers the highest net value added regardless of price. However, net value added can be very difficult to measure and generally occurs in the future, whereas cost is explicit, easy to see, and happens here & now. Hence the slight on European royalty — They knew the price of everything, and the value of nothing. It is very difficult to sell a widget that costs twice as much as the Chinese import, even though the full life-cycle cost is demonstrably less because the widget performs better, breaks down less frequently, and lasts longer.
Back to employees — it may be that paying workers more does not make them more productive. Rather, offering a higher rate of pay allows employers to be more selective about who they hire. Different subsets of the population. An example of value versus price.
Gavin…”The book sounds interesting, especially given its author’s association with a university (usually a negative, these days, unfortunately).”
She did some work on the line in the father’s textile business in Turkey, probably had some immunizing effects against the worst tendencies of academia.
I did a whole year working for a call center … about six months longer than the usual expectation for this job. Either you move up, or out. The job involved (IIRC) a week of paid training, maybe two weeks, so they had that going for them. After I bailed from that job, I also received checks by the call center corporation for all the paid hours and days that I never took, which was a nice surprise for me, as I had rather expected that all bets were off once I bailed.
But – the training was necessary because the computer interface for logging in customer stuff was clunky, unwieldy – horrible to work with. It was 1980-web in a 20– world. The demands on the phone reps to upsell all kinds of extra stuff to callers, and to do so in minimal time … can we spell contradictory? The job situation was horrible, the lunchroom where we could spend our 15-minute breaks was a pit. A horrible place, and horrible conditions, for inside work, and sitting in a cubicle with a phone and computer. Anyone with gumption and ambition either moved up in the corporation to a higher level … or they plain old quit.
At the end of six months, I only saw one other person in my training class on the floor. And I departed, singing – fifteen minutes before my assigned shift was to end. My little bit of rebellion.
I suppose that my eventual point is that generous pay and training cannot make up for basically crummy working conditions. There is only so much that workers can and will stand for.
Sgt Mom…”I suppose that my eventual point is that generous pay and training cannot make up for basically crummy working conditions. There is only so much that workers can and will stand for.” Quite true. My take on the strategy being recommended in this book is that better pay and training need to be coupled with decent working conditions, including non-dysfunctional systems and procedures.
“the training was necessary because the computer interface for logging in customer stuff was clunky, unwieldy – horrible to work with”…there has been a lot of talk about how robotics/AI are about to gobble up all the jobs, yet, actual labor productivity growth is not impressive….it needs to be better to support non-inflationary wage growth.
I think a big reason for this is the number of truly awful system implementations, where “implementations” includes the way the system is set up and the surrounding procedures, as well as the software design per se. A really hideous example was provided by the case of Target Canada:
Another software & systems debacle
I have said that most retail has spent the last 15 or more years encouraging anyone that could possibly find a job elsewhere to do so. They have been largely successful. They talk about associates and mangers and even directors but the jobs on all levels consist of checking boxes to insure compliance with the home office procedures. No one in the individual stores has any discretion to address local conditions.
An acquaintance works in a Home Depot on the Western Slope in Colorado. She says that spring plants arrive there early in the spring, the same as all the stores in the country, and promptly die from frost. Apparently, nobody in Atlanta realizes that there is a difference between there and 8,000 feet in the mountains and no one at the store can do anything to change the shipping schedule.
As far as there being electricians and plumbers in the stores, they would have to be paid more than the store director. Maybe an occasional retiree, but an actual competent tradesman wouldn’t be likely to take $10-12 when he makes 2-3 times as much plus overtime.
Most days I have a choice between taking an hour to go to the nearby Home Depot on the chance they’ll have something close enough to what I need or ordering exactly what I want and getting it the next day. I don’t think I’ve been in a Home Depot more than twice in the last four months.
I linked to this at my own site and included this anecdote:
I have a pet peeve that the customer satisfaction surveys that get sent out for every oil change and emergency-room visit are useless documents. We have them from time-to-time at my hospital. Stop and think for a moment what kind of questions one would ask customers at an involuntary psychiatric facility, and what the meaning of any statistics would be, with the mixed data of people who got better and those who are still psychotic or personality disordered. We thought we would do better when we did exit interviews instead, because trained professionals could make the necessary distinctions between responses. What went wrong there is that half the people interviewing were incompetent folk who couldn’t be fired because they were state employees that no one had bothered to make a paper trail about. This was seen as a good spot to put them out to pasture, where there would be no visible damage.
Then, finally, when we had the data from the competent interviewers, that might have told us something useful about how we treated customers and what we could do about it, we simply ignored it.
AVI….yes, the quality of customer satisfaction surveys is generally pretty bad. There is a sign outside my local Starbucks that says, “Do you love it here? Please fill out our survey”, or words to that effect. Talk about leading the witness…
One thing I’ve noticed about surveys in general is that they are almost always focused on “Did this rep do a good job?”, whereas at least 80% of the time, the problem is not with the rep, but with the workflow of the customer service process.
MCS….”No one in the individual stores has any discretion to address local conditions. An acquaintance works in a Home Depot on the Western Slope in Colorado. She says that spring plants arrive there early in the spring, the same as all the stores in the country, and promptly die from frost. Apparently, nobody in Atlanta realizes that there is a difference between there and 8,000 feet in the mountains and no one at the store can do anything to change the shipping schedule.”
An infamous example was a chain store in South Florida that received a shipment of snow blowers, just like every other store in the chain. I”ve been told that the late and sometimes-lamented Borders used a “push” inventory system that did not adequately reflect local market conditions.
I’ve previously cited an essay written by a Spanish naval official in 1797, on the topic “Why do we keep losing to the British and what can we do about it?” Here are his key points:
“An Englishman enters a naval action with the firm conviction that his duty is to hurt his enemies and help his friends and allies without looking out for directions in the midst of the fight; and while he thus clears his mind of all subsidiary distractions, he rests in confidence on the certainty that his comrades, actuated by the same principles as himself, will be bound by the sacred and priceless principle of mutual support.
Accordingly, both he and his fellows fix their minds on acting with zeal and judgement upon the spur of the moment, and with the certainty that they will not be deserted. Experience shows, on the contrary, that a Frenchman or a Spaniard, working under a system which leans to formality and strict order being maintained in battle, has no feeling for mutual support, and goes into battle with hesitation, preoccupied with the anxiety of seeing or hearing the commander-in-chief’s signals for such and such maneuvers”¦
Thus they can never make up their minds to seize any favourable opportunity that may present itself. They are fettered by the strict rule to keep station which is enforced upon then in both navies, and the usual result is that in one place ten of their ships may be firing on four, while in another four of their comrades may be receiving the fire of ten of the enemy. Worst of all they are denied the confidence inspired by mutual support, which is as surely maintained by the English as it is neglected by us, who will not learn from them.”
Too many American organizations today have caused their employees to be “preoccupied with the anxiety of seeing or hearing the commander-in-chief’s signals for such and such maneuvers…” rather than doing what needs to be done.
It seems like a lot of this is specific to large chains, but it’d be nice if “we” could think of a way to nudge things in a direction that would enable small-business retail to start to be competitive. I think that places like Lowe’s, Walmart, etc., are going to move pretty quickly towards having many fewer employees, since “what aisle are the air filters in” doesn’t require a human, and that’s the extent of what most of them do as far as I can tell.
I’ve thought for years that with the growth of Amazon, and especially now that they’re moving to 1-day shipping in most places, that there’s a big opportunity for “showroom” businesses (for clothes particularly) since you can outsource your warehousing to them, and next-day pickup seems like not a big deal compared to the several day delay that would have been necessary just a few years ago. This might be a slightly more beneficial option to the curation services for clothes that seem to be growing in popularity.
At any rate, I think a lot of this discussion is a great demonstration of why libertarianism is dead. Very few people think that the fact that economies of scale have led us to this place, and where it seems we’re going, are in any way a good thing. Certainly those on the conservative side who look around small towns and see the complete disappearance of small businesses, without big box stores flooding in to replace them, don’t.
I’ve noticed that the more competent employees at my closest Home Depot are ex-trades people and usually have some sort of physical or mental disability. Electricians or plumbers with a visible limp or other physical health problems but know their stuff. Sometimes their disability is less obvious–alcoholics with puffy red faces, etc. In those cases my guess is that no service business can hire them due to a lack of drivers license as a result of DUI(s). Getting to this particular store is easy via bus.
David F: “… at least 80% of the time, the problem is not with the rep, but with the workflow of the customer service process.”
We human beings keep having to relearn this lesson. That was one of the main points in Peter Drucker’s “The Effective Executive” written after WWII. Correcting the process rather than the person was one of Edward Deming’s main statistical insights — one which US auto executives ignored but which their Japanese counterparts took seriously, with consequences that need no further comment.
Here’s a critique (in Forbes) of the author’ conclusions:
https://www.forbes.com/sites/modeledbehavior/2014/03/11/are-retailers-missing-profit/#73cfa0d11042
“I get the impression that many (though not necessarily Ton herself) think big retailers make decisions of this sort kind of thoughtlessly. But I have read enough stories about how hard some of these companies work at operational efficiency that I find widespread mistakes hard to believe.”
I am less impressed than the writer of the Forbes piece with the idea that just because an organization is large and successful and has a lot of smart and hard-working people that it is unlikely to make major mistakes.
Home Depot stores are better than many traditional hardware stores for walk-in purchases. However, almost every appliance and cabinet order I’ve placed through HD has been fouled up to some degree. As far as I can tell this has always been because of rigidities in communications or operational procedures imposed by the HD central office that local HD employees and contractors could not easily override. Recently I bought a stove online but mistakenly submitted an incorrect delivery zip code. The delivery contractor called me a few days before delivery to confirm date, time and address. Because the delivery zip code I had submitted, which would have been correct a few blocks away, did not match the correct zip as recorded in their DB they were unwilling to deliver the order. Their software flagged it as suspicious. A local manager with authority would have known immediately that my zip code error was trivial. As it was I spent substantial time arguing with various managers at the delivery contractor and HD, all of whom insisted that there was nothing they could do and that I would have to cancel my order, rebuy the stove and schedule the delivery for a later date. Additional time was consumed in my getting assurance from them that I could rebuy the stove at the same sale price I had paid. After these phone conversations I decided to wait a few days, until I had more time and patience, before calling them again and rebuying the stove. Before I could do so I received a robocall informing me that the stove would be delivered on the following day as originally scheduled. I took no chances and waited at the delivery address and it was indeed delivered. Obviously someone with authority had reviewed the case and decided to let it go through as originally scheduled, but no one communicated this fact to me in a clear way. It’s also obvious that the local HD employees fully understand the dysfunctional features of HD’s system but have no power to do anything about them.
All businesses have the problem of determining whether an employee doesn’t know or doesn’t care. The doesn’t know is correctable and the employers fault anyway, doesn’t care is probably terminal or should be. The rigid systems I’ve seen seem to be intended to beat caring out of the employees. As long as the right boxes are checked, actual results don’t matter.
Home Depot and the like can’t survive with fewer employees. Every rack and display in the store is hours or days away from being totally destroyed by the customers looking at something and putting it back in some random location. We’re a very long way from robots that can deal with that. As it is, I’ve wasted countless hours either trying to find what I want from the resulting jumble or finding out that I’ve not noticed that one of the pieces I’ve picked up was in the wrong slot.
I honestly don’t know how someone can deal with a job like stuffing junk in boxes at an Amazon warehouse. I’ve managed to perform very tedious jobs for a limited period by making it sort of a game with myself but contemplating it as a career? So far, I haven’t needed the money that bad. Compared to that, retail should be a barrel of fun.
Call me Pollyanna, I believe most people would rather take pride in their work than just collect a pay check if they have a chance.
Maybe I’ve just gotten old and sour but it seems that in the last 20 years, going to these stores has gone from being enjoyable to something I avoid as long as possible and then get in and out as quickly as possible. I’m waiting for one of these turn-around artists to announce that he’s determined the root cause of all of the expense is the customers; that by eliminating them, he will also eliminate labor, real estate and inventory cost. A number of chains seem to have discovered this by accident.
Taco Bell says that they are “testing” paying some of their store managers $100K
https://www.marketwatch.com/story/taco-bell-will-run-pilot-program-paying-select-managers-100000-a-year-but-in-n-out-burger-already-pays-managers-160000-2020-01-09
I’m in construction, and every mucking time I go into either Home Depot or Lowes, what I run into is a vast sea of idiocy and sloth. Not so much on the part of the employees, but on the part of the company.
The employees aren’t exactly experts on things, but they’re not always utterly useless, either. The entire system, however? Burn it down, start over.
The majority of the problem is that they’re locked into the planogram and the stocking algorithm directed from corporate headquarters. Managers can’t manage–They’re stuck implementing the things corporate decrees, and there is no variation allowed from what the computer says. If a manager wants to respond to local market conditions, they’re screwed–Nothing can effectively be done to massage the gawdawful system to better serve the local customers.
Additionally, the state of affairs with regards to the questions of “Where is product X…?” and “Is product X actually in stock…?” inside the stores is insanely inconsistent. Need something? Check the online site or the app; then, call to ensure that the item is actually there, before driving twenty-odd miles to pick it up. It’s nuts.
The sad fact is that none of the “Big Box” stores have a clue how to serve their customers–It’s all the algorithm back up at headquarters. You go to Walmart, for example–I use their brand of liquid athlete’s foot spray. The local store never, ever has it in stock, and if they do, it’s stuck in behind the wrong shelf label. I’ve had innumerable conversations with the poor bastards manning the store, managers and stockers both, and there’s not a damn thing any of them can do about it. Special-order the product? Nope–The store can’t fix the issue, which is some kind of glitch in the matrix of their planogram. The computer thinks they’ve got the product on the shelf, which is empty, and which the inventory says is empty, but the computer algorithm refuses to allocate or ship product to the store. Fought that fight for I don’t know how long, because the identical brand-name product is six and eight bucks a can, while the Walmart store brand is three. Eventually, just gave up and started ordering a year’s supply through the website.
It’s insane, from a marketing standpoint, because every time I go down there to replenish, I’ve wound up buying other stuff along with it. Now that I’m ordering online, none of those sales happen.
But, I am assured, the algorithm knows best. Same deal with Home Depot and Lowe’s. I’m here to tell you, I think Amazon may well eat their lunch, assuming they don’t go all nuts and start selling nothing but the cheap Chinese counterfeits of everything.
Hiring a $100K manager to run a Taco Bell is like hiring a master cabinet maker to split fire wood. It won’t make a difference, they wouldn’t dare give anyone enough leeway to be worth $100K.
“Hiring a $100K manager to run a Taco Bell is like hiring a master cabinet maker to split fire wood. It won’t make a difference, they wouldn’t dare give anyone enough leeway to be worth $100K.”
Leeway…scope of authority…is the key. A meaningful test would couple higher pay for managers with more discretionary authority for those managers.
I think the essential problem is that the corporations want control over everything, and that militates against giving the slightest autonomy to managers, or allowing any initiative.
It’s a huge part of why so many different areas in our society are suffering issues–The people managing everything are coming out of a milieu in background, education, and selection where they are immersed in a series of controlled environments, which give them an entirely false picture of the world, and which leaves them uncomfortable and frightened of giving up any sort of control whatsoever, no matter how minor. The whole mess starts with culture–Do you really think that a kid who wasn’t ever allowed to wander around the neighborhood unsupervised is going to suddenly morph into this wildly creative type who’s willing to cede control?
We’re raising control freaks; don’t be real surprised when you see that same mentality expressed in management. The creative maverick types won’t ever get through the screening process, because they frighten the bovine occupants of those chartered cathedrals of corporate conformity we’ve set up.
It’s going to bite us in the ass, one day. Mark my words.
A Taco Bell franchise can cost $1-3M to start up, and have >$1.5M in annual sales. How could it possibly make sense to not pay someone $100k to manage a business of that magnitude?
Brian — $1.5 Million average sales. Say net profit margin is 10% — Net cash $150 K. Can that business really afford to pay a manager $100 K ?
To riff on this a little more, there have been lots of studies showing that people quickly adjust their expectations to changes in pay. Boost someone’s pay from (say) $65 K to $100 K and that person will work harder for about 3 months — and then will revert to prior behavior, because the person now thinks he is worth $100 K.
The higher pay would make sense only if Taco Bell was then able to hire different better managers. But in the Age of Woke, someone in the corporate office would probably want to hire a transgendered Palestinian single mother illegal alien who barely could speak English or Spanish.
Kirk…”control over everything”…in earlier times, people *had* to implement some level of decentralization, whether they wanted to or not…think of a naval officer a long way from home, or even a provincial governor in Roman times. Increasingly-better telecommunications has allowed tighter central control, so it requires a conscious decision to decentralize.
Someone wrote a book, which I haven’t read but might be interesting, on the impact of the telegraph and undersea cable on the working environment of ambassadors.
Of course, even for any particular level of technology there are can still be huge differences in the approach of different organizations, as demonstrated in the Spanish naval official’s comments cited above.
I expect that the current vogues for “big data” and AI will lead to a lot of unwise overcentralization decisions.
Gavin: You’re going to put up millions of dollars of your own cash and then be too cheap to spend a couple tens of K to hire someone qualified/motivated to run it well? Who are you going to find to take $60k for that job? Not anyone you’d want to do it, I don’t think.
(I’ll be honest, I don’t get franchising at all anyway. A donut shop is super cheap to start, in CA they’re all run by immigrants who start with nothing and work like crazy, so why are people spending like 900k for a dunkin franchise?)
Brian — I think we are in violent agreement. A business which offers higher pay will be able to attract recruits from a different segment of the population — hopefully a segment of the population which is smarter, more open-minded, more honest, and harder working. But pay is not the only factor. A business which offers high enough pay to attract graduates from an Ivy League Womyn’s Studies program will deserve what it gets.
Another factor to consider is that there are limits to what a business can bear. If a business pays its managers peanuts, it should not expect high performance; but if a business pays its managers so much that the business becomes unprofitable, that is not a sustainable strategy either.
I do not buy the idea that a CEO or a Director deserves to be paid a lot of money simply because the business has a huge cash flow. Boeing is (unfortunately) a good current example — the massive payouts to the senior executives and Directors has not resulted in superior (or even adequate) job performance. However, no-one likes my alternative idea of hiring executive talent the same way a business buys major capital equipment — first, pre-qualify bidders, and then award the job to the qualified bidder who puts in the lowest bid. Maybe instead of paying the CEO $10 Million per year, there is someone equally good who will do the job for $5 Million. Looking at Boeing’s performance, maybe they would have been better with that recent Womyn’s Studies graduate.
The only way it makes sense to pay someone $40-50K over the odds is if you believe that he or she can increase returns by a multiple of that amount. The first question I’d have is what are they going to do that isn’t being done already? If you know this, why aren’t you doing it? The alternative is that you hope that the extra money will attract someone enough better that they will find a way and that you will let them.
Don’t forget that we are all theorizing based on a news article that probably left far more information out than was published. I’m pretty sure that almost all of these managers are on some sort of incentive tied to store performance and I’d bet that a big piece of that $100K is just that.
As far as people working harder, let alone smarter, for more money; I don’t believe it either.
“Borders used a ‘push’ inventory system”
A former Radio Shack store managervl told me the same about RS.
Regarding inventory accuracy at supermarkets, an acquaintance in management at West Coast Grocery (now SuperValu… oops I mean UNFI) insisted that could only ever be a gross approximation due to the self-service shelving mayhem somebody referred to above, and that the stores would always have to do shelf inventories when ordering.
[The other] Kirk — a perfect micro picture of that vast idiocy at Lowe’s is found in their stocking of drip irrigation components. Despite devoting an entire bay to the stuff, you literally can’t put together even the simplest system from the random collection of parts offered.
I recall a conundrum/concern expressed by Jordan Peterson… He noted that the US Army, one of the leaders in Intelligence testing, now refuses anyone with an IQ of less than 80… Which is not a small batch of people, despite being a clear minority.
If the ARMY can’t find a useful position for someone in that group, can any organization? What do you do with these people?
A reasonably challenging question.
Sgt. Mom.
Not true…clearly, pay can ALWAYS make up for crummy working conditions, otherwise, no one would clean out septic tanks, unclog sewers, or work in Northern Alaska…
The only real question is: “How Much?”
;-)
In that case, the pay would have been about three times what was offered … but it seemed that the corporate powers that be would rather have done the deal that they offered, with a turn-around-churn of every six months more employees having to be trained and then walking away, than fix their crummy working conditions and their FREAKING AWFUL HORRENDOUS website interface!
“I recall a conundrum/concern expressed by Jordan Peterson”¦ He noted that the US Army, one of the leaders in Intelligence testing, now refuses anyone with an IQ of less than 80”¦ Which is not a small batch of people, despite being a clear minority.”
Mr. Peterson falls into the classic trap of those who buy into the entire idea of “IQ”, which is that the test is everything, and if you do poorly on it, it is a proxy for your actual “functional intelligence”, which is a concept we’ve rather poorly defined.
Some of those who score below 80 on the test are actually demonstrably “stupid” people, dangerously so, but a lot of that stems not from actual functional intelligence, but from other behavioral issues like poor impulse control and a lack of judgment.
I’d submit that it’s better to have someone with a low score on the IQ test working for you that has the good sense to know their limitations and then communicate with you about an unexpected problem, refraining from making things worse by acting for themselves. In some situations, that’s far preferable to having some high IQ dolt who thinks that they’re smarter than everyone else, who then takes actions resulting in disaster–When they should have communicated and waited for more experienced people to provide guidance.
The concept we have labeled “IQ” does not actually include anything like the really important factors we might conceptualize as a “Wisdom Quotient”. They don’t test for that, and it’s actually a hell of a lot more important than some whiz kid’s ability to ace a paper test.
And, it is highly unfortunate that we’ve warped society around this “IQ” concept–The whole thing has become a self-reinforcing, self-referential circular cluster-f**k. You look at why the “elites” are so ‘effed up, just consider how we’re going about choosing them: Little Johnny gets tested, somewhere along the line. Seeing as he does really well on that test, we track him into “better” schools that speak to and channelize his ability to pass those tests, whereupon he does better and better on them, eventually culminating in his placement in some advanced scholarship program at an elite university, where he is educated in subjects to nth degree, all in the same essentially autistic manner. The whole thing is artificial as hell, with no checks and balances on it, and no opportunity for Johnny to experience the real world until he finally matriculates at the end of the process, and is immediately welcomed into the upper ranks of society and management, whereupon he can’t quite understand why nothing works the way he was taught it should…
It’s a circular death-spiral for common sense.
Johnny doesn’t know, because Johnny was kept carefully isolated from reality, and the consequence of reality. That’s why you have these idiots insisting that their idealized planogram stocking systems run from some ivory tower within the corporate headquarters are more valid than the needs of the real customers that the local managers are trying to satisfy.
Johnny is a functionally autistic savant, and our system is designed to create him.
And, I will persist in my insistence that the whole thing is rooted in the misuse and misunderstanding of the regime of testing we’ve built up around the idea of “IQ”. Whatever quality is actually measured by those tests, it ain’t wisdom. There’s an entire aspect of intelligence that the regime misses, and that’s a huge component of the problems we have with modern society. Unintentionally or not, we’ve set things up for the autists to take over, and they have. The ability to do well on a test does not really translate very well into being able to do things in the real world, but because we have come to use those tests as a proxy for virtue, here we are: The marching morons have taken over, but they’re not the sort that C.M. Kornbluth foresaw; ours all have degrees from elite universities and exquisite credentials to match.
If I were going to rewrite the script for the movie “Idiocracy”, I’d completely avoid the trope of the illiterate idiot that they used, and substitute a far more realistic one that we’re actually experiencing: The perfectly educated and reified modern dimwit who does perfectly on tests devised by other, similar dimwits, but who can’t quite figure out which gender they are from the genitalia in their pants. That’s the reality of it all: The educated elite has come to be selected from a population of autistic savants whose inability to function in the real world has become one of the greatest dangers to modern civilization. Brawndo? Dude, look around at the inanities these creatures spout about things the average low-scoring “normie” could tell you about the world. Any one of the guys actually running the farms and forests of Australia or California could have told you about the risks of allowing fuels to build up, but no, the educated elite had to have their way and block the removal of those fuels–And, here we are. Of course, they deny that they had anything to do with it all, and are doubling down on “anthropogenic climate change”.
I eagerly await the day when these people are recognized for what they are: A threat to civilization. You want my opinion on the matter? I’d strongly suggest that instead of testing for IQ and then placing those people into positions of authority, what we should be doing would be to still keep testing them, but then sterilizing them, and then isolating them from the rest of us so that we can keep on living lives absent their many and sundry idiocies.
At this point, the sad fact is that all too many of this clade are an active threat to the general population, most of whom are not smart enough to subscribe to the idea that by not prosecuting low-level crime, we’ll get less of it.