There's no great mystery as to why companies keep salaries low -- it's an easy way to keep profit margins up. But Zeynep Ton, a professor at MIT's Sloan School of Management, argued in an article in the Harvard Business Review that the tactic usually backfires. By cutting back on manpower, companies experience a drop in performance, which, in turn, leads to a dip in customer satisfaction, and then the ultimate corporate problem -- a drop-off in sales. Home Depot is a case in point:
When former GE executive Robert Nardelli became CEO, at the end of 2000, he cut staffing levels and increased the percentage of part-timers to reduce costs and boost profits. Those moves achieved both goals immediately, but they eventually caused Home Depot's excellent customer service -- the company's claim to fame and, arguably, primary source of competitive advantage -- to suffer, customer satisfaction to plunge, and same-store sales growth to drop and even go negative in some years.
Treating workers well pays off in the long run, Ton argues. She says that four employers, Costco, Trader Joe's, QuikTrip and the Spanish supermarket chain Mercadona, are prime examples. Here's why:
1. Trader Joe's
The Trader Joe's Company has more than 365 stores in more than 30 states, and offers upscale grocery fare such as health foods, produce and nutritional supplements. It has some 10,000 employees.
Starting salary: $40,000 to $60,000. Managers also have the potential to earn six-figure salaries.
Benefits: Trader Joe's contributes an additional 15.4 percent of your gross income each year to your retirement account.
Costco Wholesale Corp. has more than 590 membership warehouse stores in 40 U.S. states and Australia, Canada, Japan, Mexico, Puerto Rico, South Korea, Taiwan and the U.K. It has roughly 174,000 employees.
Starting salary: Stockers and cashiers make on average between $11.84 to $12.61 an hour. The average starting salary for a full-time employee is $45,000 a year, compared to just $17,000 for Sam's Club.
What the CEO says: "At Costco, we know that paying employees good wages makes business sense."
QuikTrip Corp. operates more than 600 gasoline/convenience stores in 10 states, mostly in the central U.S. It has roughly 9,600 employees.
Starting salary: An entry-level clerk earns an average of $8.66 an hour, but most store managers are promoted from within and are paid relatively well. The overall salary average for all staff is $32,966.
Happy employees: Fortune magazine has named QuikTrip one of the 100 best companies to work for in every year since 2003. It has robust training programs for workers -- even low-level employees receive two weeks of training. Employees also like working here -- staff turnover is 22 percent, the lowest in the industry.
Mercadona S.A. has 1,419 stores throughout Spain. It has roughly 70,000 employees and is expanding, having hired 6,500 employees last year alone. It is known for offering consumers the lowest prices in Spain.
Starting salary: Spain has an extraordinarily high unemployment rate of 26 percent; salaries tend to be rock bottom. According to the website Hoy, the base salary for a Mercadona supermarket clerk is 12,600 euros a year or roughly $16,400 -- that's still about a $1,000 a year higher than the average salary for clerks in Spain. But what makes Mercadona exceptional in Spain is that it pays bonuses and gives raises.
Employee perks: Employees get extensive training -- one month's worth versus just seven hours for the typical grocery worker in the U.S. And most importantly to quality of life, employees have predictable schedules. Workers learn their schedules one month in advance and don't have to work different shifts from one day to the next. They're also given full-time schedules, something that low-wage workers in the U.S. often lack.
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