It Pays to Treat Employees Well

clintl said:

Back when I was in business school, we learned about something called the Service-Profit Chain Theory, which basically said companies should treat employees well. The idea behind that was that happy employees are more productive and stick around, and serve customers better, and that retaining higher paid long-time employees is still less costly than recruiting and training new ones.

A few years later, I saw it stated a different way, as investment advice: a recommendation to invest in companies you would want to work for if you were working in that industry.

Just read this article that provides some strong evidence for this. The companies on Fortune's 100 Best Companies to Work For list average to twice the return on their stock prices as the average company.

So treating employees well is actually not just good business, it's a great business strategy. Too bad there are so many dimwitted CEOs who behave otherwise.

http://www.cbsnews.com/news/are-companies-that-value-employees-more-successful/

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I remember reading something a while back that suggested that happy employees take fewer sick days and are less likely to steal from their employers too. This certainly would have a cost benefit for their employers. And if work is a place you like being, you might even be willing to stay a little later to get whatever you're doing done.

I wonder about the training thing, though. From what I can tell, it's now the thing to complain that colleges and universities aren't doing a good enough job with training a nimble workforce who can hit the ground running without any training at all. "Nimble workforce" seems to be business speak for disposable. They don't want to have to train their employees. College is supposed to be like vocational school now. Focused on job training rather than educating people in a broader way (which, ironically, makes people more flexible and better able to acquire new knowledge and learn new skills on the job).

I even heard an economist on the radio a while ago who was complaining that the "American Dream" of home ownership was holding growth back, because home ownership makes people less willing to move to where the jobs currently are. Today's workers need to be flexible and nimble, he said. The days of someone being able to stay in the same company, or even the same geographic area, over the course of their career are over.

I think one issue is that technology is changing so quickly now, no one can really keep up with it. But also, technology has made workers more productive, so fewer people can do more now. And of course, less skilled jobs are often outsourced. So it's increasingly an employer's market, even in skilled professions like engineering (engineering salaries have been flat for the past 20 years).

We have found that even in a business that gives an annual 3-5% salary increase, that doesn't keep up with the kinds of pay that a new worker coming in would make doing the same job. So in order to keep earning at your fullest potential, it makes sense to quit, go to another company and then come back. People around here do it all the time. I'm talking in IT.

The problem is that most businesses don't have any loyalty to employees, and to get a raise you typically have to quit your job and go some where else.

The businesses in my view that are the healthiest are those that promote from within and that build up their own talent from within. These organizations are a lot more robust because they've got a core of institutional knowledge that is retained even as employees come and go.

A book (I forget the author) called "The Customer Comes Second" came out many years back. The point was that your employees should come first, and then they'll treat your customers right. I have always believed that and practiced it when I ran a bank branch. The bank for which I worked, unfortunately (you'd recognize the name; it's one of the top handful in the country now) didn't see it that way. They didn't care to keep employees long term, just hire cheap, train minimally, let move on. A competitor bank chain, headquartered where I live, followed more the approach I liked. They promoted from within; at one point, the Chairman was a guy who'd started out there as a part time teller. They are a highly successful regional chain and bank holding company.

Roxxsmom said:

I remember reading something a while back that suggested that happy employees take fewer sick days and are less likely to steal from their employers too. This certainly would have a cost benefit for their employers. And if work is a place you like being, you might even be willing to stay a little later to get whatever you're doing done.

I wonder about the training thing, though. From what I can tell, it's now the thing to complain that colleges and universities aren't doing a good enough job with training a nimble workforce who can hit the ground running without any training at all. "Nimble workforce" seems to be business speak for disposable. They don't want to have to train their employees. College is supposed to be like vocational school now. Focused on job training rather than educating people in a broader way (which, ironically, makes people more flexible and better able to acquire new knowledge and learn new skills on the job).

I even heard an economist on the radio a while ago who was complaining that the "American Dream" of home ownership was holding growth back, because home ownership makes people less willing to move to where the jobs currently are. Today's workers need to be flexible and nimble, he said. The days of someone being able to stay in the same company, or even the same geographic area, over the course of their career are over.

I think one issue is that technology is changing so quickly now, no one can really keep up with it. But also, technology has made workers more productive, so fewer people can do more now. And of course, less skilled jobs are often outsourced. So it's increasingly an employer's market, even in skilled professions like engineering (engineering salaries have been flat for the past 20 years).

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Training costs can be significant for a lot of companies as it usually takes 3-6 months to properly train a young graduate.

All the noise you hear about a skills gap is nonsense though. The true aim of corporations is two fold: they want to outsource some of the training costs to Universities/Colleges (that way they improve their bottom line. This will however shift the costs from company to school, who will then shift the costs to the student), and they want to create a situation were they can also hire more foreign workers at lower wages (by removing the cap on H1B visa's), which would obviously once again boost their bottom line (the losers here are the native American workers as this influx of foreign workers would depress wages, and increase unemployment for them)

And if employees in general are getting the same message (and we are) that if you want to improve, you have to move, or at least prepare to be dumped as soon as it's convenient for the company, why not live as though you've got one foot out the door? Why waste time on loyalty?
I work for a relatively stable company in a traditional business, and we're unionized so we've got a little protection, but we know that when the bosses talk about 'improvements', they mean opportunities to get rid of staff.
They used to have a quarterly presentation to all the employees where they told us how the company was doing. 'Employees' were referred to as 'Admin Costs', and of course, costs are always too high. There's a morale builder. Not enough giveaways and cheap prizes to make up for that kind of thinking.

"Treat employees well" involves an awful of a lot more than just paying them well or giving them annual raises.

I work in management for a company that treats its employees well. Here are some of the facets of treating employees well:

• All positions are paid based on market rates or better, with respect for education, experience and level of responsibility.
  
• We get generous performance bonuses at all levels.
  
• When filling a position, we look hard for someone to promote even when that requires additional training. Hiring from outside is typically a last resort or for lower-level positions. Employees are always given first crack at new or opening positions.
  
• We are an employee-owned company so all employees earn stock in the company, which pays quarterly dividends.
  
• The company pays for employee education and training. We have several people who've gone on to earn higher degrees on the company dime, and only one person who left after doing so (because it didn't immediately result in him being appointed Ruler of All He Could See.)
  
• As an employee-owned company, we all enjoy profit sharing which motivates all employees to use company resources judiciously.
  
• Employees are respected and listened to, and publicly given credit for ideas and great service.
  
• Any criticism or re-direction is done in private.
  
• We have a generous paid time off policy, with no differentiation between sick days where you're actually ill, doctor appointments, taking kids to the dentist, funeral leave and personal emergencies (I have to go home because my new refrigerator is being delivered, for example). There is not a limit on PTO. If an individual employee is thought to be abusing PTO it is taken up privately between that employee and her manager.
  
• We have a generous family leave policy.
  
• We have a generous vacation policy.
  
• Every third year, each full-time employee is given a 2-week paid sabbatical in addition to earned vacation time, regardless of position. The employee assembling boxes gets the same sabbatical as the CEO.
  
• We have a pleasant working environment (clean, professional, we have appropriate tools to do our jobs). Our spacious, clean lunch room is always stocked with fresh, seasonal fruit and filtered water.
  
• We have a pleasant work culture. Bullying and intimidation are not tolerated. Nobody gets yelled at, ever. We go home at 5:00 pm (seriously, if I leave at 5:10 I'm locking up.) Managers habitually show up earlier than their reports. We're not required to, but most of us make it our practice.
  
• All employees are welcome to use the company's boat shop for their projects. They're also allowed to store their boats, RVs etc. on the secured boat shop grounds.
  
• For those of us who have to travel, we always get our own private rooms, stay in nice hotels and are not limited in dining/drinking etc. This is out of respect for the fact that travelling employees must be away from their homes/families and should at least be made comfortable in exchange for that sacrifice.

I could go on, but you get the picture. There is so much more to treating employees well than just upping their salaries regularly. In a nutshell, employees are respected, valued and trusted.

The downside for a company like ours is nobody wants to retire.

I work for one of the companies on the Fortune 100 Best list--Sheetz. It's our second year on that list, and we moved up several slots this year. It was all very exciting, especially since we're a regional company with only about 500 stores in 4-5 states.

Sheetz is a family-owned chain of gas station/restaurant/convenience stores centered in PA. Yeah, there's a lot of turnover on the entry level, however many the people in my store have been there have been there 5+ years. Management actively looks for entry-level people to promote up (I was approached for it before I'd finished my first three months). It's the first place I've worked where managers graciously accept commentary on their performance and actually act on it and check back with the employee to see if there's progress. If the store is busy, the managers is working right alongside us, or changing the garbage or cleaning the rest rooms or mopping the floor. There is nothing I am required to do as an entry-level worker that I have not witnessed every manager doing (including the district manager).

When the store does well on QA and customer service, every employee gets a bonus. Every quarter, every employee gets a profit sharing check. Though I'm part-time, I qualified for full insurance coverage. I get a generous mileage check if I cover another store for some reason. My starting wage at Sheetz was nearly $1 more than I made at a competitor's after 2 years of service (and still didn't have benefits at). Every 5 year anniversary, the employee and a guest are treated to 24 hours of luxury at a local resort (and are paid a day's wage to be there), all on Sheetz. Once you're been there for 3 years, you're invited to a to-do with the Sheetz family, which I've heard is a fun celebration of the workers, not so much the company.

The vacation and time-off policies are standard for the industry, however if you request a day off, the schedules are flexible enough that such requests don't affect your usual number of hours and the management bends over backwards to try and give everyone the days off they want. When my father died unexpectedly in May, they told me to go. I was gone four days (he died 11 hours drive away), got paid for all the time I'd been scheduled for, and there was never a hassle about how long I was gone.

Compared to Devil's employer, we're lacking a lot, but for our industry, we're pretty golden.

I've been told by several people I know that Starbucks is a great employer - mat leave and dental benefits, a pound of free coffee a week, 'flexible' hours that work around the staff as well as the needs of the company (according to a mum-of-four I knew) and nobody can deny the success that company has enjoyed.

I've also seen companies that coast on monopolising a good location that could be massively more profitable if they fired their General Manager.

I've only known one Starbucks barista (odd since it started here and we have one on every corner). She got fired because she ordered her free employee beverage one day, drank half of it and had to get back to work, so she handed it to one of us -- the manager accused her of giving away a free beverage (against policy) and fired her.

I once worked for a large insurance company here -- it was on the list of the top ten best places in the US to work for at the time. My manager had the same last name as a famous Mexican cartoon character -- and one day a cartoon appeared taped on his door. I reported it to him, telling him that I was sorry someone made that bigoted gesture and he said, "Oh, I put that up!"

When they fired me, they did it by having me go into the lunchroom where everyone (20 or so people) in my unit were eating. They sat me down at the table next to my unit and said I was being let go because they found out I had a mental illness and they would never have hired me if they had known (they did know -- I had asked for accommodation when I accepted the job). It was humiliating, to say the least. I found out later that the same VP who fired me did this kind of thing for fun all the time. Within 5 years, the company was no longer on the list of best places to work.

Costco is always one of the prime examples of this, and I think especially notable as so many of their employees are hourly, retail floor workers. It seems, at least to me, easier to be a great place to work when the majority of workers aren't on their feet or dealing with the general public, or in a traditionally minimum-wage category. Costco is also always an example of how raising minimum wages won't bankrupt companies or force higher costs.

As noted here -

CEO Craig Jelinek says he views people as an investment. Costco pays its employees an average hourly wage of $11.50 to start. After five years, they make $19.50 an hour and get an "extra check," a bonus of more than $2,000 every six months...

Costco workers pay a 12 percent out-of-pocket premium for benefits, while Walmart workers pay 40 percent...

Unlike rivals like Walmart, Costco works with unions. The Teamsters union represents about 10 percent of Costco's employees. The contract guarantees employees 25 hours of work a week.

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And here -

Joe Carcello has a great job. The 59-year-old has an annual salary of $52,700, gets five weeks of vacation a year, and is looking forward to retiring on the sizable nest egg in his 401(k), which his employer augments with matching funds. After 26 years at his company, he’s not worried about layoffs. In 2009, as the recession deepened, his bosses handed out raises. “I’m just grateful to come here to work every day,” he says.

This wouldn’t be remarkable except that Carcello works in retail...

Costco has thrived over the last five years. While competitors lost customers to the Internet and weathered a wave of investor pessimism, Costco’s sales have grown 39 percent and its stock price has doubled since 2009. The hot streak continued through last year’s retirement of widely admired co-founder and Chief Executive Officer Jim Sinegal. The share price is up 30 percent under the leadership of its new, plain-spoken CEO, Craig Jelinek.

Despite the sagging economy and challenges to the industry, Costco pays its hourly workers an average of $20.89 an hour, not including overtime (vs. the minimum wage of $7.25 an hour). By comparison, Walmart said its average wage for full-time employees in the U.S. is $12.67 an hour, according to a letter it sent in April to activist Ralph Nader. Eighty-eight percent of Costco employees have company-sponsored health insurance; Walmart says that “more than half” of its do.

Costco workers with coverage pay premiums that amount to less than 10 percent of the overall cost of their plans. It treats its employees well in the belief that a happier work environment will result in a more profitable company. “I just think people need to make a living wage with health benefits,” says Jelinek. “It also puts more money back into the economy and creates a healthier country. It’s really that simple.”

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Your company sounds great, they should be writing the book! Or, at least, being written about!

Devil Ledbetter said:

We have a generous paid time off policy, with no differentiation between sick days where you're actually ill, doctor appointments, taking kids to the dentist, funeral leave and personal emergencies (I have to go home because my new refrigerator is being delivered, for example). There is not a limit on PTO. If an individual employee is thought to be abusing PTO it is taken up privately between that employee and her manager.

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This is the nicely thought out part. We've got PTO and earnable flex-time, but taking it is a sea of choices: there's bereavement leave (PTO), sick days (PTO)(when you're actually sick), Short and Long Term Disability (PTO at different rates), Family Responsibility Leave (for when family members are sick or personal emergencies (EFT), as well as Flex-Time itself, where you can earn hours, then book off as you want, if staffing-levels permit(EFT). (Flex-Time and FRL has to be either earned in advance, or gradually earned back.) As well, there's vacation time. It's a sea of choices, each with it's own little rules, and variations. It's all for the sake of control and statistics, I assume, so they can track the sick days and chide us, etc. but it would be so much simpler if it was all one pool.

*When FRL was first announced, it was to be used strictly for the purpose of childcare. This had to be vigorously objected to by the childless, as we would never get the benefit of it, for deliveries, tradesmen, etc.
Turns out the original agreement between the Employer and the Union had been intended to cover all those possibilities, but the keener in H-R who wrote up the memo explaining the changes decided to parse it as tightly as possible, for reasons of her own.
So much depends on the people involved.

At my place, there are six personal days. You can use it if you are sick, need to go to the doctor or need to bereave. Most workers don't use it all up. Often the segregated off-day rules come from negotiations with employees and there hasn't been an effort to simplify the rules. Newer companies opt for the simplified rules which contain bereavement and doctors simply because they can and know about that option.

Awesome employers are needed for growing industries, shrewd and awful employers are needed for companies and sectors that need to downsize. Excessive cruelty in firing someone is something that should be taken to court. Keep the sharks on their toes and not to permit them too much joy when doing their job.