Some companies have learned to create good jobs for employees at every level of the organization, blue collar and white collar alike.
By John Case
Nearly every politician these days wants to create more jobs. And not just any jobs — good jobs. But what is a good job, and how does a company go about creating one?
Right now, plenty of Americans already have what nearly anyone would define as a good job. They earn great money, receive generous benefits, and enjoy a great deal of job security. They get a chance to learn and advance.
Trouble is, most of these people are college graduates, many with advanced degrees. They have advantages like programming abilities, legal or medical knowledge, business skills such as marketing or finance. Companies create good jobs for these folks without any encouragement, because they need the talent.
The two-thirds of Americans who don’t have college degrees face a different kind of labor market. They are often paid by the hour, which means they don’t get paid if they have to miss work. Their schedules may vary from week to week, even day to day. Median weekly earnings for high-school graduates are $678, slightly more than half the median for college graduates. Walmart, the nation’s largest private employer, recently raised its entry-level wage to just $11, or $440 a week for full timers.
President Trump and many other political leaders promise to bring back the well-paid blue-collar jobs of the past — factory work, coal mining, and so on. But this is a fantasy. The nation gained 500 coal mining jobs during the past year. As Paul Krugman has pointed out, this is 0.0003% of total US employment. He also notes that five times as many people work in solar as in coal.
As for factories, manufacturing work accounts for less than 10% of US employment these days, down from 25% in 1970.
As for factories, manufacturing work accounts for less than 10% of US employment these days, down from 25% in 1970. Most new plants are likely to have more robots than human beings, and the few workers who do manage to land manufacturing jobs are often paid on a lower scale than veteran factory workers.
But the picture isn’t wholly grim. As my coauthors and I describe in a recent Harvard Business Review article, some companies have learned to create good jobs for employees at every level of the organization, blue collar and white collar alike.
Part of their strategy is to change the nature of compensation. Rather than paying an unsustainably high fixed wage, as the big manufacturers of the past once did, they pay market rates — but they supplement the wage with stock awards, profit sharing, or both. Yogurt maker Chobani famously gave its workers stock worth up to 10% of the company’s valuation in 2016. Florida-based Publix Super Markets, which is wholly owned by its employees, gives shares every year to workers who put in 1,000 hours or more. Over the past several years, the award has come to 8.5% of pay. Publix makes a point of promoting from within, and as workers advance through the ranks, the stock awards can add up to a comfortable nest egg.
A second part of the good-jobs strategy: involve employees in the business through open-book management.
A second part of the good-jobs strategy: involve employees in the business through open-book management. This not only makes the company more productive, it provides workers with valuable skills that they can take to another employer or even another industry should they find it necessary.
Open-book management usually works like this. Companies consult with employees and managers about the biggest challenges they face. They identify one or two key numbers that they’d like to improve — numbers that link directly to the financials. As we note in our HBR article, the relevant metric might be weekly sales at a retailer, average tabs in a restaurant, shipments or rework rates in a plant, or occupancy rates in a hotel.
Employees then take on responsibility for tracking, forecasting, and improving those numbers from week to week. If they hit certain targets — targets that they themselves have helped to set — they typically get cash bonuses. The bonuses cost the company nothing, because the improved financial performance pays for them. At many open-book companies they put several weeks’ worth of additional pay in employees’ pockets. And they come in addition to whatever stock or profit-sharing benefits the company may provide.
It’s a simple system, and it works. A few years ago a big travel agency launched an open-book experiment in three of its 27 branches. Employees focused on direct profitability, or revenue minus direct costs. They began figuring out ways to improve this metric. One customer relations rep, for instance, started contacting vendors to recover money lost owing to hotel no-shows, canceled flights, and the like. She collected close to $200,000 in the first several months.
After a year the outcome could scarcely have been clearer. The three experimental branches exceeded their annual profit targets by 10%, 17%, and 20% after incentive payments. None of the other 24 branches achieved its profit target that year. The employees in the experimental branches took home a nice bonus, and they learned a great deal about how to run a profitable travel business.
The goal of employee ownership and profit sharing is to spread the wealth that a company creates. The goal of open-book management is to help employees learn to think like businesspeople — like owners. Put those two together and you can create a great company, and a whole lot of good jobs.
John Case is author of two books on open-book management; he is also coauthor of “Equity: Why Employee Ownership Is Good for Business,” (Harvard Business School Press). His articles have appeared in Inc., Harvard Business Review, and numerous other publications. He is also a board member of the National Center for Employee Ownership (NCEO).