Western politicians have been promising and not delivering good jobs at good wages for generations now, but one associate adjunct professor at the Sloan School of Management at the Massachusetts Institute of Technology thinks she has discovered how it can be done.

Her solution to this perennial challenge is making Zeynep Ton, 41, a popular academic in Washington these days. Reached the day after a meeting at the White House and the same week in which US presidential candidate Hillary Clinton made a reference to her work in a key economic speech, Ton discussed the 10 years of research that went into her 2014 book, The Good Jobs Strategy.

In her book, Ton explains how four very different retailers—Mercadona, Spain’s largest supermarket chain; Trader Joe’s, the US grocery store chain; Costco, the US’s second-largest grocery store chain; and QuikTrip, a US convenience store chain—have made above-average wages part of their competitive advantage, and the key operational decisions that make their plumper pay cheques possible. Edited excerpts from an interview:

You’re an operations professor. How did you get interested in wages?

I started my career looking at retail supply chains. Early on, I, along with the other researchers I was working with, found a pretty big surprise working on a study of retailers run by Harvard Business School and Wharton: even those retailers that were really good at managing their supply chain were doing a poor job inside their stores with regard to inventory management.

These problems had a huge impact on sales and profits. We looked at why some stores were doing a better job than others. We found that stores that had more employee turnover, less training, were understaffed, all had more problems.

I realized that retailers were actually caught in a vicious cycle, which starts with the mentality that people are just a cost, and leads to pressure to minimize that cost. Underinvestment in people leads to inventory problems, customer service problems, and eventually to lower sales and lower profits. When the sales are lower, payroll budgets are lower and companies invest in their people even less. And the cycle continues.

I started looking for companies that operated differently, and I found Mercadona and then QuikTrip. Although they were so different in so many ways—the size of their stores are different, their customers are different, what they sell is different, how many products they have. Yet, they both get to low prices, good jobs and great performance in exactly the same way. That was the aha! moment for me. I identified the common practices between these two, and then when I looked at a few other successful retailers, including Costco and Trader Joe’s, I found the same traits: a very good operations strategy that depends on highly motivated people.

If your good jobs model works so well, why has the low-wage model been so popular?

I think it’s the path of least resistance. The good jobs strategy requires a long-term mindset. It also requires a systems perspective. Most companies operate in silos. Most business executives probably find it easier to have a business model where they don’t have to depend on hundreds of thousands of workers. It’s easier to focus on cost than on generating more value.

It’s also easier to scale a model that doesn’t depend as much on people, because when people are so important to your model, you have to be very careful about growth, you have to be careful about who you hire, and that requires a lot more thought.

In your book, you say companies that pursue this strategy need to make some choices.

The strategy is not just pay people more. It’s about making four operational choices. First, offer less. If you have a factory that focuses on a more limited number of products for a limited set of customers, it will perform much better than competitors that do not focus.

Second, standardize your work and empower people. On Henry Ford’s assembly line, things were standardized and people didn’t have to do narrow tasks over and over. But that type of standardization doesn’t produce great outcomes for quality or productivity or worker satisfaction. That’s where empowerment comes in. Toyota took the Ford model and on top of standardization, added empowerment. They empowered their people on the assembly line to identify and solve problems. That combination of standardization and empowerment works great because it’s very efficient.

The third choice is cross-training, an important form of flexibility when you have variable demand. When people can do different jobs, you build more slack into the system.

The fourth choice is to operate with slack: staff stores with more employees than the expected workload.

These four choices really depend on great people, and that’s exactly why these companies invest in their workforce. You can’t use empowerment if you haven’t invested in workers, because it only works when people make good decisions. You can’t use people to do multiple tasks if they don’t know how to do them appropriately.

Does investing in your employees bring any other advantages?

This ability to execute allows you to do things that your competitors can’t. For instance, QuikTrip realized several years ago that people want to be able to buy fresh food really fast. So they prepared some of the food inside their stores. Any other convenience store would have found it very difficult to prepare fresh food in their stores because they have very high employee turnover and weak operations.

You’ve written about retail, but are your conclusions only applicable to certain kinds of retailers?

The four operational practices behind this model are not at all unique to retail. I haven’t studied enough industries to say that yes, it will work in every single industry, but I don’t have a reason to believe it wouldn’t work in some industries.

An unabridged version of this interview can be read on www.foundingfuel.com, printed in an exclusive partnership with CKGSB Knowledge.

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