Why most employers arent like Starbucks and Costco
This article points out the facts as to companies that pay their employees low wages and benefits have poor customer service levels.
You get what you pay for.
Pay employes shit wages and crappy benefits, you employ unmotivated shit employees that provide shitty customer service.
If those unnmotivated shit employees that provide shitty customer service don't like their shit wages and crappy benefits they can always go to work at some other company that pays employees shit wages and crappy benefits and provide shitty customer service there.
Free market job market forces combined with trickle down economics work well in some cases as to ensuring shitty customer service and high rates of employee turn over.
By Rick Newman
Being a coffee clerk may not be a dream job, but Starbucks (SBUX) has added some kick to its line positions with a new program that covers college tuition for employees who meet certain conditions. And Starbucks, like Costco (COST), Whole Foods (WFM) and a handful of other enlightened employers, offers starting pay well above minimum wage, along with other benefits it probably doesnt have to.
Firms that offer employees above-market pay and perks usually contend it makes good business sense to treat workers well, since it boosts morale, discourages turnover and improves the companys image. So why dont more companies do it? The answer involves a combination of pragmatism, short-sightedness and sensitivity to Wall Street concerns.
Companies basically fall into two categories in terms of the pay and perks they offer their workers: Those that view their workforce as a cost and those that consider employees an investment. It wont be surprising to hear the overwhelming majority of companies take the cost approach. The number of companies who treat employees as an investment is pretty slim, says Lee Dyer, a professor at Cornell Universitys ILR School. When a company like Starbucks invests in its people, the reason it gets so much attention is because its such an anomaly.
The few companies that do make a point of treating workers better than average have a few things in common. First, they typically distinguish themselves in the marketplace through quality, service or some attribute other than low prices. That makes it important to have loyal, personable employees who make a good impression on customers and maintain quality control throughout the ranks. Starbucks, for instance, clearly doesnt woo customers through discounts. Instead, it emphasizes a pleasant experience in its stores, which tend to draw businesspeople and others willing to pay $4 or more for a cup of coffee. If youre in the business of touching customers every day, you want a workforce thats loyal and in a positive mood, says Mike Van Ham, a principal with Buck Consultants.
Hiring talented employees, even at the entry level, requires the kind of fairly sophisticated hiring operation many companies dont have, either because theyre too small or theyve never invested in it. It helps if the firm has centralized control of all its outlets, which is difficult at chains such as McDonalds (MCD) or Subway, which franchise most of their stores. And most companies that feel strongly about high-quality employees have a founder whos passionate about the issue and remains influential at the firm. That certainly pertains to Howard Schultz of Starbucks, John Mackey of Whole Foods and Jeff Brotman and Jim Sinegal, the co-founders of Costco. A knack for wringing good PR from employee programs which some have accused Starbucks of doing with its new college benefit doesnt hurt, either.
There have been dozens of studies showing the investment approach to employees can pay for itself, and then some but only if it fits with the companys culture and is institutionalized among managers at all levels. For starters, offering better compensation than competitors draws better job applicants.
Its a way to pick out the best workers from the undifferentiated masses, says Mark Pauly, a professor at the University of Pennsylvanias Wharton School. You want to avoid the workers who will shirk and keep the ones who wont. A well-known 2006 study by Wayne F. Cascio comparing Costcos business practices to those of Sams Club which aggressively works to keep wages and labor costs as low as possible found Costcos productive workforce more than offset its higher costs.