Mastodon

Author: Adam Best

The Structure and Growth of Teams

Talent wins games, but teamwork, and intelligence win championships. – Michael Jordan

Few things are as important as teamwork and the intelligence required to steer the team. From the systems of government to the microchip that processed this document for you to read, all of humanity’s greatest achievements came from groups of people working together. Let’s look at team formation and the benefits of dialling in the social parameters surrounding them.

In the beginning a group may be formed from the shared interests of its members. To become a team, there must be an underlying goal that is to be accomplished. Most teams are built of members that hold complementary skills to each other and hold each other accountable for the success of the group. There are a variety of theoretical models that describe the formation of groups. The general idea is that groups progress from their initialization to their end moving through common steps along the way. In the beginning, they must organize themselves for the task ahead and sort out any conflicts. Once the way is clear the group can move on to their purpose and focus on the achievement of the goal.

It’s highly possible for a team to have multiple leaders that split management tasks amongst themselves. The effectiveness of a team depends significantly on two factors: norms of behaviour and group cohesion. Norms of behaviour are a cultural benchmark for action. The signals for what is acceptable and unacceptable might come from within the group; this would be known as an organizational subculture. They may also come from the organization itself. These norms will influence several dimensions of performance as they define the competitiveness, values, and adherence to policy within the group.

Group cohesion is the level of influence members have over each other to hold each other accountable for the success of their mission. Cohesion typically forms over time as members get to know each other and the accepted norms at play. Cohesion is a powerful factor that is often planned for by business leaders that are attempting to maximize results.

Team building is an important activity that we have all engaged in at one point in time or another. The focus is to develop group cohesion, define role expectations, and develop interpersonal relationships. Exercises where we introduce ourselves and talk a bit about ourselves help to get the ball rolling but there are many more options; many of which don’t shy away from making fun their primary function. Fun can certainly bond people together.

Teams come with their own sets of advantages and disadvantages. Diverse teams can bring many perspectives into focus on a single problem, opening the door to greater innovation and creativity. Groups also have the benefit of being able to check their own work. Whereas an individual may not be able to see their own mistakes a group has more opportunity to clean up after each other. When a team is functioning well it can produce more work in a shorter period than an individual may. When the team is not coordinating so well it is entirely possible to be less productive, known formally as a process loss. Teams also bring fulfillment to individuals through shared achievement.

Studies have shown that teams frequently do worse than individuals do. What gives? Here are the main problems: Poorly defined team goals can cause the group to have a hard time falling into step towards their goals. Weak leadership leads to poor coordination and lack of direction and so is a necessary pillar of success. Team members must do their part to make the teamwork, if too much time is spent resolving conflicts or developing relationships the team itself can falter. The challenges of coordination can drag a team down with their sheer gravity. Performing as one can be very demanding to get right. Lastly an imbalance between collectivism and individualism can stifle the individual’s voice which will silence the innovative benefits of a diverse team.

In the end, a team requires a lot of work to perform at its peak potential. It’s important to know what it takes to develop and run a team, or you can quickly find yourself wishing you had just left it to the individual. To quote Henry Ford “[if] everyone is moving forward together, then success takes care of itself.”. Teamwork makes the dream work, but you have to get that team locked in and ready to perform.

References
ORGB. (2020) Nelson, Quick, Armstrong, Roubecas, Condie. 

This article was written by summer student Adam Best and edited by summer student Hannah Mastin. This article was funded by the Government of Canada.

Inclusion, The Global Directive We Love

Hello Traveller! Today I am fortunate enough to be able to write about something I feel close to, inclusion. Inclusion matters because it is a critical component of a high functioning team, and it is an excellent philosophy to practice as the world is becoming more diverse. Please adjust your thoughts now and focus on inclusion, a state of being included. A recent study by Mckinsey, and the ensuing “slew” of articles that followed, has been looking at the idea that diverse and highly inclusive workplaces can lead directly to higher sales, and innovation. This seems to be great news if you’re in favor of either money, technology, or the cultural revolution we are headed through now. I’m speaking of course about the abolition of hate speech directed towards traits and differences; notable segments, like the education field, business and tech, the United Nations, government, and invested citizens, are voting inclusion with their actions and words, which is a good thing because the population may want to work together on account of the planet heating up and the icebergs melting.

Now inclusion, has been identified as separate and vital to achieving a diverse workplace and being able to use the benefits as such. Meaning, you might hire people who are diverse, but said employees must also interact, and develop as a team that manages inclusion in good faith. A different report from Mckinsey recommends having diversity in all levels of the business. Making diversity and inclusion (DI) every manager’s job from top to bottom level, developing transparency for rewards and promotions to reduce ambiguities. Adopting a zero-tolerance policy towards discrimination to allow for people to feel more relaxed, and actively embracing new types of diversity that are receiving attention. This sounds like it would bring inclusion front and center, but like everything else it will require oversight to ensure progress is being made and ethics are being upheld.

DI strategies have developed in recognition of the fact that there must be time spent managing and promoting inclusion for it to thrive. People must feel the positive connections that come from trust and close relationships to reach their potential in the workplace. To access the potential gains of diversity, we must be allowed to relax a bit. One must be able to be their true authentic self to get there. Furthermore, feeling included can lead to the development of loyalty and group cohesion. Cohesion is how groups hold each other accountable and more developed cohesion will increase their ability to reliably complete their group tasks. It seems fitting to discover that in business it is good to work with diverse people when put it in contrast to growing legislation and deliberation on reducing racism.

So, it becomes no wonder that inclusion is the topic of the day then. By opening ourselves to others we craft a community and find enrichment in our lives. This a marathon though not a sprint. By leading the way in inclusive and ethical business we are opening the doors for a better future in communication. Thankfully, this will mean fostering a global outlook in all our dealings, ideally until it has become the standard of business in the 21st century. The positive effects of good faith business practices on our society and conscience can not be overstated.

Attaining true inclusion culture for the long term isn’t a walk in the park though. To be inclusive a company needs to make sure its employees are inclusion minded and share the same values on the matter by checking, constantly. This can mean a lot of training and repetition until the values of the training set in. Eventually though, with enough hard work a culture can become inclusive and diverse and may even reach into the next level of innovation and performance.

References

https://www.mckinsey.com/featured-insights/diversity-and-inclusion/diversity-wins-how-inclusion-matters
https://www.cio.com/article/3262704/diversity-and-inclusion-8-best-practices-for-changing-your-culture.html
https://knowledge.wharton.upenn.edu/article/inclusion-helps-companies-succeed/
https://www.mckinsey.com/featured-insights/diversity-and-inclusion/diversity-wins-how-inclusion-matters

This article was written by summer student Adam Best. This article was funded by the Government of Canada.

What is Work Culture? Where does it come from and how do we change it?

There are few topics as broad, or fundamental as culture. Most of us only recognize the dimensions of our culture when we begin to compare our way of life to that of another. Workplace culture is built of all the customs, habits, traditions, values, skills, beliefs, and knowledge of the people included in the company. (Nelson, Quick, Armstrong, Roubecas, Condie, 2021) It affects everything that happens, every action taken, and is shaped by every person that is included. Culture regulates behavior through norms and values, and in so defines the character of a company. (Nelson, 2021)

To get culture right it is crucial to have an idea of what it should look like and a plan for its formation before the start of an enterprise. Defining what is desirable and undesirable behavior is necessary to guide staff toward business objectives in the best way. An inclusive and supportive culture leads to satisfied employees and can enforce those values into employee behavior. (Nelson, 2021) The same applies for a competitive or aggressive culture; its employees will work hard to achieve results but may focus less on their soft skills. (Nelson, 2021) When the values of the culture are the same as the values of its employees, it provides a sense of identity and motivates them to higher levels of achievement.

There are three different parts that compose the culture of an organization. There is the structural system consisting of policies, management processes, and plans. (Nelson, 2021) This structural culture of the organization is crafted by its leaders. It also includes objectives, the authority hierarchy, reward systems, recruitment, and training methods. (Nelson, 2021) As a result, the structural systems produce formal norms, traditions, values, and knowledge. Then there are expressive systems which are created by organizational history, the business environment, and society itself. (Nelson, 2021) These systems propagate the blueprint for how meanings, values, and beliefs are espoused within the organization. (Nelson, 2021) Finally, there are the individuals within the organization. Each person brings their own beliefs and personalities into the mix that shape the culture of the group.

Depending on the unique composition of a culture it can bring strengths or weaknesses that can make or break an organization. An outcome of the behavior controlling nature of culture, is that it can influence employees to be competitive, support creative thinking, demand punctuality, or signal how important it is to follow the policies of the organization. (Nelson, 2021) A culture that promotes open communication can reduce conflict or encourage relationship building, which in turn may increase productivity and improve employee satisfaction or stability within the workplace. (Nelson, 2021) In the inverse perspective, culture can lead to a variety of significant problems. A weak culture (which is one that can easily change from day to day) can result in instability that is stressful to some. (Nelson, 2021) A culture that is too strong may be resistant to change and prevent the development and adaptation that is critical for survival. (Nelson, 2021) It is also possible for a culture to walk astray from its founding values. If bad behavior is left unchecked, it can lead to its promotion as employees may interpret lack of punishment as a green light. (Nelson, 2021) Culture is a big attraction for the modern job seeker and having a misalignment between ideals and reality can lead to job dissatisfaction quite quickly.

It all starts with an idea. When an entrepreneur or founding party chooses their business, the environment that it operates within defines the first set of rules with its historical expectations. From there the values and beliefs of the founders are poured into the organization’s structure giving the second layer of culture. Jeff Bezos, founder of Amazon, once said “Our culture is friendly and intense, but if push comes to shove we’ll settle for intense”. (Nelson, 2021) The third layer comes as the structural systems of policy and plans are laid out by the founders. By now the expressive systems of beliefs and behaviors will have formed naturally in the process of the founders working together and will evolve as others are added to the organization. (Nelson, 2021) The culture will follow the personality of the CEO in a smaller organization but as it grows it will dilute to include the influences of other directors and members.

There are five points of attention that communicate the desired culture lying in the behavior of leadership. These include what leadership pays attention to, how they react to crises, how they behave, how they give out rewards and how they hire and fire. (Nelson, 2021)
What leaders pay attention to is one of the most obvious clues to what is most important within the organization. They will have a certain set of behaviors, metrics, or objectives they need to monitor. Employees will be aware of what their boss cares about and take direction from observations. (Nelson, 2021)

How leaders react to crises can reveal a mismatch between proposed values and real values within the organizational culture. (Nelson, 2021) Imagine a company that says that it cares about its employees but doesn’t hesitate to introduce layoffs in a touch of hard times. Employees will pick up on this and share the story of what happened revealing the true nature of the organization for a long time. How leaders behave is often replicated by employees and will reveal what is acceptable behavior. (Nelson, 2021) If a manager tends to swear or complain about certain customers, it sends a signal about perceptions and beliefs within the organization. (Nelson, 2021) Bosses are often tasked with being role-models and coaches, so it is no wonder that their actions can be interpreted as accepted norms.

How leaders distribute rewards must be on message with the intended values of the organization to ensure that employees’ perceptions of company values are the same. (Nelson, 2021) Rewarding staff for performance when espousing the value of tenure shows the true values of directors and CEOs.

How leaders hire and fire employees defines the culture in some of the starkest terms. The decision to fire or not to fire an individual for failure to perform or for unethical behavior communicates values of the company and will reinforce that culture by the impression formed by employees. (Nelson, 2021) Notably, when hiring, leaders often look for those who share similar beliefs to promote the desired culture in the organization. (Nelson, 2021)

Workplace culture is constantly changing. Through the shifting of society to the changing of the work team, it is always stepping forwards and back and side to side. Controlling the change is another matter entirely, as the myriad of factors that compose a culture are often invisible except in certain situations. Part of what makes up a culture is often unconscious as we can be unaware of our attitudes and beliefs, and this can make grappling with it a challenge. (Nelson, 2021)

Cultural intervention is a strategy wherein the leadership will review all communications, past and present, to make changes that reflect the new values they are trying to promote. (Nelson, 2021) After a period to allow staff to adopt the new values they will remove employees who do not keep up and hire new ones, with the hopes they will take to the proposed values. (Nelson, 2021) Changing culture takes time and requires constant effort on the behalf of management.

Citations

Organizational Behavior (2021). Nelson, Quick, Roubecas, Condie, Armstrong

This essay was written by summer student Adam Best and edited by summer student Hannah Mastin. This article was funded by the Government of Canada.

Leadership in Times of Change

Change is constant. The good and the bad; change leaves us twisting and dancing. Leaders guide the pack through the change that is most certainly on its way. Every company and organization that is to survive requires a strong leader that can motivate and enable others to contribute to their goals. A leader often disrupts the status quo to pave the way for new plans through a combination of communication, managing the internal forces within the group, and removing barriers that hinder members from their shared success. The best leaders must be highly strategic, and both oriented to the task and people demands of managing others.

It is important to be aware that we will likely face change and to understand the ways in which to respond to it. Each force of change will bring barriers for the leader to remove. From within the company there may be forces that ignite change such as a loss of productivity, poor quarterly profits, strikes, or a disenchantment of the work force. The main external forces driving change are globalization, workforce diversity, technological change, and managing ethical behavior. We will look at these external factors briefly before examining one of the most popular theoretical models for understanding change, then we will consider the most important steps for leaders who want to stimulate change.

Globalization has opened opportunities for many businesses to interact with and serve markets anywhere in the world. Leaders must be aware of these changes to capitalize on all opportunities for growth, and to foresee threats from competitors who have access to the same markets they rely on. Workforce diversity is closely related to globalization. As the globe shrinks, demographics become more diverse which leads to a greater need to manage diversity and ensure inclusion. Technological innovation is changing the world every year; failing to stay at pace can result in loss of competitive advantage and income. Lastly, in a connected world that is striving for more accountability, inclusion and ethical behavior, a business may have cultural issues such as systemic racism or unethical practices that must be unrooted.

Kotter’s Change Model is one of the more popular models for understanding how to initiate and sustain change and describes the process through eight steps.  Kotter recommends first creating a sense of urgency. Using a strong, aspirational statement to communicate the urgency of change, will initiate motion. Second, Kotter advises implementing a guiding coalition. Preparing a team to spearhead and guide others on the pathway to change. This approach is more likely to succeed than attempting to initiate change alone. The third step is forming a strategic vision and initiatives. One must document how they will act and what success will look like once the plan is complete. This helps explain to newcomers why you are seeking change and what it will mean once it’s achieved. The fourth step is enlisting a volunteer army; more agents of change inevitably enhance the reach of the campaign and help spread the message. Next, the fifth step is to enable action by removing barriers. If no one is removing barriers then the coalition will be slowed down, and loss of momentum can very well lead to failure during such a demanding process. The sixth step is to generate short term wins. These are the building blocks that you show to others as proof of change in action. Kotter recommends celebrating short term wins to help motivate others. Step seven is to sustain acceleration; now is the time to keep pushing towards change goals and will demand extra effort to keep the ball rolling. Finally, step eight is to institute change. At this final stage Kotter recommends reminding followers of the change plan until the new behaviors become habitual and long lasting.

Kotter’s model is helpful to visualize and navigate the way through change but there’s still so much more to leadership in times of change. There is a quote attributed to Mahatma Gandhi: “Be the change you wish to see in the world”.  When tasked with leading through change it is essential to fully embrace it. To inspire others to follow, a leader must be maximally engaged and on task. Leading requires presenting oneself in a way that inspires confidence and an interest in goals. Change must be prepared like a dinner so that it is palatable and served on a regular basis so that the nutrients are sustained for the body to use as fuel.

References
https://www.kotterinc.com/8-steps-process-for-leading-change/

ORGB (2018) Nelson, Quick, Armstrong, Roubecas, Condie.

This article was written by summer student Adam Best and edited by summer student Hannah Mastin. This article was paid for by the Government of Canada.

The facts about workplace wellness programs

As much as a business is a vehicle for profit, it is capable of being a force for good. Workplace wellness programs help businesses by improving the physical and mental health of their employees.  This aims to give back to the business by increasing the capability of their staff to perform, and reducing expenses for health care coverage. In a 2014 U.S. study, workplace wellness programs were divided into the following categories, from most to least frequent:  Nutrition/Weight Management, Smoking Cessation, Fitness, Alcohol and Drug Abuse, Stress Management, Health Education, and Other. Many businesses use financial or social incentives to help motivate staff to participate.

Workplace stress influences behaviours like productivity, staff turnover, employee satisfaction, and absenteeism. A 2017 survey said 25 percent of Canadians have left jobs due to stress and 17 percent were considering it. Furthermore, a study from Health Canada in 2000 showed the increased health risks of high stress environments. When expected to contribute high effort for little reward there is a 2-3x increased risk of injuries, 2x risk of substance abuse, 3x risk of heart problems and back pain, and a 5x increased risk of certain cancers. In a high-pressure environment where employees have little control over their work, there are 2-3x risk of infections, mental health problems, and conflict; as well as greater risks of cancer and injury.

Depending on which study you look at, the efficacy of workplace wellness differs. An abstract posted in the Journal of Occupational and Environmental Medicine in 2011 claims measurable improvements in “those who are underweight, those with high systolic or diastolic blood pressure, high total cholesterol, high low-density lipoprotein, low high-density lipoprotein, high triglycerides, and high glucose.”. Another study, from Rand Health Q. in 2013, concluded that the impacts of a wellness program are sustainable and “clinically meaningful” but estimated that savings on health coverage could be lacklustre.

Other studies, including a publication from Harvard, cited no clinical differences and cautioned that return on investment (ROI) would be underwhelming in the short term. It should be obvious that aside from smoking and other dangerously bad health habits, no one should expect a large ROI in as little time as a year or two. Workplace wellness is a long-term investment that protects the longevity of workers and improving fitness and wellbeing takes time.

When administering a wellness program, large companies have the benefit of a greater administrative task force, bigger budgets and facilities. Small businesses must overcome potentially rural settings with less access to providers, smaller budgets, fewer management hours, and increased difficulty of protecting employee privacy.  Employee assistance programs are popular among big businesses offering aid with mental health issues or substance abuse problems. Big firms also occasionally have 24/7 Teladoc services, paid naps, in-house chefs to cook nutritious meals, free gym memberships, on site fitness classes, and unlimited paid time off. These perks sound great, but what about small businesses?

A small business can either build their own program or hire an external provider to manage the program.  If going it alone there are two pillars to nailing wellness for small businesses. The first one is to be creative and aware of the needs of the workforce. Doing a little research in the form of surveys can help illuminate needs and wants of employees. Be weary that surveys aren’t always 100 percent reliable. The second is having a strong communication strategy; winging it can run the risk of coming off as unprepared and can damage employee buy-in.

Once the foundation is laid a quick trip to Google will net hundreds of creative options that work for a wide variety of unique business formats. The program can be as simple as encouraging extra walking breaks, free healthy snacks, or putting together an email newsletter to educate staff on the benefits of different healthy activities. These days it is not enough to just pay your employees, and most will appreciate the extra care and investment in their well being. 

References

https://www.monster.com/career-advice/article/companies-good-wellness-programs

https://journals.lww.com/joem/Abstract/2011/07000/Effectiveness_of_a_Workplace_Wellness_Program_for.15.aspx#:~:text=In%20addition%2C%20studies%20have%20shown,behaviors%20and%20long%2Dterm%20health.

https://hms.harvard.edu/news/do-wellness-programs-work

https://pubmed.ncbi.nlm.nih.gov/33289018/

https://www.ncbi.nlm.nih.gov/pmc/articles/PMC4945172/

https://www.reference.com/world-view/percentage-lives-spent-working-599e3f7fb2c88fca
ORGB (2018) Nelson, Quick Armstrong, Roubecas, Condie

This article was written by summer student Adam best and edited by summer student Hannah Mastin. Thia article was funded by the Government of Canada.

Evolution of Labour: The 4-Day Workweek

Search Google right now for the four-day work week and you are bound to find multiple new articles spinning their take on this hot topic. Writers are hailing the onset of a labour revolution; a shift unseen since the 20’s and the historic transition from six-day weeks to five. The Cliffs Notes version is that the four-day work week is currently entering trial across the globe, following the success of a handful of early experiments. Countries and companies are rolling out pilot programs, egged on by the promise of reducing economic waste and permanent long weekends. In some fortunate positions employees who can complete the same work as before, in four days, receive the same compensation as if they had worked five days.

There are two organizational theories that are interesting to look at before we consider the possibility of condensing five days into four. The Punctuated Equilibrium model says that groups do not actually get down to business until halfway through their deadline, at which point behaviour shifts and production ramps up. Parkinson’s Law, defined in 1955 by British Historian Cyril Parkinson, states that people have the tendency to fit their work to the time allotted. People can work faster when they need to, but tend to act leisurely, chit-chat, or do non-essential tasks if there is no looming deadline driving them.

The most notable test run of reduced hours with the same pay may be Microsoft Japan’s. Through August of 2019 Microsoft Japan ran a four-day work week with great results; productivity measured in sales went up by 40 percent; paper printing went down 59 percent; and electricity fell by 23 percent. 94 percent of employees were happy with the program. Jack Kelly insightfully notes in his report published for Forbes however, that the numbers are not everything here. He suggests that staff could have worked exceptionally hard during the trial period or may eventually take the new system for granted once it becomes the standard of operating; one month does not necessarily mean productivity would be sustained.

The excitement for three-day weekends is so universal that it has become political as governments and politicians are showing their support. The government of Spain is offering to help businesses pay for expenses incurred in a national four-day work week experiment.  Andrew Yang, a progressive Democrat who ran in the 2020 U.S. election, said the country should “seriously” consider making the switch on his Twitter account, expressing the benefits for worker wellness and work life balance.  In Ireland, there is a conglomerate of organizations putting together a pilot of the four-day week with mentoring and assistance for companies willing to give it a shot. The government will provide funding for researching the social, environmental, and economic results of the experiment.  Scotland and New Zealand are also reported to be involved in talks for the four-day work week.

It is not all sunshine and rainbows though. Concerning four ten-hour days there are voices of opposition. The primary concerns are worker efficiency, stress accumulation, and competition. Some are of the view that if the week could be condensed workers must not have been efficient or focused. The suggestion here is that management needs to do a better job controlling employee production. Another counterpoint is that working four ten-hour days accumulates more fatigue and stress than does five eight-hour days. There is also an argument based on the idea that competition will gain an advantage by continuing a five-day week, possibly contacting your customers while you are unable to respond. Other voices of concern are focused on the loss of work culture, the fostering of relationships and a possible loss in career development.

The organization of work is an ever-evolving beast that rides on the saddle of technology. Most businesses that can cut hours for the same pay are either tech or knowledge enterprises, wherein the product for sale is often knowledge or information. The question of a four-day work week will most likely prove to be a circumstantial tool. Some industries and corporations could thrive with periodic use, some may use it year-round, and some may never see a positive implementation. Will this be a worldwide change in labour practices, or will it fizzle out as incompatible dream material? The answer might be right around the corner. Oh, what a time to be alive.

References
https://www.history.com/this-day-in-history/ford-factory-workers-get-40-hour-week#:~:text=On%20May%201%2C%201926%2C%20Ford,office%20workers%20the%20following%20August.https://www.workstars.com/recognition-and-engagement-blog/2020/03/25/six-businesses-that-have-moved-to-a-four-day-working-week-and-what-they-found/

https://www.theguardian.com/world/2021/mar/15/spain-to-launch-trial-of-four-day-working-week

https://www.nbcnews.com/business/business-news/four-day-work-week-might-be-exactly-what-u-s-n1229631

https://www.businessinsider.com/andrew-yang-4-day-workweek-longer-weekend-improves-mental-health-2020-5

https://news.osu.edu/why-a-four-day-workweek-is-not-good-for-your-health/

https://personalmba.com/parkinsons-law/

ORGB. (2020) Nelson, Quick, Armstrong, Roubecas, Condie. 

Minimum Wage, Minimum Effort?

From beginning to end, challenging the status quo is the incremental path of social and societal evolution. When dust settles and senses rest on something out of place, what starts as an individual musing grows into initiative for change. From one mind, or more likely, a hearty discussion of many: a framework erects and is bolted together by sound reasoning and good intentions for the future. At last, change finds its way to the hands of a doer; a creator.

There has been a traditional belief that to maximize profit, low skill labour must be paid the bare minimum. Within the last two decades a selection of large companies have made headlines by choosing to pay greater than minimum wage for their general labour and service needs. Much interest and discourse has been made of these progressive resource strategies and an examination of outcomes serves to educate on the wins that are being recorded for those capable and brave enough to raise the bar; those banking on the human factor.

Perhaps the most well-known example of this is Costco. Costco has ranked as the fourth largest retailer in the world, clearing over 100 billion dollars in sales in 2018. In 2019 Costco raised its minimum wage four times while also increasing wages for supervisors. At first it was $14, then $14.50, $15, and then $15.50. Employees receive two raises per year, and more than half of Costco’s employees make more than $25 an hour. CEO Craig Jelinek finds pride in Costco’s employee retention. On the benefits of paying more Craig said, “We feel the experience level and loyalty of our employees is a significant advantage for our company”. Happy experienced staff upsell more products, resolve complaints more efficiently, and get more done.  Reducing employee turnover will also mean less spent on the expenses of hiring and training.

Costco is not the only company who has seen the light. Trader Joe’s, QuikTrip, Mercadona, The Gap, Starbucks, Wells Fargo, Walmart, Ikea, and even Mcdonalds have all implemented internal minimum wages. In a lot of cases these changes have produced positive results along key performance indicators, such as turnover and customer satisfaction. Gravity Payments, a company that handles credit and debit transactions, gave a 20 percent raise to all employees in 2012. What they recorded was a profit increase substantially greater than the expense of the wages.

The next year Gravity bumped wages up yet another 20 percent. Once again, profits shot up proportionately; productivity rates increased by a whopping 30 to 40 percent. It was also reported that “Gravity’s customer retention rate rose from 91 to 95 percent in the second quarter.” That increase of 4 percent in customer retention can be the same as cutting expenses by one fifth.

When Gravity Payments CEO Dan Price announced a three-year plan to phase in a minimum wage of $70,000 and that he would immediately reduce his salary from $1.1 million to $70,000 there were over 500 million mentions on social media; a video from NBC covering Gravity became the most shared within network history. This kind of good publicity makes a huge difference when it comes time for the customer to choose a service provider. Not only are they now aware of the company, but good actions build trust, and trust is everything when deciding on who to do business with.

Higher wages attract more applications and being able to select from a greater pool of applicants will offer opportunities for greater talent. In 2014 when The Gap announced they would raise their minimum wage in the United States to $9 an hour, there was a sharp increase in applications. The Global Head of HR at The Gap said, “almost immediately, we saw our applications increase by double digits”. After Gravity’s well-earned publicity, they reported receiving over 4500 new applications in the first week after the announcement they would phase in the $70,000 minimum wage.

When a company has enough cash flow and organizational structure in place, it certainly appears that providing a higher wage can result in improved customer and employee loyalty. Investing in front-line workers is now a well documented way to compete on service and motivate efficiency from employees and the hiring process. Should there be transparent systems for evaluating and rewarding performance in more workplaces? Leave a comment, tell us what you think! If you liked the article, share it with your friends and get a discussion going!

Sources

https://nrf.com/resources/top-retailers/top-100-retailers/top-100-retailers-2019
https://ca.finance.yahoo.com/news/why-costco-pays-its-180000-workers-way-more-than-the-minimum-wage-120358716.html
https://www.mashed.com/224884/heres-how-much-money-costco-employees-really-make/
https://www.investopedia.com/articles/markets-economy/081416/top-8-companies-raising-minimum-wage-mcd-sbux.asp
https://www.washingtonpost.com/news/wonk/wp/2015/03/31/higher-wages-boosted-gaps-applicant-pool-will-it-do-the-same-for-productivity/
Lamb, Charles W.; Hair, Joe F.; McDaniel, Carl; Boivin, Marc; Gaudet, David; Shearer, Janice. 
         (2019). Principles of Marketing.

This article was written by summer student Adam Best and edited by summer student Hannah Mastin. This article was funded by the Government of Canada.