April 4, 2013 -- Frustrated: That's how customers trying to shop Walmart's grocery aisles describe themselves. They can't find what they want, they say, because what they want isn't on the shelves.
Walmart, according to the Bloomberg News, has so reduced its staffing that there aren't enough workers left to re-stock properly.
Zeynep Ton, a professor at MIT's Sloan School of Management, says retailers who cut staff to cut costs are succumbing to whatshe calls a vicious cycle: Cutting people, hours and wages does lower costs--at first. But inevitably customer satisfaction suffers, and the employer loses sales.
"Understaffing and the resulting operational problems are not unique to Walmart," Ton tells ABC News. "That's what you see at companies that view labor just as a cost to be minimized."
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An article by Ton in the Harvard Business Review--"Why Good Jobs Are Good 4 Retailing"--prescribes a different solution: a virtuous cycle, in which employers offer employees higher rewards and find themselves with higher profits. While her article draws its examples from retailing, she thinks her findings apply to much of the American workforce.
"Almost one-fifth of American workers have bad jobs," she writes."They endure low wages, poor benefits, schedules that change with little--if any--notice, and few opportunities for advancement."
Employers assume that the only way they can afford to offer customers low prices is to pay their staff a pittance. Ton argues, however, that her study shows that this presumed trade-off between paying workers more or charging customers more can be broken.
She cites as examples four companies--all highly profitable and allhaving high customer satisfaction ratings--who treat their employees royally: Costco, Trader Joe's, Quiktrip and the Spanish supermarket chain Mercadona.
These employers, relative to their competitors, says Ton, offer employees high pay, flexible hours, a high measure of autonomy, and good chances for advancement.
At Costco, according to Ton, workers earn about 40 percent more than at its largest competitors. The starting pay at Trader Joe's for a full-time employee is between $40,000 and $60,000 a year, more than twice what some of its competitors offer.
At Quiktrip convenience stores, she writes, wages and benefits are so good that the chain has been named by Fortune one of the 100 best companies to work for every year since 2003. Consumer Reports, she says, ranked Trader Joe's the second-best supermarket chain in the U.S., after Wegman's.
How do these employers manage to offer low prices and relatively high pay? Four practices distinguish them from their competition, says Ton:
They simplify their operations by offering fewer products andpromotions; they train their employees to perform multiple tasks; they let employees make minor decisions; and they rigorously eliminate waste in everything but staffing.
Costco and Trader Joe's, says Ton, deliberately carry fewer products than their competitors. Each carries about 4,000 items, compared with the supermarket industry average of roughly 39,000.
"Do customers mind limited options?" she asks. At these two chains, sales per square foot show they don't. With fewer products to sell, she says, employees can be better informed about each and better able to make recommendationsto customers.
Quiktrip, she says, gets big benefits from cross-training workers todo more than one job. When customer traffic is at its highest, they concentrate on serving customers. When it falls off, they do other work that they've been trained to do, including brewing coffee, re-ordering merchandise, sweeping floors, stocking freezers and cleaning bathrooms.
At Quiktrip, part-time employees get 40 hours of training, Ton writes, and full-timers get two weeks. That compares, she writes, to an average of only seven hours of training per employee for the retail industry generally.
Ton thinks the model used by these retailers can be applied broadly to other kinds of service organizations, including banks, hospitals, restaurants and hotels.
What do the employees of these companies think? On Glassdoor.com, Costco rates a 3.7 out of 5 with employees saying things like: "The culture is great. The pay is the highest in the industry. You're working for a corporation that has high morals."
Quiktrip got 4 out of 5 stars, with one worker saying: "Putting employee compensation ahead of profit and bottom line, this company was built by loyalty." Some 84 percent of employees who submitted reviews to the site would recommend their job to a friend. Just 48 percent of those who work at Walmart said the same thing.