A guy I used to work with left an all-hands meeting one day. The company had just announced a layoff (it was long enough ago that this was still stunning, not an everyday occurrence like it is now). He turned to me and said, “They always get rid of the mailroom guy.”
What he meant was that the burden of whatever circumstances caused the company to cut back fell on the lowest-paid employees. And whatever mistakes the mailroom guy had made, they hadn’t caused the company’s distress.
Lots has changed since that meeting, but the “mailroom guy” syndrome hasn’t. Companies still press down on the lowest-level employees to try to make themselves more competitive. This has led to reduced benefits, reengineering, offshoring, etc., etc. Generations of management consultants made partner by cutting costs at the bottom level. (It didn’t help consultants’ relationships to recommend cost cuts at the executive levels, did it?)
Finally, there is a dissenting view emerging in the business literature. Jody Heymann’s recent book “Profit at the Bottom of the Ladder: Creating Value by Investing in Your Workforce” discusses case studies of companies on three continents that have been successful while providing superior benefits and wages to their ground-floor staff. A recent New York Times article profiles a Dominican garment factory that pays a living wage to their employees and advertises that fact on the goods they sell.
Finally, Harvard Business School professor Zeynep Ton has just published a case study of the Spanish retailer Mercadona. According to Ton,
Mercadona offers the lowest prices in Spain, and its operational performance exceeds that of comparable Spanish and foreign chains. In 2008, Mercadona’s sales per square foot was 60 percent higher than that of France’s giant Carrefour, and more than twice that of an average U.S. supermarket. Sales per employee were 18 percent higher than that of other Spanish supermarkets that disclosed financial information that year and more than 50 percent higher than U.S. supermarkets. By all measures, its inventory productivity is much higher than that of its competitors….
For Mercadona, investment in employees is part and parcel of process and product improvement. In 2008, the chain invested four weeks of training time and €5,000 for each new store employee. “In the United States,” Ton points out, “the norm is only seven hours, and the difference shows.”
For example, Mercadona cross-trains employees so their productivity is not tied to store traffic. Cleaners can work the cash registers during busy periods, and cashiers can shelve products during downtime. Departmental specialists can assist customers during busy periods and order merchandise and arrange their sections during slack hours.
Much of the value proposition around investing more in ground-level employees is the benefit of lower turnover that results from better pay, benefits and working conditions. But better trained employees that have more flexible work roles improve efficiency as well.
The strategy of squeezing every last cent out of the workforce has reached the end of the road. Perhaps it’s time to explore a different approach. Stop picking on the mailroom guy.