Jackson: You know, we often think of high employee turnover as just an HR problem, a line on a spreadsheet. But what if it's actually a multi-million dollar liability hiding in plain sight? Olivia: Exactly. And what if the most seemingly 'cost-effective' companies, the ones that pinch every penny on labor, are actually the most fragile? What if paying people more is the secret to lowering your overall costs? Jackson: That sounds completely backward. It feels like breaking a fundamental law of business. Olivia: It does, but that's the central, radical idea in Zeynep Ton's award-winning book, The Case for Good Jobs: How Great Companies Bring Dignity, Pay & Meaning to Everyone’s Work. And Ton isn't just a theorist; she's a professor of operations management at MIT Sloan and co-founder of the Good Jobs Institute. She has spent years inside these companies, from Costco to Quest Diagnostics, figuring out what actually works. Jackson: Okay, an MIT professor saying 'pay people more' sounds nice in a lecture hall, but how does that not just tank a company's profits in the real world? I mean, labor is almost always the biggest expense. Olivia: That is the million-dollar question, and the answer lies in understanding two opposing forces she describes: the 'vicious cycle' of bad jobs, and the 'virtuous cycle' of good jobs. And once you see the vicious cycle in action, you'll never look at a low-wage job the same way again.

Jackson: Alright, I'm intrigued. What exactly is this 'vicious cycle'? Lay it on me. Olivia: It’s a self-perpetuating death spiral that starts with one simple decision: viewing employees as a cost to be minimized. A company says, "Let's pay the absolute minimum the market will bear, keep hours unpredictable to match customer traffic, and not waste money on extensive training." Jackson: That sounds like… pretty much every retail and service job I've ever heard of. It sounds like standard business practice. Olivia: It is. And that's the problem. Because what happens next? The pay is low and schedules are chaotic, so good people leave. Turnover skyrockets. Now you're constantly hiring, but you're in a rush, so you can't be picky. You hire anyone with a pulse. You don't have time to train them properly, so they're not very good at their jobs. Jackson: And I'm guessing that leads to terrible customer service. Olivia: Terrible customer service, constant mistakes, and operational chaos. Shelves aren't stocked, lines are long, questions go unanswered. This hurts sales and profits. And how does management respond to lower profits? Jackson: Let me guess. They cut labor costs even more. Olivia: Precisely. They cut hours, freeze wages, and the cycle gets even more vicious. The perfect example from the book is Quest Diagnostics. In 2013, they decided to consolidate twenty regional call centers into two massive ones in low-cost-of-living areas to save money. Jackson: A classic corporate efficiency move. Olivia: On paper, yes. But they set the starting pay at around $13 an hour. The job itself was incredibly demanding. These weren't just simple queries; reps needed medical knowledge to help doctors and patients. The result? By 2015, annual turnover hit 34%. A third of their workforce was leaving every year. Jackson: Whoa. That's a revolving door. The cost of just hiring and training must have been huge. Olivia: The direct costs were staggering, estimated at up to $10.5 million a year. But the indirect costs were the real killer. Supervisors were so busy handling escalated calls from undertrained new hires that they had no time to coach or improve anything. One supervisor said, "We were caught in a negative feedback loop... There wasn’t time to think about if there was a better way." Jackson: So they were just treading water, constantly putting out fires. Olivia: Exactly. And here’s the kicker. The service got so bad that doctors started switching to competing labs. An executive, Jim Davis, said it plainly: "When patients have a bad experience, they complain to their doctors and then the doctors... are going to flip their labs to the other guy." Their 'cost-saving' measure was actively destroying their customer base. Jackson: That is insane. The strategy to save money was literally costing them millions in lost business. It's like trying to save money on boat maintenance by drilling holes in the hull. Olivia: That's a perfect analogy. And this leads to what Ton calls the 'five corporate disabilities' that plague these companies. Because turnover is so high, they can't hire the right people, they can't train them well, and because they can't trust their undertrained, revolving-door workforce, they can't empower them to make decisions. Jackson: So employees are just seen as "human robots," as one worker in the book put it. Olivia: Yes. There's a great, quick story about a Good Jobs Institute colleague, Sarah Kalloch, who went undercover at a large retailer. She was an MIT Sloan MBA grad, but they hired her for a shelf-stocking job without checking a single reference. Her training was a joke—more than half of it was wasted on tech glitches and waiting around. She never received a single piece of feedback in nine weeks. The system was designed for mediocrity because it assumed mediocrity. Jackson: It's a self-fulfilling prophecy. You treat people like they're disposable, and you create a disposable, low-performing workforce. Okay, I see the death spiral. It's bleak. So how does a company possibly escape this? Is it just about throwing money at the problem?

Olivia: That's the most common mistake people make, and it's why so many attempts to fix this fail. It's not just about raising pay. It's about a complete system change. It requires what leaders in the book call a 'leap of faith,' which is what kicks off the 'virtuous cycle.' Jackson: A 'leap of faith' sounds a little… un-business-like. A little fuzzy. What does that actually mean in practice? Olivia: It means fundamentally changing your mindset. Instead of seeing people as a cost, you see them as the primary driver of value. And you build an entire operational system around that belief. The book outlines four key operational choices: Focus and Simplify, Standardize and Empower, Cross-Train, and Operate with Slack. When you combine those with an investment in people, magic happens. Jackson: Okay, that's still a bit abstract. Give me a story. Who took this leap of faith and what happened? Olivia: The best story is Sam's Club. In 2017, they were getting crushed by Costco. Same-store sales were lagging, customer satisfaction was low, and turnover was high. The new CEO, John Furner, came in and saw the connection. He knew he couldn't fix the customer experience without fixing the employee experience. Jackson: So what did he do? Olivia: He proposed a massive investment in people, starting with raising the pay for the most critical roles—team leads, meat cutters, bakery specialists—by $5 to $7 an hour. That's a more than 30 percent increase in some cases. Jackson: I can just imagine the reaction from the finance department. They must have had a heart attack. Olivia: They did! The book says the finance and HR teams pushed back hard. Their models, based on historical data from their broken system, showed it wouldn't pay off. They said, "We are not a company that tends to make bets on its people." But Furner had the courage to push forward. He knew that the investment in pay had to be paired with operational changes to make those employees more productive. Jackson: So what were those changes? Olivia: They simplified everything. They cut the number of products on the shelves, which made stocking easier and faster. They streamlined communications from the home office so managers weren't constantly buried in emails. They introduced new tech, like an app called 'Ask Sam,' that helped employees answer customer questions instantly without having to find a manager. Jackson: Ah, so they weren't just paying people more to do the same broken job. They were redesigning the job to be better, and the higher pay was part of that new system. Olivia: Exactly! They invested in people, and they subtracted from their workload simultaneously. The results were stunning. Within two years, employee turnover dropped substantially. Customer satisfaction scores went up 7 percent. And sales grew by $15 billion without opening new stores. Productivity, measured as units sold per labor hour, increased 16 percent. Jackson: Wow. So the 'leap of faith' paid off, literally. But a giant like Sam's Club, a part of Walmart, can afford to make a big bet like that. What about a smaller company that doesn't have billions in the bank? Olivia: Great question. The book features a pet products chain called Mud Bay. They had low profit margins and high labor costs. But the co-CEOs, Lars and Marisa Wulff, read Ton's work and decided to go for it. They raised average hourly wages by 24 percent. Jackson: For a small chain, that's a massive risk. Olivia: A huge risk. But they also made operational changes. They cross-trained employees to handle both stocking and customer service. They changed shelving procedures to happen during lulls in the day, so more staff were available to help customers during peak hours. The result? Sales-per-square-foot jumped 25 percent. Turnover dropped by 35 percent in three years. As Lars Wulff said, "The good jobs strategy has made us the sort of organization that is much more likely to be here—healthy, growing, and profitable—ten and twenty years from now." Jackson: That's incredible. It really drives home the point that this is a system. You can't just pull one lever. And it makes me think of that famous NUMMI plant story. Olivia: Yes! The book brings it up, and it's the ultimate proof. You take the "worst workforce" in the American auto industry at a GM plant, a place with 20 percent absenteeism and people drinking on the job. The plant closes. Then Toyota comes in, forms a joint venture called NUMMI, hires back 85 percent of the exact same workers, and implements the Toyota Production System—a system built on respect, training, and empowerment. Jackson: And within two years, it becomes one of the most productive and high-quality plants in the country. Olivia: With the same people! It was never about the workers' inherent 'worth.' It was always about the design of the job and the system they worked in. The question isn't "Are people worth higher wages?" The question is, "Have we designed a job that creates enough value to justify higher wages?"

Jackson: So the big takeaway here isn't just 'be nice to your employees' or 'pay a living wage because it's the right thing to do,' though it is. The real, hard-nosed business insight is that your company is a human system. And if you design that system with contempt for the people in it—with low pay, chaotic schedules, and no trust—it will inevitably fail you, no matter how profitable it looks on a spreadsheet for a quarter or two. Olivia: That's the heart of it. The mediocrity is profitable, but it's also incredibly vulnerable. A company operating in that vicious cycle can't adapt, can't innovate, and can't deliver a consistently good experience. They are brittle. A company with a good jobs system, with a stable, capable, motivated workforce, is resilient. They can handle shocks, they can adapt to change, and they can win. Jackson: It feels like it comes down to a fundamental choice in leadership. A choice between short-term, spreadsheet-driven management and long-term, system-driven leadership. Olivia: Exactly. The book forces leaders to ask a fundamental question: Is your workforce a cost to be minimized, or your single greatest competitive advantage? The answer to that question determines your company's future. It's the difference between a company that just exists and a company that truly excels. Jackson: It’s a powerful and, honestly, hopeful message. It suggests that creating better work and a better world isn't at odds with creating a better business. Olivia: They are one and the same. And we'd love to hear from our listeners on this. Have you ever worked in a 'good job' or a 'bad job' environment? What was the difference it made, not just for you, but for the customers and the business? Share your stories with the Aibrary community. Jackson: This is Aibrary, signing off.