How businesses can profit from raising compensation at the bottom
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Lessons for leaders
Costco and Great Little Box benefited significantly by providing incentives for employees at every level of the firm. Both companies found ways to profit by offering better compensation to employees at the bottom of the ladder. The experiences of these two companies, as well as those of other companies we studied around the world, suggest lessons that corporate leaders can apply to enable all levels of a company to profit.
1. Understand who performs the majority of the essential work. At professional services firms, this may be lawyers or paralegals; in surgical clinics, this could include surgeons, nurses, technicians, paramedics, and individuals preparing the operating room; and in manufacturing, those working on the factory floor clearly carry out most of the essential work.
2. Realize that the firms’ success depends on the quality of the work performed by the majority of workers. Remarkably, few firms currently design their organizations to optimize the efforts of employees at the bottom of the corporate ladder—even when these employees are central to the firms’ ability to add value. At Costco, the sales staff was instrumental in ensuring the high-quality shopping experience that would draw customers to return. At Great Little Box, the company beat competitors because of its ability to respond rapidly to customized orders.
3. Recognize that the quality and productivity of employees at the bottom of the ladder depend on whether these employees are motivated, healthy, adequately rested, and well-prepared to carry out the tasks they are asked to perform. Employees at Costco were motivated to work harder and perform better by a combination of higher wages and opportunities for promotions. Great Little Box employees had a direct financial stake in the company’s performance.
4. Realize that line workers are often the ones who know best how to increase efficiency. Great Little Box benefited from suggestions from line workers that led to cost savings and greater flexibility in production. Managers at Costco had a better understanding of how to improve production because most had served as hourly workers.
http://www.iveybusinessjournal.com/topics/the-organization/how-businesses-can-profit-from-raising-compensation-at-the-bottom#.ULH4OGdkcaM
Excellent read!!!
