The Key To Trader Joe's Success Isn't Great Hummus—It's Paying People Well

Holy crap, employees are humans! And they like money!

If the economy is in peril, all companies should be reducing every cost possible, right? Especially employees—who should be grateful just to have a job, goes the thinking.

Not exactly, as Sophie Quinton reports for the Atlantic:

Many employers believe that one of the best ways to raise their profit margin is to cut labor costs. But companies like QuikTrip, the grocery-store chain Trader Joe's, and Costco Wholesale are proving that the decision to offer low wages is a choice, not an economic necessity.

Contrary to the perceived wisdom, these companies have found that valuing workers pays off with increased sales and productivity. It's an innovation via reconsideration—and one that's rather, well, considerate.

The old, dreary default is that employees are a cost to be minimized, says Zeynep Ton, an MIT scholar who researches and has written extensively on the topic. Underinvestment, she says, has consequences: Operations get problematic, sales drop, and costs again get cut. It's a kind of grumpy management style suited to wrangling iguanas, but not humans.

Instead of that, Trader Joe's and its kin see "employees as assets to be maximized," Ton says. So the cycle goes upward: You get better customer service, higher operational efficiency, and, in the end, better sales. (Trader Joe's also, for the record, has a habit of hiring interesting people.)

Does the doting make a difference?

Certainly. If someone's going all the way to the store instead of buying something online, they want a high-touch experience—consider the Uniqlo or Zara model in apparel or how Google does HR. But perhaps an Atlantic commenter puts it best:

Anyone who shops at TJ's has experience of the direct benefits to the consumer of the higher employee morale that comes with a living wage: genuine friendliness, a willingness to help, an altogether positive interaction. It makes all the difference.

And even if you're not in retail, you should invest in your talent: After all, contented cows give better milk.

The Trader Joe's Lesson: How to Pay a Living Wage and Still Make Money in Retail

Drake Baer covers leadership for Fast Company. You can follow him on Twitter.

[Image: Flickr user Kevin Dooley]

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