OM in the News: Human-Centered Operations Management
A big theme in 2015 is jobs, writes The New York Times (July 7, 2015). How will America close the skills gap? Where will the good middle-class jobs come from? Will infrastructure or energy create jobs? Innovation? MIT Prof. Zeynep Ton believes that companies that provide employees a decent living, which includes not just pay but also a sense of purpose and empowerment at work, can be as profitable (or more) as companies that keep their labor costs low by paying the minimum wage with no benefits. Ton believes a “human-centered operation strategy” is needed.
Her thesis comes from studying supply chain and inventory management in the retail industry. What she discovered is that while most companies were very good at getting products from China to their stores, it was a different story once the merchandise arrived. Sometimes a product stayed in the back room instead of making it to a shelf. Or it was in the wrong place. Special in-store promotions weren’t being executed a surprisingly high percentage of the time. She saw this pattern in company after company. Ton realized that the problem was that these companies viewed their employees “as a cost that they tried to minimize.” Workers were not just poorly paid, but poorly trained. They often didn’t know their schedule until the last moment. Morale was low and turnover was high. Customer service was largely nonexistent.
Unconvinced that this was the only approach, Ton decided to search for retail companies — the same kind of companies that needed low prices to succeed — that did things differently. She found some, like QuikTrip, an $11 billion company with 722 stores. Paying employees middle-class wages allows the company to get the most out of them. Employees are cross-trained so they can do different jobs. They can solve problems by themselves. They make merchandising decisions for their own stores. The ultimate result of the higher wages QuikTrip pays is that costs everywhere else in the operation go down. At QuikTrip, says Ton, products don’t remain in the back room, and in-store promotions always take place, as they’re supposed to.
Classroom discussion questions:
1. What did Ton find was the biggest problem at retailers?
2. Discuss the concept she proposes.