What’s the secret to keeping employees, getting them to work hard and provide a more engaging experience with your customers? There are two answers. The first is one word: Money.
Many years ago, I worked with a well-known fast casual restaurant chain. I was impressed by its low turnover and high customer engagement and satisfaction ratings. Its secret was higher starting pay, generous raises and a reasonable benefits package. All of that compensation led to attracting the best candidates, and more importantly, keeping them.
A recent RetailWire article covered the higher wages Costco pays its employees. Typical hourly employees (Costco refers to them as “assistants”) include cashiers, stockers, warehouse personnel and people running the Costco food courts. With a tighter labor market, it is tougher to find people to fill these roles (and others). It is reported that Costco’s wages are at the high end of the industry. A memo from Costco’s CEO Ron Vachris stated, “We believe our hourly wages and benefits will continue to far outpace others in the retail industry.”
While wages are higher, employee retention in retail has gone down. According to an article in The Economist, the average employee turnover rate in the retail industry is 60%. Costco’s turnover is 8%, which is an incredible 86.67% lower than the industry.
Does this mean the higher wages are being paid by consumers? The simple answer is no. The longer answer is why. Just because a company pays employees more, a resulting benefit, such as lower turnover, actually reduces the cost of the higher wage. Lower turnover results in lower hiring costs, which also includes the cost of onboarding and training. The full cost of the higher wage is dramatically reduced to a point that might pay for itself.
But higher wages aren’t the only reason employees stick around, work harder and better engage with customers. As mentioned at the top of the article, there is also a second reason, and that is culture.
While some employees will stick around for the paycheck, if you want the most out of any employee, they must like their job, and that goes beyond the job description. It also includes who they work with and work for. The culture of a company helps retain the best talent.
Regardless of what you pay your employees, if they don’t like the company, the way they are treated, their boss or leadership, paying them more may not be enough. I won’t go into creating company culture, but you can check out a Forbes article from last year that covered the Employee Hierarchy of Needs with a focus on building a fulfilling workplace culture.
Happy employees mean happier customers. All the benefits mentioned translate to higher NPS and customer satisfaction scores. If you compare the highest-rated companies and brands for customer service and experience posted by the American Customer Satisfaction Institute (ACSI) and the highest-rated companies and brands by employees at www.Glassdoor.com, you’ll find many of the same names. This is further backed up by an excellent article in the Harvard Business Review titled The Key to Happy Customers? Happy Employees by Andrew Chamberlain and Daniel Zhao. Even though it was written just over five years ago, the insights are more relevant than ever.
Companies like Costco prove that investing in employees through both compensation and culture isn’t just good for employees. It’s good for business. Employee happiness is contagious. Customers pick up on it. And when customers are happy, they come back, spend more and tell others. And, that makes the leadership and investors happy too!