Companies are often reluctant to invest in employees. Training is one of the first areas to be slashed when budgets tighten and is often one of the last to be restored. Fortunately, some employers have begun to realize the value of training, as well as increasing employee wages. Surprisingly, two leaders in this effort are from very large employers not generally known for good employee treatment.
Business Insider magazine reports Walmart and McDonalds have both committed to significant investments in employee training and wage increases. Although the decision is recent, it is already paying off for the companies.
In 2015, Walmart committed to investing $2.7 billion over two years in wage increases, scheduling improvements, and employee training. The move was intended to help alleviate customer complaints and low employee morale.
As a result, Walmart executives report a higher level of employee engagement which has contributed to improvements in customer traffic and sales. The changes were also noticed by shoppers. “Our customers continue to tell us they are happy with the changes we’re making in our stores, as evidenced by our customer-experience scores, which rose again this quarter versus last year,” said Brett Biggs, executive vice president and chief financial officer of Walmart stores.
The Washington Post reports on a management webcast to McDonalds franchise owners that acknowledged customer dissatisfaction is rising in part because “service is broken.” To reverse the trend, the company offered increases in wages, benefits, and employee training. McDonalds CEO Steve Easterbrook said the changes “have resulted in lower crew turnover and higher customer-satisfaction scores … and we are gaining share relative to the [fast-food] sandwich segment.” As a result, he reported customer-satisfaction scores were up 6% in the first quarter, compared to the same period last year.
Even with these improvements, these employers fall below the standards for providing a living wage for their employees. For example, McDonalds plans to increase its pay rate to $10 per hour this year, well below the $15 an hour rate sought by labor groups and others.
Other employers have already stepped up to provide increased wages and have seen the positive impact this has on customer service and sales. Costco pays workers an average of $20.89 an hour, compared with Wal-Mart’s average hourly wage of $11.83. The result for Costco has been lower turnover and better on-the-job performance. Forbes reports Costco pays their employees a livable wage and gets sales per employee at double what Walmart subsidiary Sam’s Club gets from their employees who work for lower pay.
Dr. Deming argued pay was not a motivator for employees, and he was right to an extent. Pay is not an effective motivator once employees have achieved the amount they need as a living wage. Until then, incomes do drive people, improve their morale, and keep them from leaving their current employers. More employers are beginning to become aware of this and recognize the need to pay a living wage and provide employee training, and employees and customers stand to benefit from this realization.