Paying better wages and profit sharing another way to success?
Higher Wages, Profit Sharing and Greater Flexibility Benefit All Employees — And the Company Bottom Line Too
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Costco is so certain that its policy is sound that it has kept paying better wages than rivals, even as Wall Street has pressured the company to conform to industry standards.
As the economy slowly recovers, it’s no secret that companies would like to boost productivity and profits. Many think the best way to do so is to slash costs. As an entrepreneur and business owner, though, I’d like to suggest another idea: Pay your employees more.
That’s not as crazy as it sounds. A growing body of evidence is revealing that companies that pay fair wages, and offer flexibility and training to even entry-level and lower-skilled employees, do better than those that don’t. A vast number of businesses mistakenly assume that their lowest-wage workers are easily replaced or not worth investing in, but those that do the right thing soon find that they’re doing the right thing for their bottom lines. It’s time that this becomes a business norm.
Time to revive Adam Smith’s theory that the owners of capital are involved in a conspiracy to suppress wages artificially?
if this is true – and I want it to be – it tells us a great deal about profit maxmizing firms’ ability to profit maximize. how long have they been missing this trick for?
It is one way. Slavery is another that works for some. I like the Costco way.
link doesnt work, dan…
This kind of enlightened business leadership is becoming a bit more common in my experience. Many of the influential capitalists I know hold a much more broad conception of the stakeholders in a corporation than has been common in the past. It seems the empirically unsustainable nature of the pillaging model of business has become a distinct object lesson for these leaders.
Business models come and go, and history indicates to me that this century-old idea is particularly unlikely to catch-on and last on its own merits. Powerful unions politically and economically fought for this particular approach, with considerable success through the 60s. They of course withered in the 80s, are all but gone, and haven’t been replaced by anything new to give legs to this particular argument. Enlightened board room leaders and the broad electorate (with the right political leadership) conceivably could give it impetus, but then sustainability would require political organization and coalition-building.
Keeping wages low is another of the many ideological magical-thinking ideas that are driving this country into the ground. It persists because to too many, management is about power, not profit-maximization, and pay differentials are a symbol of management power.
Wal-Mart-style managements on the Cheap-Labor Republicans model will spend a fortune on high turnover, union-busting, etc. rather than pay and treat their employees better even when it would help their bottom line because they are so wedded to an adversarial model of labor relations and low pay is seen as “winning”.
“As the economy slowly recovers, it’s no secret that companies would like to boost productivity and profits. Many think the best way to do so is to slash costs. As an entrepreneur and business owner, though, I’d like to suggest another idea: Pay your employees more.”
Henry Ford was nobody’s fool. 🙂
Until this country begins to tax the imports from Exploitationville the avaricious greed associated with the corporate mentality will persist.
Hard to understand why Wall Street would pressure Costco or any other company to conform to “Industry standards”, when those standards are in the short term interests only. But then, this is the era of the greed, so we have to live with the shortsightedness.
Wall Street’s population is largely sociopathic, IMO.
Firmly agreed. Management has been as much about control and status as about profits since Taylorism and before.
One solution is co-operatives, worker-management.
While I agree with the idea of increasing wages to increase productivity, the vast majority of business in this nation would have a difficult time with increasing their costs to increase productivity in the future in a healthy economy, let alone the one we have today. Sadly what the business community is loathe to admit is that higher wages and more benefits lead to less turnover, which leads to gains in efficiency and customer service. While firms in general concede these points they are wary of the prescriptions that evolve out of them, specifically giving more power to labor. As long as both party’s continue to drink at the trough of big business while bemoaning the increasing difficulty of the average American there is little hope for labor to make any significant gains.