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I'd like to question the premise. How confidently can you associate cause and effect here? Based on what can he guarantee that raises in salary caused the comp

I'd like to question the premise. How confidently can you associate cause and effect here? Based on what can he guarantee that raises in salary caused the company to grow? If the formula is so simple couldn't other companies copy that and grow 5500%?

economusty 5y ago
I guess it would depend on how underpaid the groups where profits are created are. Absent any other catalyst a random event of paying people more followed by a marked increase in productivity would be enough correlation to say "hey, I think this is probably the cause"
andrewljohnson 5y ago
He didn’t just raise salaries... he cut out management too. It makes sense to me the bottom feeder testing companies might not be running very profitably and this strategy could work... pay better people marginally more and have fewer managers.
lotsofpulp 5y ago
>How confidently can you associate cause and effect here? You cannot. It depends if you’re buying commodified labor and selling commodity products. Walmart and McDonalds franchisees are not going to see much difference other than higher labor expenses and reduced sales due to higher prices at competitors.
- rileymat2 5y ago
  Is this true? When I worked as an assistant manager at Burger King, you could see employees that were more productive by a large factor. If paying them more led them to stay longer it would have been a big win. The best could do the work of 2-3 people, if paying them 1.5x more means they stay, you more profits on lower labor costs. What is hard to do is create a repeatable process for this. And trusting local management.
  - ecpottinger 5y ago
    Equally important, when I work at Arby's the quality of some of the workers was questionable at best, but because of the pay rate the better workers soon found work elsewhere and most who were left clearly did not as good or fast of a job as they could. I only stayed since I only had to work in the early morning and the work was less than a block from my house. Also the other worker "Dave" was studying robotics at the local college, it was amazing how much the other worker tried to put him down because he did not spend the night after work going out for drinks with them (neither did I). Looking back, if the store had more workers like myself and Dave, I bet we could have increased the sales 20-50%.
    - rileymat2 5y ago
      There were clear differences in drive-tru with up selling that makes a huge difference too.
    - crispyambulance 5y ago
      There's something to be said for a food or retail establishment that is able to staff up with a cohort of smart local kids. Not saying the service is better or that they'll work harder, but it's nice to hear witty banter from national merit semifinalists enjoying (and especially not enjoying) their after-school jobs.
    - lotsofpulp 5y ago
      > Looking back, if the store had more workers like myself and Dave, I bet we could have increased the sales 20-50%. The fact that there are tens of thousands of restaurants not hiring workers like yourself or Dave to increase sales 20% to 50% means there must be something preventing that. Such as insufficient number of workers like yourself or Dave at the wages they can pay and also sell at a low enough price, or the inevitability of workers like yourself to leave for greener pastures, or maybe sales would not go up 20% to 50%. Either way, the market data is very clear for some businesses that they aren’t able to necessarily differentiate themselves at scale to earn enough profit to offset the costs.
      - 5y ago
- simfree 5y ago
  Walmart and McDonalds think they are buying commoditized labor, but as In-N-Out, Costco, Dick's, Burgerville and many others have shown, paying above average wages and focusing on worker retention produces a better quality product as those employees gain experience and are emotionally invested in performing their job well. Boeing is a great example where management has spent the past couple decades getting rid of their competent employees to move production to cheaper areas that produce planes which have all kinds of quality control issues (metal shavings left throught the plane, copious wiring faults, numerous structural issues, etc). The new Boeing workforce has minimal experience in aerospace and is not paid enough to stick around long term.
  - lotsofpulp 5y ago
    > Walmart and McDonalds think they are buying commoditized labor, but as In-N-Out, Costco, Dick's, Burgerville and many others have shown, paying above average wages and focusing on worker retention produces a better quality product as those employees gain experience and are emotionally invested in performing their job well. In n Out, Costco, Dick’s, and Burgerville exist in the richer parts of town/country. You can figure out which side of town has more money based on which stores are there.
    - simfree 5y ago
      In N Out has opened new locations in poorer southern Oregon communities over the last few years. Dick's made a similar move opening their south end location.
II2II 5y ago
The article left me with the impression that he was acquiring companies in order to acquire qualified engineers (and, likely, clients) while finding efficiencies by reducing the number of managers. Presumably there will be room for growth as long as there are companies to acquire, but it will suffer from diminishing returns. Replicating his approach would be difficult since it is based upon the premise that engineers are actually creating value for the company and acknowledges that management is a cost centre. That seems to be diametrically opposed to the culture of many businesses. (That's not to dismiss the value of managers since they are necessary for the operation of a business. It's simply a recognition that clients pay for the engineer's product, rather than the management's labour.)

economusty 5y ago

I guess it would depend on how underpaid the groups where profits are created are. Absent any other catalyst a random event of paying people more followed by a marked increase in productivity would be enough correlation to say "hey, I think this is probably the cause"

andrewljohnson 5y ago

He didn’t just raise salaries... he cut out management too. It makes sense to me the bottom feeder testing companies might not be running very profitably and this strategy could work... pay better people marginally more and have fewer managers.

lotsofpulp 5y ago

>How confidently can you associate cause and effect here? You cannot. It depends if you’re buying commodified labor and selling commodity products. Walmart and McDonalds franchisees are not going to see much difference other than higher labor expenses and reduced sales due to higher prices at competitors.

rileymat2 5y ago
Is this true? When I worked as an assistant manager at Burger King, you could see employees that were more productive by a large factor. If paying them more led them to stay longer it would have been a big win. The best could do the work of 2-3 people, if paying them 1.5x more means they stay, you more profits on lower labor costs. What is hard to do is create a repeatable process for this. And trusting local management.
- ecpottinger 5y ago
  Equally important, when I work at Arby's the quality of some of the workers was questionable at best, but because of the pay rate the better workers soon found work elsewhere and most who were left clearly did not as good or fast of a job as they could. I only stayed since I only had to work in the early morning and the work was less than a block from my house. Also the other worker "Dave" was studying robotics at the local college, it was amazing how much the other worker tried to put him down because he did not spend the night after work going out for drinks with them (neither did I). Looking back, if the store had more workers like myself and Dave, I bet we could have increased the sales 20-50%.
  - rileymat2 5y ago
    There were clear differences in drive-tru with up selling that makes a huge difference too.
  - crispyambulance 5y ago
    There's something to be said for a food or retail establishment that is able to staff up with a cohort of smart local kids. Not saying the service is better or that they'll work harder, but it's nice to hear witty banter from national merit semifinalists enjoying (and especially not enjoying) their after-school jobs.
  - lotsofpulp 5y ago
    > Looking back, if the store had more workers like myself and Dave, I bet we could have increased the sales 20-50%. The fact that there are tens of thousands of restaurants not hiring workers like yourself or Dave to increase sales 20% to 50% means there must be something preventing that. Such as insufficient number of workers like yourself or Dave at the wages they can pay and also sell at a low enough price, or the inevitability of workers like yourself to leave for greener pastures, or maybe sales would not go up 20% to 50%. Either way, the market data is very clear for some businesses that they aren’t able to necessarily differentiate themselves at scale to earn enough profit to offset the costs.
    - 5y ago
simfree 5y ago
Walmart and McDonalds think they are buying commoditized labor, but as In-N-Out, Costco, Dick's, Burgerville and many others have shown, paying above average wages and focusing on worker retention produces a better quality product as those employees gain experience and are emotionally invested in performing their job well. Boeing is a great example where management has spent the past couple decades getting rid of their competent employees to move production to cheaper areas that produce planes which have all kinds of quality control issues (metal shavings left throught the plane, copious wiring faults, numerous structural issues, etc). The new Boeing workforce has minimal experience in aerospace and is not paid enough to stick around long term.
- lotsofpulp 5y ago
  > Walmart and McDonalds think they are buying commoditized labor, but as In-N-Out, Costco, Dick's, Burgerville and many others have shown, paying above average wages and focusing on worker retention produces a better quality product as those employees gain experience and are emotionally invested in performing their job well. In n Out, Costco, Dick’s, and Burgerville exist in the richer parts of town/country. You can figure out which side of town has more money based on which stores are there.
  - simfree 5y ago
    In N Out has opened new locations in poorer southern Oregon communities over the last few years. Dick's made a similar move opening their south end location.

II2II 5y ago

The article left me with the impression that he was acquiring companies in order to acquire qualified engineers (and, likely, clients) while finding efficiencies by reducing the number of managers. Presumably there will be room for growth as long as there are companies to acquire, but it will suffer from diminishing returns. Replicating his approach would be difficult since it is based upon the premise that engineers are actually creating value for the company and acknowledges that management is a cost centre. That seems to be diametrically opposed to the culture of many businesses. (That's not to dismiss the value of managers since they are necessary for the operation of a business. It's simply a recognition that clients pay for the engineer's product, rather than the management's labour.)