Idea in Brief
The Myth
Companies have long treated frontline workers as commodities that can be easily replaced and have assumed that high turnover and low morale are inevitable in the low-wage workforce.
The Reality
Most low-wage workers want to stay and grow with the organizations that employ them. By underinvesting in them, companies harm not only the workers but also their own strategic interests.
The Way Forward
Many companies already have a well-developed playbook for attracting and retaining high-level talent. It’s time they used that same playbook to boost the prospects of those at the bottom of the organizational pyramid.
Despite all their efforts since the summer of 2021 to bring frontline workers back into the fold, companies are struggling to rehire and return operations to a prepandemic normal. As a result they have failed to deliver products and services, lost revenue, and disappointed their customers. Supply chains remain snarled, with warehouse and delivery operations woefully understaffed. Grocery stores and pharmacies are unable to keep their shelves stocked. Restaurants can’t find enough cooks, cleaners, and waiters. Hotel chains can’t book to their full capacity, because they don’t have enough housekeeping staff. Airlines have been forced to ground hundreds of flights.
In 2021 companies convinced themselves that the labor shortages they were experiencing were a passing phenomenon, and in response they trotted out the standard short-term fixes: raising wages by a few dollars an hour, awarding signing and referral bonuses, and even offering more flexibility in working shifts. But none of those measures were particularly effective. So in 2022, with the labor situation worsening, some companies resorted to tactics that ran counter to their core strategies. CVS and Walgreens began closing stores earlier or shutting down on Sundays. Domino’s, unable to find drivers, reversed its focus on deliveries and instead offered customers a $3 “tip” if they picked up their own orders. Others took extraordinary measures to fill frontline jobs. When it didn’t have enough baggage handlers, Qantas begged senior executives to volunteer to sort, scan, and transport baggage for three months.
How to Hang On to Your Frontline Workers:
Series reprint
Companies blamed everyone but themselves for the labor shortages: The pandemic was a once-in-a-lifetime shock to the system that had provoked the scarcity. The government had exacerbated the problem by issuing stimulus checks. High rates of churn were a fact of life in the world of low-wage work.
But that thinking was misguided. After studying this topic for several years, as part of Harvard Business School’s Project on Managing the Future of Work, we have concluded that the real problem lies in the way that organizations mismanage their hourly workers: They are underinvesting in those employees and harming their own strategic interests.
About the Research
How are companies going astray? By not recognizing the contribution that low-wage workers make to executing their strategies. By not measuring all the hidden costs of constant churn. By not implementing management practices that could improve the productivity of low-wage workers and encourage them to stay and prosper at the company. By devoting vastly more attention—when it comes to such basics as hiring, skill building, on-the-job feedback, career development, and mentorship—to salaried workers than to hourly workers, even though the latter constitute more than 40% of the U.S. labor force.
This pattern of denial and neglect hurts workers in ways that have profound societal costs. No matter how hard or how long they work, many low-wage workers cannot climb out of poverty. We studied the fortunes of 181,891 workers who started low-wage jobs in 2012, and we found that five years later 60% of them remained stuck in such positions. People who had managed to escape those jobs had most often done so by quitting industries such as hospitality, food services, and retail, which are classic low-wage traps. Across industries, women were overrepresented in low-wage jobs and most likely to stay impoverished.
The pattern also inflicts all sorts of direct and indirect costs on companies, including lower retention and higher absenteeism, more overtime, a reliance on staffing agencies to provide temporary workers, constant recruitment and training of new employees, a lowering of morale, a loss of institutional and process knowledge, a decline in customer goodwill, a damaged reputation among job seekers, stagnant or lower rates of productivity—and less revenue.
Covid shutdowns and the struggle to bring operations back to normal have forced companies to acknowledge that their low-wage workers are indispensable.
Companies must do better. It turns out that if low-wage workers are managed well and given the appropriate career guidance and mentorship to develop, they usually want to stay and grow with the organizations that employ them. And when they do that, not only do most of them thrive personally and professionally, but the companies they work for benefit substantially: For employers, investments in training and mentorship result in greater productivity, which leads to better pay and the prospect of promotion for workers. Companies have an easier time filling critical positions. They see a drop in turnover rates, improvements in customer service, and an increased ability to attract frontline workers. And promoting internally helps companies meet their diversity goals, because the low-wage labor pool is disproportionately drawn from underrepresented populations.
The Mistakes Employers Make
Covid shutdowns and the struggle to bring operations back to normal have forced companies to acknowledge that their low-wage workers are indispensable. In fact, they are “essential” in the same sense in which governments have used the term for health care and transit workers. Yet our research has consistently revealed that executives do not understand or track the contribution that low-wage workers make. Instead companies have long treated frontline workers as commodities that can be easily replaced, and have assumed that high turnover and low morale are inevitable in a low-wage workforce. In the post-Covid recovery, however, companies are learning the hard way that such an attitude is neither sustainable nor advisable.
Drawing on our research, we have identified six big mistakes that companies have long been making with regard to low-wage workers.
They don’t realize that low-wage workers want to stay with them.
Companies recognize that many of their low-wage positions involve difficult, dirty, or dangerous work—driving long distances, cleaning toilets, covering 12-hour shifts. A high rate of churn in such jobs, they assume, is just a fact of life. Roughly half the employers in our survey estimated that turnover among their low-wage earners was greater than 24% a year, and almost a quarter estimated that it was greater than 50%.
Companies confuse cause and effect when they analyze high churn: They tend to believe that workers are fickle and change jobs constantly, whereas it is typically misguided or poorly executed management practices that prompt workers to leave. Our surveys revealed that low-wage workers are actually strongly predisposed to stay with their current employers. In fact, 51% of those we surveyed had worked at their company for four years or more, including 17% who had been there for more than 10 years. Despite their long tenure, their pay was still low enough to meet our low-wage criteria. (We defined a low-wage worker as someone who lives in a household of three with an annual household income of $39,970 or less or who earns $20 an hour or less—income thresholds that are no more than twice the level considered the federal poverty line.)
Quite rationally, 62% of the workers we surveyed said that getting higher pay or a promotion would motivate them to remain with their current employer. Some even said they’d be willing to stay at the same pay level if the employer offered them more skills training (9%) or more responsibility (6%). And 22% agreed with the statement “Even if my company doesn’t offer me higher pay, skills training, and more responsibility, I would prefer to stay at my current company.”
They underestimate the importance of location and stability.
Companies appear not to understand why low-wage workers would want to stay in these difficult positions. Our research revealed two crucial factors that explain that desire. First, hourly workers put a high premium on location. When they take a job, they’re often signaling a strong preference to work at that specific place. That’s because transportation can be a challenge for them. The more convenient the commute is, the more likely they are to stick with the employer. When we asked why they had changed jobs in the past, 64% cited greater convenience in getting to work—the top reason, well ahead of both the pay (43%) and the support of team members (41%). Employers, however, had no idea how much location and transportation mattered. In our surveys they didn’t even rank the convenience of getting to work among the top five reasons that workers might change jobs. Second, given the extreme difficulty of coping with poverty, low-wage workers value stability above all. Moving to another company involves disruption, which they prefer to avoid.
Most companies are either unaware of or choose not to recognize the pressures low-wage workers feel. In addition to shouldering caregiving responsibilities and managing work/life issues, most of them put in long hours, sometimes at more than one job. Workers who live in households earning less than $40,000 a year—sometimes even less than $20,000—are often on the verge of homelessness, food insecurity, and insolvency. Employers who are oblivious to their personal circumstances are unable to see what really matters to them: stability and security.
They underestimate workers’ goodwill.
We found that even though low-wage workers often perform the most thankless tasks within an organization, they nonetheless hold surprisingly positive views of their employers. Many (47%) told us they would be very likely to recommend their current job to a friend—rating it 8 or higher on a scale of 1 to 10, where 10 signified “extremely likely to recommend.” Only 19% rated their current job as poor, with a score below 5. Far more workers agreed than disagreed that they felt a sense of “belonging at the company,” were “valued,” and were “working at a great place.” This surprisingly large reservoir of goodwill represents an enormous and invaluable asset that companies ignore to their own detriment.
They leave workers to initiate career discussions.
Our surveys revealed that employers rarely make any systematic effort to help hourly workers progress to the next level. When asked who was responsible for the upward mobility of low-wage employees, 53% of employers pointed to the employees themselves. Only 32% said their company had that responsibility. In open-ended responses, many employers said that workers should “take the initiative” or “be up front with the supervisor” in career conversations.
It’s much harder than employers recognize for those workers to take the lead. Many of them are very hesitant to broach a pay raise or a promotion because they fear alienating management and threatening the security they value so highly. Each side is waiting for the other to speak up, and silence prevails as a result. Of the workers we surveyed, 33% reported that they were unaware of any opportunity to progress in their organization. Even most of those who had been in the same job for at least three years didn’t know what the next step or two on the ladder might be for them.
Companies also aren’t giving workers clear, timely, and usable feedback on how to improve in their current jobs. More than 50% of the workers we surveyed reported that their managers had not discussed what skills they should develop to improve their performance and boost their chances for advancement. And only 55% said they’d ever had a supervisor or a mentor who helped them succeed. No wonder many of these workers are trapped in low-wage positions—nobody’s telling them how to move up.
We also found that employers’ job postings mentioned the accessibility of pathways to career advancement rarely (5% of the time) or not at all, and they almost never discussed company values and benefits. In most organizations management simply doesn’t plan for conversations that would reveal the ambitions and preferences of low-wage workers.
They disregard low-wage workers’ strategic importance.
For highly skilled positions—scientists at a pharma company, say, or partners at a consulting firm—companies pull out all the stops to attract and retain employees. Why? Because it’s clear that competitiveness in those industries hinges on having the best talent. But companies need their low-wage workers for exactly the same reason. Few of them recognize or acknowledge that fact.
When we presented executives and senior managers with 60 practices that are known to contribute to career progression, most told us they were already implementing many of them across their organizations. The more senior the leaders were, the more adamant they were: If their company had a policy for career progression, surely HR was implementing it. Frontline supervisors and low-wage workers told a very different story. Whereas leaders tended to say they always implemented a given practice, workers often said that their company never implemented it—or that they were unaware of it. This mismatch reveals a troubling reality: Against their own strategic interests, organizations are doing very little to attract and retain low-wage workers. They may have policies and practices in place to do so, but they’re doing a poor job of following through on them.
They fail workers on the three things that matter the most.
To become more productive and perform better, workers need supervisors who can help in three areas: mentorship, career pathways, and guidance on learning and development. One third of employers reported that at their company the average number of workers under one supervisor ranged from 11 to 20; another 11% reported that the number was 21 or more. Such high employee-to-supervisor ratios mean that it’s hard to provide workers with regular, usable feedback; to identify gaps in skills and suggest relevant training; or to offer individualized career mentoring and coaching. Thus few of the low-wage workers we surveyed could point to specific ways in which they needed to improve their performance. They understood little about how to better their prospects, they had no idea how to navigate their careers within their organizations, and they received no guidance on what learning and development they might need to advance.
Employers, for their part, admitted that they had few or no formal mechanisms in place for hearing directly from workers about their career aspirations and the barriers they faced in pursuing them. Employers also reported that they were unaware of their workers’ personal situations and often expressed concern that asking questions about them would raise legal or HR issues.
Unlocking the Potential of Low-Wage Workers
Many low-wage jobs will always be difficult, demanding, and occasionally dangerous. But employers can make them more tolerable by understanding the circumstances of their employees and implementing practices to help attract and retain them. Over the past few years companies have speedily created a new normal for higher-wage workers—flexible schedules, work-from-home arrangements, better job quality, and greater acceptance of caregiving responsibilities. They need to apply the same creativity and flexibility in policies for their low-wage workers. That will improve not only workers’ lives but also the companies’ own competitiveness, through greater access to talent and greater retention among their employees.
We believe that most organizations mean to support their low-wage employees, but they don’t quite know what to do. As a start their leaders should focus on four key actions:
Understand the business case.
Companies are quick to calculate the costs of investing in skills development for low-wage workers, but they tend to ignore the hidden costs of constantly searching for, hiring, onboarding, and training employees, not to mention paying overtime to existing staffers to get essential work done. In other words, they focus on the investment and disregard the return. Small wonder they are reluctant to invest.
Companies may have policies and practices in place for attracting and retaining low-wage workers, but they’re doing a poor job of following through on them.
Disney is among the few major U.S. companies that have shown they understand the business case for upgrading the skills of a frontline workforce. In 2018 the company launched Disney Aspire, an education-investment program for both full-time and part-time hourly workers across the United States. Once eligible employees have been with Disney for 90 days, they can enroll in the program, which allows them to choose between earning a degree or a high school diploma and acquiring a new vocational skill—with Disney paying 100% of their tuition costs up front and reimbursing them for applicable fees and books. Academic partners for Disney Aspire include North Carolina Agricultural and Technical State University (an HBCU), the culinary-focused Johnson & Wales University, and several institutions near two of Disney’s largest hourly-employment sites: California State University, Fullerton and Fullerton College; and the University of Central Florida and Valencia College.
More than 14,000 hourly employees are currently enrolled in Disney Aspire. Of those, 50% are working toward a bachelor’s or a master’s degree. Since the program’s inception 3,500 have graduated. Disney has been able to promote more than 2,800 students and graduates internally, because Aspire has given them skills and opportunities to explore professional growth. That’s helping the company build a more diverse organization: Of those workers who are currently enrolled in the program, more than 50% are persons of color, and more than 60% are women. Finally, the program is helping the company attract talent: A quarter of all the people who apply for hourly positions say that they were motivated to do so because they knew they could get access to education, training, and career pathways through Aspire. The outcomes are impressive: Aspire made it possible, for example, for an hourly attraction operator to become an associate electrical engineer in the facilities department and for a merchandiser to become a global HR operations associate with the corporate team.
Facilitate better top-down communication.
Our research shows that three practices lie at the heart of highly effective efforts to advance low-wage workers: offering and publicizing clear career pathways, detailing specific learning and development opportunities for individual workers, and providing mentorship. Workers who had received pay raises and promotions were much more likely to report having taken advantage of those three practices than workers who had experienced no upward mobility.
For such practices to take root, the initiative, the messaging, and the trust building must start at the top. The more that organizations communicate information about career development opportunities, the more trust workers will have in the process and their employers.
Given the chronically high turnover rates in the food services business, Chipotle has not been shy in communicating its practices to its workforce. “We love promoting from within,” the company announces on its website, noting that more than 80% of its leaders have risen through the ranks. The site also makes public the total salary-plus-benefits compensation earned in each job: crew member ($41,300), kitchen manager ($46,300), service manager ($49,400), apprentice ($71,100), general manager ($87,500), certified training manager ($106,600), and restaurateur ($112,300-plus). It provides success stories and offers hints about how workers can develop their careers and exert agency within the organization, and it tells entry-level crew members that if they so choose, they may avail themselves of leadership-skills training and rise to a leadership position within 18 months. All this has created a culture at Chipotle that facilitates conversations between workers and supervisors. Instead of being reluctant to inquire about opportunities for advancement, Chipotle’s crew members feel empowered to take the initiative. Even better, their supervisors are expected to initiate conversations.
Get to know the barriers workers face.
Christian Guerra always took pride in how his company treated its shop-floor employees. Guerra is the vice president and general manager of operations at Avanzar Interior Technologies, a Toyota supplier in San Antonio with more than 1,500 employees. But then one day Guerra came to work early and found an employee sleeping in a car in the factory’s parking lot. He subsequently learned that the employee, who was known for having a spotless attendance record, had been homeless for months and was sleeping in the parking lot every night so that he could show up at work on time. It was a pivotal moment for Guerra, who was ashamed to realize that he didn’t understand his workforce nearly as well as he had thought.
When Guerra surveyed his temporary and full-time employees, he was shocked to discover that in the previous three months 16% of them had suffered from at least one of three vulnerabilities: food insecurity, housing insecurity, and an inability to pay bills. He began conducting exit interviews of his shop-floor workers, because their turnover rate was high and he wanted to understand why. He learned that 43% were abandoning their jobs because of transportation and childcare problems.
Guerra decided that he and his company would make an effort to reduce the churn. To that end, they have invested in a guidance system for workers. The company now employs mentors (Guerra thinks of them as “guidance counselors”), who explain training options and pathways to promotion within the company.
“At some point,” Guerra told us, “you have to just stop and say, ‘OK, do we have the right structure to execute this? Can we, as managers, effectively tap into the mindset of the entry-level worker and understand what the constraints, what the concerns, and what the lack of understanding are?’ I believe the answer is yes.”
Guerra says his efforts have paid off: Absenteeism and turnover are down. “If team members realize that they can spend 20 years working here,” he says, “I can promote them to managerial levels from within and don’t have to go out and find qualified managers from other parts of the country.”
Collaborate with other companies.
It’s not possible to promote all your workers up through the organization. But companies can improve retention by offering career pathways outside the enterprise. With more than 1.5 million hourly-wage jobs in warehousing, delivery, and retail, Amazon launched Career Choice, which has evolved into a popular nationwide program. The idea is to give workers an opportunity to acquire skills, credentials, and degrees as they work, so they can either move up within Amazon or prepare for jobs and careers in other companies and industries.
Small companies can do this too. Consider Butterball Farms, a producer of culinary butter and margarine products. Recognizing that most low-wage workers have no financial cushion and few resources to use in a crisis—and that as a small company, Butterball has only a limited ability to help them on its own—Mark Peters, the CEO, has created a consortium of 25 companies called The Source. The goal, Peters told us, is to connect frontline workers with various state, local, and philanthropic services that will help them stay in their jobs and rise up the ladder. To that end the consortium employs “resource navigators” who regularly visit member companies and offer guidance and assistance to frontline employees in six areas that are vital for job stability and career advancement: secure housing, food assistance, transportation, financial management, family health care, and educational expenses for children. “The metric we use,” Peters told us, “is that if The Source has helped your organization three times, that counts as a job save. Each job save is worth more than $3,000, because we lower costs and improve retention. All the member companies pay a membership fee to The Source, and we reckon we get more than a 200% return on that investment, on average.”
. . .
Frontline workers perform all sorts of critical tasks in organizations. For too long companies have assumed that these workers are in “bad jobs”; that negative system effects, such as high turnover and low morale, are inevitable; and that if policies to reduce churn are in place, somebody must be implementing them. That needs to change. Organizations must understand their workers better and appreciate what an important resource they are. Many companies already have a well-developed playbook for attracting and retaining high-level talent. It’s time they extended that approach to boost the prospects of the people at the bottom of the organizational pyramid—the vital foundation on which everything else rests.
