How Businesses Can Profit From Raising Compensation at the Bottom


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This article is about how businesses can profit from raising compensation at the bottom. Most of the companies persevered in increasing profit by cutting wages and benefits for employees at the lowest of pay and status. They assume that employees at the lowest of pay and status don’t need any incentives because they can be replaced easily. During six years study, we conducted that almost all companies around the world who had tried to invest in their employees at the lowest of pay and status. In our research in nine countries, the companies ranging in size from 27 to 126000 employees that we studied included automobile, financial services, personal goods, technology hardware and equipment, pharmaceutical, food production, construction materials, and industrial metals industries. We interviewed employees at all the levels from the lowest-paid to those in top management position including CEOs, CFOs, and COOs. From the publicly available data, financial reports from publicly traded companies and academic, professional, and media reports information that we get, it showed that investing in employees at the lowest of pay and status can be an advantage even in economic growth or during a recession.


They conducted a six year study of companies around the world that had tried investing in their employees at the bottom of the ladder. They found that many of the companies offered the kind of incentives at every level that are commonly offered only to highly skilled professionals such as higher wages, profit sharing, training and career tracks. For example, Costco and Great Little Box Company.

One of the ways that can profit from raising compensation at the bottom is offering higher wages. It can ensure Costco to retain the best employees. Furthermore, providing career tracks is a way that can profit from raising compensation at the bottom. It is because Costco think that preparing workers for management position is the only way to guarantee them to do a better work. Another ways are sharing financial incentives and profit with staff at every level. Employee of Great Little Box Company not only would learn of the company's profit but also know about how the firm was performing.

This article also had given some lessons for leaders. First is understand who performs the majority of the essential work. Second is leaders should realize that the firms’ success depends on the quality of the work and recognize that the quality and productivity of employees at the bottom of the ladder depend on whether these employees are motivated, healthy, adequately rested, and well-prepared to carry out the tasks they are asked to perform. Lastly, leaders realize that line workers are often the ones who know best how to increase efficiency are important.


1.1 Profit Sharing

We agree that open-book management strategy combine with profit sharing will improve company performance. Open-book management is the information received by the employees can help them to do their jobs more efficient and also help them to understand how the company operate. Employees know they will receive a bonus on their salary. If the company's pre-tax profits were divide equally, the workers will find ways to improve productivity and reduce costs. In addition, the company also set up financial incentives for quality control. This can improve the image of the company and satisfaction of their customers.

In our opinion, the combination of open-book management strategy with profit sharing and incentives can give the workers a personal stake in the company's success. Since the workers know their incomes will increase, so they will be motivate to increase the company's profits. They can know what the company was doing and how their actions could result in improvements. In order to save the cost, the company provide incentives for the workers because turnover rate reduced. As a result, the workers will discover the ways to reduce costs and increase productivity.

1.2 High Quality Goods, Pay High Wages and Hire High Quality Employee

According the article , Costco is using many ways and strategy to improve their profit . Firstly , we agree that high quality goods with low price is the best way to attract customers . Although this way at very low markup , high volume is successful in the company . With this way , it also can make regular customers and willing to pay membership fees . Providing high quality products and services to ensure customer satisfaction and loyalty after purchase .

Next , Costco’s CEO believed that hire high quality employees can help them to increase their business because they are the most important part in company . In our opinion , one of the strategies that Costco uses to improve their business is ‘ Paying higher wages and providing career tracks ’ . Wages is the way to make employees survive so paying high wages and bonus is the best way to ensure them to work hard to company . For example , although Costco did not spent any money on recruiting , there are 800,000 applications a year for 400 locations in which approximately 14,000 people were hired even when unemployment was low .

Costco also providing career advancement opportunities for enter-level workers was necessary for the company’s continuing success . We agree that treating workers well can help increase motivation , higher quality service , greater productivity and lower turnover . The combination of good wages is an incentive for employees work hard . High quality of service provide by workers and high quality goods with low price will attract client that shop not only for basic goods but also luxury item .

1.3 Firms' Success depends the quality of the work performed by major workers

According the article ,Costco’s business attracted high-quality employees by offering better than average wages and retained the best employees by providing rapid wage growth and career advancement opportunities. Great Little Box Company share the profit of the company with employee and give financial incentives to improve the productivity of employee.

Employees are the important assets of company, a good leader of company with ensure that ,each employees have good productivity .Leader of company with find out the best way to attract the quality employees because employees are the image of company ,especially front line worker ,for example ,cashier ,waiters .In the article ,Costco provide advancement opportunities for entry-level workers has led to increase motivation, higher quality service, greater productivity and lower turnover .The combination of good wages and the knowledge that there were opportunities for advancement is an important incentive for employees to work hard and build a career with the firm.

A successful company means have lower cost operation and higher productivity .A good quality employees will help company archives the strategies .A productivity employees will provide the high quality of service and then combine with the low price of product ,meant that customers returned and were willing pay the membership fees .The long term relationship between the customer and company will give a big advantages to company thus increase the profit of company.

The sense of belonging of each employee is the way to improve the productivity of employees .Company share a part of profit equally amongst everyone from managers to workers ,as a result workers at every level were aware of how the firm was performing and were motivated to find out the ways to improve productivity and reduce costs .Company can launched several program to teach employee how to improve their productivity to reduce the cost .The combination of profit sharing and the program let the employees understood how the company was doing and how their actions could result in improvement .The resulting increased sense of ownership meant that employees worked harder and watched co-workers ,since a drop in productivity and product quality would lead to reduce profit for the company and at the same time reduce earnings for employees. As a result ,each employees will constantly looking for ways to reduce costs and increase productivity.

A firm success are depends on the quality of the work performed by the workers ,there for company should pay attention to all the employees and provide incentive for each employees and try to archives the win-win situation.


As a conclusion, we all agree that a company wanted to increasing their profit through advancement the opportunities for entry-level worker. Another one is hiring good quality employees so that can help to increasing company’ profit. Good quality employees will produce a high quality goods with low price and best for attract the customers. Company also give good wages as an incentive for employees to work hard. Open-book management combine with profit sharing will make all employees at different level know how the firm performing and it can make them more motivated to find out the best way to improve the company’ productivity and reduce the cost.

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