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Do Increased Wages Improve Customer Service?


This has been an ongoing debate recently, about increasing minimum wage and raising wages for those jobs that currently see lower pay. While a bulk of the conversation revolves around being able to improve the cost of living, there is speculation that increased wages will ultimately lead to improved customer service, which will in turn lead to better sales and revenue. Sounds like a win-win situation, but is it true?

Recently, McDonald’s made news by sharing an increase in sales. In addition to new menu items, and breakfast being served all day, this is also being attributed to higher wages. Similarly, Walmart announced earlier this year that they were giving widespread raises to their staff.

While this seems great on the outset, it comes with some drawbacks.

  • Staff may see less hours, or staffing levels may change to accommodate the higher wages paid out.
  • While additional benefits may be seen (McDonald’s is offering five paid vacation days in addition to the higher wages), some may be taken away. For example, Walmart offered paid holidays to their staff; with the new changes, they now need to use their PTO if they would like to be paid for the holidays.
  • Product prices, in some cases, may have to go up to accommodate the additional spend on employee wages. While this has not yet been noticeable in either company, it may be something that happens slowly over time.

But does increasing wages really account for improved customer service? Not by itself, it doesn’t. What it can do is create opportunities to motivate current employees, have a larger candidate pool to select from, since the higher wages may encourage more people to apply, and set the bar for customer service.

That last point is pretty important; you can pay staff as much as you’d like, but if they’re the wrong fit for the job and/or they are not trained properly, it’s money wasted.

Both McDonald’s and Walmart upped the ante when it comes to training when these wage increases went into effect. At McDonald’s, the company is trying to improve accuracy at the drive thru while speeding up wait times by incorporating the “ask, ask tell” training method. Walmart has always regularly had employees engage in continued education and testing through a computerized system. Shortly after announcing the company-wide pay increase, they announced the addition of Walmart Training Academies. It appears that this will eventually replace their current computer based training and will give more in depth information to new hires.

If you’re thinking that you should raise wages to get more from your employees, improve customer service, and potentially increase revenue, step back for a minute and think about your current culture:

  • What is the general sentiment of your staff? If you don’t know, ask them. Employee feedback is a great place to start. If you have a bulk of your staff who have the attitude that they would work harder or better if they are paid more, then there are other issues to deal with besides increasing wages.
  • Do your employees feel valued and motivated to do better? It’s not always about money, though that is a huge driver. Do you reward employees for strong performance, promote those who work hard and provide strong service? Instead of a company wide wage increase, you may want to consider a strong incentive and/or promotion program. Finding the good employees and keeping them over a long period of time with room for growth will be invaluable.
  • Is a solid training program in place? It would be interesting to see if there were improved customer service reports for McDonald’s and Walmart had they revamped their training program without increasing wages. However, having a strong training program in place can go a long way in giving employees the best chance for success.
  • What would a company wide wage increase mean for the company? As we saw with Walmart, there was a give and take and there were some benefits that were lost or revamped. This is to be expected, so it’s good to think through all aspects of employee wages and benefits before rolling out a new wage program.

As more pressure is put on employers to increase wages, this conversation will need to happen sooner than later. To improve service, however, it all starts at the bottom – hiring the right people, providing strong training, and creating a positive work environment with room for growth and recognition will go farther than a company wide wage increase.


Hire Right & Pay People to Quit




Zappos is known for its stellar and personalized customer service. Their motto is that they are a service company that happens to sell shoes. It’s a clear message that service comes first. In order to provide this kind of service, however, you need strong employees. What is Zappos’ secret?

They realize that a job is not for everyone, and they work hard to find the best fit possible for employees. You may or may not heard of “The Offer” – once an employee is hired, they go through the training process. About a week after their training is completed, they are given the offer – stay at the job or you will receive your pay to date plus a $2,000 bonus to leave.

Sounds crazy, right?

Surprisingly, only 2-3% take the company up on the offer; the rest stay.

More recently, the company made a bold move to change the way the company operates. They focused on a different management structure, holacracy. Simply put, this removes hierarchies within a company so everyone is essentially equal. When they put this into place, they again realized it may not be for everyone. When they made the switch, they explained the new structure to employees and made another offer – stay with the company, or leave with three months’ severance pay. This resulted in a higher number of employees leaving – approximately 14% of the staff took the buyout.

Did this concern Zappos? Not really.

The company holds firm to their theory that employees need to have the right fit to be successful, and, in turn, make the company successful. If 14% of the staff felt that the new management system would not work for them, then that was okay.

What can you learn from this example, even if you cannot afford to offer a buyout?

Hire right: by looking at the most successful employees, HR departments can create a “profile” for hiring purposes. This can be useful during the hiring process –¬†finding someone that meets the requirements and will fit with the company culture will result in a lower turnover.

Keep in touch with the health of your culture: make use of employee feedback surveys, hold regularly scheduled meetings in which employees can share the good, bad, and ugly of their work, and use other methods to be sure you are aware of what’s going on with staff. Being aware and listening to employee feedback can go a long way in ensuring employee satisfaction, which directly affects customer satisfaction.

Show employees their value: Zappos is great at this – the company not only hires right, but offers great employee perks, such as fun outings and events. This creates a “fun” environment to work in, and one that helps with longevity and loyalty.

While Zappos is a great example in general, the hiring and buyout process is particularly interesting. They realize the cost of hiring right, and also understand that sometimes it may not be a good fit after all, so it’s better (and more inexpensive) to cut ties early if needed. One of the many reasons the company is so successful!



Know Your Customers, Save a Life

That’s what happened in one Domino’s restaurant location in Salem, Oregon recently.

Employees became familiar with the customer as he ordered from them on a regular basis. After some time, employees noticed they hadn’t seen an order from him in some time. This prompted them to make a visit to his house and subsequently called 911 when the customer didn’t come to the door. They ultimately saved his life, and he is currently recovering.

This is a great story and shows great compassion in employees for their regular customers. It reminds me of our local pizza place – every Friday for as long as I can remember was “pizza day” at my house. My dad called in around the same time every Friday, and over the years it got to the point where the pizza place had caller ID, so they’d greet him and let him know it’d be ready soon. He didn’t even have to restate the order.

He battled cancer a few years ago, and he died on a Wednesday. The Friday before, he was still determined to go about life as normal as possible, even though he was in a very weakened state. I was at my parents’ house and offered to order for him. He wouldn’t let me, and told me how well they knew him there. He had the biggest smile on his face when he placed that order and said that it made him feel important that they knew him so well.

I went and picked up the order, and the young girls at the counter immediately asked where he was. I shared that he was very ill and was not up to driving. They sent well wishes home with me.

A couple of weeks later, we got a call from one of the employees. They said that they were in the night I picked up the pizza, and haven’t heard from us since, so they were checking in on my Dad. I had to share the bad news, and they felt really bad. My mom received a sympathy card from the restaurant a short while later.

Of course this is not possible for all loyal customers, but it goes to show the importance of customer loyalty and appreciation – while we have not ordered pizza from that restaurant in some time, I will never forget that experience; I’m sure the Domino’s customer and his family feel the same.