Bruce Temkin wrote a blog post recently about Walmart's plans to give a pay raise to many of its lowest-paid employees. Bruce's conclusion, after looking at this decision through the lens of customer experience, is that in the long run Walmart is likely to save money through lower staff turnover leading to better customer experience and more loyal customers.
I think Bruce is spot-on. The only part I disagree with is that this is surprising or counter-intuitive.
The simple fact is that employee turnover is expensive, inexperienced employees are more likely to make mistakes, and underpaid employees aren't likely to go out of their way for customers. People want to be valued in their jobs, and underpaying them to do menial work is a great way to communicate that they are not valued.
My guess is that by paying employees more, Walmart will save money through reduced turnover alone, nevermind any customer experience benefits. Over the longer term, better morale among employees could also pay dividends through better customer experience as a bonus.
We don't have to guess, though. Compare Sam's Club, a warehouse store run by Walmart, to Costco, a direct competitor known for relatively generous pay and benefits and low employee turnover.
Which has the better customer experience, higher customer loyalty, stronger reputation, and better financial results?