Several years ago, I was on a plane flight, and the unnamed airline was going through a labor dispute with its flight attendants. Talks of a strike were in the air – literally. During the flight I was forced to listen to an unhappy flight attendant complain for an hour to the guy behind me. He was a sympathetic ear and she made sure he, and everyone within 5 rows, knew what a horrible airline she worked for and how badly she was treated.

I have no idea if what she said was true, but I do know I didn’t get a pillow or blanket, I really wanted something to drink, and the service was definitely not done with a smile. You know what else happened? I haven’t flown with that airline since.

The Walmart Founder’s Great Advice on Employees

I thought of the above story as I read Walmart Founder Sam Walton’s autobiography, Made in America. He wrote it on his death bed and, while it’s not particularly well written, it’s a fascinating story told from the point of view of one of the most successful entrepreneurs of all time.

On page 78, he said something that immediately brought the unhappy flight attendant to mind:

The way management treats the associates is exactly how the associates will then treat the customers. And if the associates treat the customers well, the customers will return again and again, and that is where the real profit in this business lies.

In light of the recent Black Friday strikes by Walmart employees, it’s kind of ironic that their founder helped me to realize how important it is to your bottom line to treat your employees well. And it makes sense.

Walmart’s Successful and Much More Expensive Competition

Consider another retailer: Nordstrom. Famous for its customer service, it pays its sales associates roughly 50% more than Walmart ($27,232 vs. $17,797 according to Glass Door). These are very different companies, but it’s obvious to anyone who has shopped at both stores: Nordstrom employees are much happier, more informed, and more helpful. The result? They can charge a lot more for a pair of shoes than Walmart can.

Business 101

You will only remain in business if you make a profit. To make a profit, you need paying customers. To get a paying customer for the first time, you have to convince them you have what they want. To get that customer to come back, they had to be happy with their first experience.

Getting them in the door the first time is a matter of marketing. Let’s focus on getting that customer to come back.

What does it take to make customers happy? The answer is: it depends. If their motivation is only price, then you have to be the cheapest option. That’s Walmart’s strategy and customer base.

But what if their motivation is something else? What if they’re looking for the best products? Top notch support after the sale? Convenience? A pleasant shopping experience? Talking with an expert? Unless you’re a solo entrepreneur, every one of these factors is determined by one or more of your employees.

Three Examples of Happy Employees

My favorite store in the world is REI. It’s definitely not their pricing strategy – they aren’t cheap. But they do have tons of high-quality gear and everyone working there is knowledgeable and passionate about sharing what they know. They love the outdoors and they love working at REI. The result is an expensive outdoor store that is always busy.

How about a software company? Google is  famous for the great amenities it offers its employees: free meals, bowling and bocce courts on campus, a policy of letting employees spend 20% of their time working on side projects, and more. Fortune Magazine recently rated Google the best place to work. The result of this company happiness is the world’s most popular search engine and billions of dollars in profit.

Even Walmart has a place in the story of happy employees. Sure, their low wage sales associates might not make much money, but you have to consider why people shop at Walmart. It’s the low prices. This requires top-notch buyers to find and negotiate great deals. Walmart does pay these people well. On average, about $90,000 – that’s a lot of money in Bentonville, AK. Walmart knows which of its employees are essential to keeping its customers happy.

Three Big Lessons

  1. Hire employees that are passionate about what you do. This works for companies like REI, Apple, and your local animal shelter.
  2. Offer great benefits. This isn’t just health care. I used to work at Cray Supercomputers and the last Friday of every month they brought in a half-barrel of beer, chips, and a birthday cake to celebrate all birthdays for the month. It was fun, made the birthday people feel special, and created a sense of camaraderie.
  3. Recognize the crucial people in your business and make sure to pay them well. Great people have options, and all the birthday cake in the world won’t keep them around if they can make a lot more money somewhere else for the same work.

One Important Bonus Lesson

There are lots of other things you need to do to keep you team happy (treat them with respect, follow through on your promises, etc). But here’s a really important one: make them feel like they’re part of something great. Daniel Burnham famously wrote:

Make no little plans; they have no magic to stir men’s blood… Make big plans…

Jim Collins says something similar in his fantastic book Good to Great. His research showed that most successful companies utilize the BHAG: Big Hairy Audacious Goal.

A real life example is Steve Jobs. I’m almost finished with his biography and he broke just about every rule of making people happy. He was cruel, lied, took credit for other people’s ideas, cheated people out of money, and was generally an ass in every way. But one thing he did really well was make people believe that they were part of changing the world. The results were the first MacIntosh, Toy Story (with Pixar), the iPod, and the iPhone. They were the kind projects that stirred everyone up.

Case Study for Employee Happiness

I know it’s hard to be unbiased when looking at your own business but one thing we’ve done well at JCD Repair is take care of our employees. While our first foray into hiring almost put us out of business, we’ve had great success since then hiring and keeping good people.

I don’t claim to be perfect, but we just hired our 16th employee, and besides one gentleman who left for the police academy, we’ve only had one other person leave in the last 2-1/2 years. The actual work of fixing iPhones and iPads isn’t the kind of occupation people grow up dreaming about. So how do we get and keep good people?

  1. We pay as well as we can and when we’re able to pay better, we do. Nothing tells an employee they’re appreciated like giving them a raise without their asking for it. It shows you know they’re valuable and not trying to milk every last dollar out of them.
  2. Transparency. I’m not ashamed of anything we do as a business, so if any of my employees asks me anything about our business (including financials), I’m completely open. I have nothing to hide from them and they know this.
  3. Fun work place. The most important element of this is hiring fun people. We then set up our work area so employees sit in close proximity to each other. This makes coming to work fun because you’re basically doing your job while hanging out with friends.
  4. Few rules and empowerment. We have no formal vacation policy or dress code. We also give people the freedom to make decisions. If they think a repair took too long, they can give the customer a discount. If a customer isn’t happy, everyone knows they can (and should) do what it takes to fix the situation.
  5. Pleasant surprises. We routinely buy lunch for big days. That could be a big sales day or a new hire’s first day. Last week, I bought a cake and balloons for someone’s birthday. These are nice treat and it makes people smile.
  6. Big goals and opportunities. We hope to have 10 stores by the end of 2013. That’s an aggressive plan but if we can do it, it means a lot of potential advancement for people. In addition, since each of our stores has only 3-7 employees, they don’t feel like a cog in the wheel. They feel like an important piece of the puzzle.
  7. If you’re the founder, get your hands dirty. Your thoughts and advice will carry a lot more weight if your team sees you working in the trenches from time-to-time. It also helps make you aware of what issues they’re facing every day.

Again, I can’t say that everyone in our company is blissfully happy, but I’ve had more than one person tell me this is the best company they’ve ever worked for. That not only makes me proud, but it means they’re happy and, if our online reviews are to be believed, it means our customers are happy.

What to Do With This Information

If you’re a founder, employer, or manager looking to pump up morale, here’s a few suggestions:

  1. Have an open and honest conversation with everyone on your team. Ask this question: “What can I do to make your job better?” A word of caution: Don’t get defensive about their answer, or they won’t be honest with you in the future.
  2. Make a list of 25 things you could do to make your team happier. Think outside the box. For example, put up some funny art around the work place. Feel free to use that as one of your ideas.
  3. Ask yourself if your company has any big, hairy, audacious goals. If so, talk with your team on how it’s coming along? If not, talk to your team about it and come up with one.

If you’ve gotten this far, thank you for reading. Now I’d like to ask you one more favor: Please comment with some ideas of your own on how to make a better work place. You never know: you might find yourself shopping at some store some day that implemented your idea. Their happier the employees, the happier the customers.