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.

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