James Surowiecki reports on research that suggests that retail chains that hire more workers and spend more money training them are more successful than those who don’t. Highlights include:

• Every dollar spent on additional workers and training can lead to an extra $28 in sales.
• Having more sales staff rectifies the problem of the “phantom stock-out” – this is when the store has the product but the customer is unable to find it.
• Companies that drastically reduce payroll costs don’t do well. Circuit City fired 3,000 employees, and sales dropped as the new inexperienced hires couldn’t help customers find the products they were looking for. The company went bankrupt.
• Despite this research companies continue to find ways to cut payroll costs due to the way that managerial incentives are set up, and because the benefits are distributed over time.

To read more about how businesses have been outsourcing work to consumers, how this isn’t necessarily a bad thing, more details of the study, and what the experience of Home Depot demonstrates, click here.

Source: The New Yorker

Via: Freakonomics