Joe Fuller: Frontline jobs are not inherently dead-end pursuits. But many companies’ staffing plans treat the workers who perform them as fungible commodities. That comes at a steep price for both workers and employers in terms of high turnover, low employee engagement, and reduced productivity. How can we change that paradigm? How can we design entry-level jobs that provide a firm basis for career growth for workers and a more productive workforce for employers?

Welcome to the Managing of the Future of Work podcast from Harvard Business School. I’m your host, Harvard Business School Professor and Visiting Fellow at the American Enterprise Institute, Joe Fuller. My guest today is Dan Johnston, the co-founder and CEO of WorkStep, the technology firm that sells software and services for hiring and retaining frontline workers. We’ll talk about the role of employee sentiment tracking in reducing churn and increasing employee engagement. We’ll also discuss what it takes to provide opportunities for frontline workers to build a career and how that can affect corporate performance. Welcome to the podcast, Dan.

Dan Johnston: Thanks for having me, Joe. I’m looking forward to the conversation.

Fuller: Dan, tell me about the origins of WorkStep. What was it in your background that caused you to get interested in this business model, and how did it all unfold?

Johnston: Yeah, so really my journey to WorkStep, Joe, started with my work experience even prior to moving into technology. I actually had the opportunity to manage a third-party logistics warehouse in suburban Portland, Oregon, that of all things imported trampolines from China and shipped them out to [distribution centers] DCs and e-commerce orders throughout the country. In that role, I had the experience and the ability to really see just how the labor system was stacked against the frontline workers in our building. We used almost 100 percent temp staffing to fill our daily headcount needs, which ,of course, led to workers who felt like they didn’t see their whole paycheck. At the time, we were paying our staffing agency $18 an hour; the workers were taking home $11 to $12 of that. It also meant they couldn’t move up within our organization because they didn’t actually work for our company. And as an organization, it meant that we were running new training groups almost every single day because of this constant rotating door of temps. That system just never sat right with me. At the time, I didn’t have the tools to really solve that problem or even attempt to solve that problem, but it stuck with me. That’s what led us to found WorkStep. Really, what we sought out to do with this company is to build a technology-driven ally for this segment of the workforce population, the frontline worker, that we saw as increasingly in need of one.

Fuller: So you’re very explicit that this really emerged out of an understanding of the system, as you said, being stacked against frontline workers. Walk us through the business model. How does WorkStep work, and how does it address that imbalance in power that causes those frontline workers to have this unsatisfying, difficult work, work that has no future to it, the various things that we’re all too familiar with?

Johnston: So WorkStep is the leading provider of workforce engagement and retention technology for companies that employ broad, distributed frontline teams. So what the technology does is, it first and foremost gives frontline workers a voice by automating the ways these organizations can collect sentiment and feedback from their distributed frontline workforce at scale. It helps these organizations analyze that feedback to understand what are the immediate challenges that we need to solve today. But also at an organizational level, at a segment level, what is causing our employees to be dissatisfied and ultimately quit, as well as what can we do about it. So that really is a system through which these frontline workers can have a voice and can participate in the process and the strategy of their company in a way that they couldn’t before, and they can ensure their voice is heard.

Fuller: So, Dan, what drives turnover? More broadly, what do you find frontline workers are looking for that’s lacking in the jobs that are easily available to them?

Johnston: I think, at a country level, there are three trends that are contributing to that overall outcome. One is the rise of flexible work alternatives, right? A decade or two decades ago, if you were an hourly worker and you left your job today, best case, by the time you find another role, you’d then reach your end of your next pay period. Today, you could quit and drive for Uber or deliver for Instacart or take on one of these numerous gig economy opportunities and get paid tomorrow. That lowers your barrier to exit from an organization, knowing that there’s this plethora of opportunities that could bridge that potential wage gap for you. Second of all, over the trailing decades, unions have become much less prominent, especially in the private sector, as you know. Unions provide structure in a sort of reason to stay. As I stay longer, I have these guaranteed wage changes, I have these guaranteed schedule improvements, and, therefore, it makes sense for me to climb this ladder within my union organization. As unions are less common, those reasons to stay become less common. Then finally—and this one’s harder to quantify—just a broader societal shift, right? People are less aligned in their careers to a single employer than they were a generation or especially two generations ago, right? So at a society level, there’s these three macro trends that are driving turnover up.

Fuller: It’s clear that probably, as people have witnessed the growing uncertainty about career paths and the end of lifetime-employment-type opportunities with maybe their parents or their grandparents, that’s just what they expect. I think it’s fundamentally different from even 25 years ago, let alone 50 years ago. You say in your research that 77 percent of frontline workers are considering a job change in the next three months. That’s an eye-watering number. Does that considering of getting a new job actually happen at that rate? What’s specifically motivating people to leave their existing employer? What is it about those jobs that they find lacking?

Johnston: Yeah, so that is a bit of a stark statistic, right? So at WorkStep, we are lucky to work with and support more than a million frontline workers in the United States. That gives us a unique vantage point into what they’re thinking and feeling and prioritizing at any given time. What they tell us is that more than three out of four—you said it, 77 percent—are considering a job change in the next three months. Seventy-two percent rank career growth as their top priority when considering a new opportunity. First of all, that’s a huge percentage of the overall working population that is open to change, right? There was a recent Gallup survey that showed that 28 percent of workers are actively disengaged with their company—so basically on the way out the door—and another 51 percent are psychologically unattached—basically, they could go either way. So both Gallup and WorkStep have sort of similar numbers, which is, at the end of the day, somewhere in the high seventies percent of frontline workers are really not attached to where they are today. Beyond the ability to sort of survey these workers to understand how they’re feeling and what’s important, WorkStep can go one step further, which is, we partner with companies to collect sentiment data from their teammates throughout their employment journey. And then on the backend, that sentiment data is tied to worker outcomes to understand for companies—help companies understand—what are their actual turnover drivers, what parts of workforce sentiment are actually leading people to quit. As an organization, WorkStep can then look at this at a global level and understand as an economy, as a frontline workforce, what are the top drivers of turnover independent of company or sub-sector. That data shows the same thing, which is that the number one driver of turnover, quarter after quarter after quarter, is career growth. The employees who don’t understand the career growth pathways available to them at their current employer are the most likely to leave. That’s logical, especially in an economy with, what is it, two open jobs per job seeker. If there’s a plethora of available opportunities to you, the reason to stay with your current employer is really because you believe that the future with your current employer is brighter than the present—i.e., there’s no reason to start over somewhere else because you’re already on a growth trajectory where you are. But if you can’t see that trajectory, then if there’s two open jobs for you if you decide to leave, you can likely optimize for wage or schedule or benefits slightly to make a lateral move. That’s part of the reason why growth and growth trajectory is so important.

Fuller: Well, that certainly is confirmed by our research, as well. Interestingly, our research indicates that lower-wage workers would actually prefer to stay in a job they’re already settled into if they had those opportunities. So it’s not just that they’ll leave because there aren’t opportunities. It’s that, if they’re in a job they know how to get to conveniently, where they fit in, they’re feeling to be productive, they know their supervisor seems to be a reasonable person, they’d rather stay. But many, many companies just do both a bad job of creating pathways and of publicizing the pathways that they do offer for advancement. So let’s talk about what’s in it for the business, what’s in it for your commercial clients. They’re buying your platform, they’re buying your services. How do the economics work for them?

Johnston: As you mentioned, as turnover accelerates, companies are more hesitant to invest in these frontline teammates, which only further accelerates turnover. So maybe one way of framing the value we provide is, we help companies reverse that cycle. We really provide a solution that speaks to the double bottom line, right? Not only does our software help companies improve job satisfaction, sentiment, and ultimately life satisfaction for their frontline teammates by ensuring they feel heard, engaging them with a dialogue, and improving their company as a place to work in a meaningful and measurable way, but it also impacts the financial bottom line, right? As companies, cost of turnover, cost of losing trained, ramped, and productive talent can be incredibly high. For example, if you employ 10,000 frontline workers, and you are turning over 75 percent of those workers in a given year, you might be looking at a cost of $10,000 fully loaded to replace each of those workers. So what that is going to add up to is about $75 million a year in turnover expense. Now, if you work in logistics or food service or manufacturing, you’re operating a very small margin business—$75 million a year is a very big deal. And so, from a business case, what we help companies do is understand the sentiment, feelings, and voice of their front line, but more importantly or equally importantly, understand how that ties to outcomes and, really, how they can proactively address that workforce turnover before it occurs. And that’s the business case, because as we demonstrate time and time again, helping companies save 10, 15, 20, 25 percent of their turnover, for that example of the company we just talked about, that’s $7.5 million to $20 million a year in savings that drops right to their bottom line. That is the business case for investing in frontline workforce engagement, listening, and, ultimately, retention.

Fuller: Dan, you talked about the voice of the worker earlier. You talked about you do sentiment analysis through your platform of workers. Can you define that for us? And when you think about how to translate the lived experience of these workers to a management team, to the person making the decisions about whether to hire WorkStep or retain it, how do you think about that? How do you define what the voice of the worker is, and what are you hearing these days from American workers beyond what we’ve talked about?

Johnston: A lot of this really comes back to, what is our experiences as human beings. We talked earlier about growth being such an important driver of turnover, and I believe that’s because we, as humans, naturally want to grow and evolve in our lives and our careers. And, generally, we hate to be entirely stagnant. We want to believe that the future is better than the present in some meaningful way. We all want to be heard. We want a partner who listens to us and seeks to understand. And work is no different. And as an employee, having a voice means feeling like a participant in your journey, rather than a cog in a machine. And we know inherently, especially if we’re part of a much larger company, that we won’t always get what we want. Our voice won’t always be acted on, but we still want our voices to be heard. And our data, of course, backs that up as well. What we’ve seen in engaging with workers is that 89 percent—almost 9 out of 10 frontline workers—are more likely to stay at a company that they feel encourages and listens to their feedback. So this desire to be and to feel heard is ever-present.

Fuller: That’s interesting and also is confirmed in some of our research as well. And the word that I would apply to it is that workers want to see that their opinions and concerns at least get some consideration—but contrary to the anxiety of some executives, who I think worry that if they really start engaging their workers and listening to their workers, they’re going to get lots of outrageous demands or lots of ideas that couldn’t possibly be pursued. And that’s going to cause a source of resentment or actually spur more turnover. In fact, it is that they’re heard, and some consideration is given and often not always some answer is provided, and that answer can explain why you can’t do something that workers are raising or how there may be already something that’s being done to address that need that they may not be aware of. Certainly, with the advent of universal social media, a company that isn’t prepared to seek and listen to those voices is certainly playing with the fire, because it’s going to find an outlet one way or the other.

Johnston: Yeah, absolutely, Joe. And I think that there’s been a major sort of sea change over the last two or three years, specifically since the start of Covid, when every company needed to think of and label their frontline workforce as what they are, which is “essential.” And prior to 2020, a lot of companies would basically say, “We are fine with our head in the sand. Don’t ask for feedback, we won’t get feedback, we won’t act on feedback, we won’t try to improve ourselves as an employer.” And that’s just not a perspective that we’re seeing nearly as frequently anymore. Every company is really seeking to be an employer of choice, and the smart companies know that, to do that, their employees need to be participants in that process. And so we’re seeing a real power dynamic shift—from companies to employees, and companies really embracing this sort of partnership with their workforce. I don’t think there’s a more stark example than Amazon, which historically hasn’t been always known as necessarily the best place to work, but they actually redid their mission statement last year, because their mission was to be the world’s most customer-centric organization. And they actually changed it last year to be the world’s most customer-centric company and best employer, because they knew that, if they were unable to acquire and retain the talent they need at scale, that would prevent them from being the most customer-centric company.

Fuller: What do you think accounts for that, Dan? Was it lessons of Covid, or is it that ratio of two job postings for every one unemployed worker? Is it that we’ve got that social media effect?

Johnston: It’s impossible to pick all of these things apart. I think that, in the early days of Covid, certainly, companies realized just how reliant they were on their frontline workers showing up and continuing to be employees, right? And if that stops, the whole business stops with it—even more so than their office workers, who work in front of a computer every day. Historically low unemployment, number of open jobs, those certainly help empower workers, as well. And then, finally, like you mentioned, we live in a day where we expect our voices to be heard. I eat at a restaurant, I don’t like it—I wouldn’t do it, but you can easily ensure your voice is heard online. You work for a company, you don’t like the way they’re treating you, you can certainly ensure your voice is heard online. You can rack up the followers and the likes and the credibility, and you can engage leadership in a way where they sort of have to play ball with you. And that’s just the expectation. But I’m curious, Joe, from your vantage point, do you think that this trend has staying power? Do you think that this power dynamic shift is something that’s a little bit more longitudinal than something that’s created with a 3 percent unemployment environment?

Fuller: That’s an interesting question. I think it probably is changing. And it’s changing—let me use your own illustration of the Amazon new mission statement—that yes, companies want to be a preferred employer, yes, companies worry about their reputation, yes, the opportunity for individual workers or small groups of workers to call out their employer on multiple fronts has now become such that that is concerning to management. But I think the ultimate reason it’s going to continue is, it’s just smarter business. You describe the kind of low-wage trap, high-turnover jobs that I’ve featured in some of our research, and designing a job to sustain 70 percent turnover when it’s constantly occupied by someone that you don’t have experience of, you don’t have a personnel file on them, they’re learning the job, that’s an inefficient way to do business. Having unmotivated workers is an inefficient way to do business. Having a reputation where you’re an employer of last resort, that’s just bad for business. And high-performing companies in all sorts of industries invariably have levels of employee engagement and culture that are psychologically safe and aspirational for their workers, that try to grow as a business by growing their workers—that’s just a better way to compete. And one thing I’ll say for Amazon, to the degree I understand that company, I think it’s because they have done the math. And who doesn’t like supervising more-motivated people that are more likely to stay and are more committed to their work? So I think it’s really, in some ways, we’re setting aside the last vestiges of what was called “scientific management” and Frederick Taylor—that jobs were designed to minimize the input of human beings and to treat them as the equivalent of machinery, or as the equivalent of robots. And the more we move away from that, the faster, the better, in my book. I should confess that Taylor’s early concepts were warmly embraced by my employer, the Harvard Business School, and were widely propagated by the Harvard Business School for several generations. So, you know, we cannot excuse ourselves from some of the consequences. So do you find big differences by sector, in terms of the attitudes of workers and the receptivity to some of the messages that you give management through sentiment surveys and through understanding the voice of the workers, or is it a pretty much uniform distribution in terms of how managers are responding and how companies are preparing for this post-Covid future?

Johnston: There are stark differences, not just by industry, of which of course there are, but also by role type within a company, and even by location within a company, where an organization has many locations that do almost identical work, right? You can look out across a network of factories that are all producing the same widget within the same country, and what’s driving the workers to quit at one factory—manager relationships—might be the ninth or 10th leading cause of turnover at another factory, or even in the organization as a whole. And so there are both sort of macro trends that hold. For instance, career growth is the number one driver of turnover, feedback is number two. But when you start digging into different segments—retail versus distribution versus transportation—you see meaningful differences, but similarly, if you look at two different transportation companies, they could look as different as transportation and retail do. And that’s why it’s important for companies to always keep the finger on the pulse.

Fuller: Dan, you publish a turnover cost calculator. Can you kind of break that down for us? What are the components in it, and what types of costs do you find are driven by turnover? What is the magnitude of them, for example, as a percentage of income, let’s say, of the worker that’s left?

Johnston: I think it ties back to something you mentioned earlier, which is that investing in retaining your workforce is just good business, because that cost of turnover can really add up for a company, right? First, and most obviously, are those short-term, direct, easy-to-measure replacement costs. How much does it cost an organization to source a new employee? How much does it cost to allocate time toward interviewing all of those candidates, to doing the pre-employment screens, and to incentivizing applicant flow with new-hire incentives, which has become more and more common, right? That is a chunk of cost that’s easy to measure. It can certainly stack up, but it’s actually a fraction of the overall cost of losing your employee. Where it gets really expensive is A) cost-of-productivity ramp. So if a role takes 90, 120, 180 days to become fully productive, the time between an employee’s first day and that day at which they’re running at 100 percent speed is their ramp period. And if they’re being paid their full wage during that period—which of course, they basically always are—the difference between their current productivity, it might be 25 percent, 50 percent, and 100 percent, and their full productivity is a very real expense for the company. What also adds up is, especially in a frontline environment, when you lose an employee, typically it means your other employees have to step up to fill that opening while it’s open, typically with forced overtime, which can add up. You layer on the cost of training resources to bring these new employees up to speed, and you start looking at something that can measure anywhere between 10 and 25, 30 percent of an annual salary. We hear everything from $5,000 per turnover event to $50,000 per turnover event—depending on the role, the complexity, the time to ramp, and of course, the difficulty of filling that position.

Fuller: So, Dan, when you invest in not only hearing the employees’ voice, but demonstrating to employees that their views are being considered, does that express itself in value that accrued to the company beyond your lower turnover? Do you see higher levels of productivity? Do you see higher levels of innovation, things like that?

Johnston: Well, first of all, Joe, lower turnover, itself, drives higher productivity. But I do know what you’re asking, which is a slightly different question, which is, yes. In addition to that sentiment data, what leadership is able to capture is actually feedback from the front lines who are actually doing the work. And that can be extremely tactical things in terms of equipment or gloves or the process through which the company works through the challenges. It can also be direct feedback that impacts the customer. For example, if your cashiers are stressed out about the length of the lines at their checkout stands, that tells you something about the customer experience in that store, as well. And so what you’re trying to do, really, is collapse the distance between the “decision makers”—that can make things happen quickly in terms of process improvements—and the people who are actually getting the most data the most quickly, in terms of how the business is running, what the customer experience looks like, and what meaningfully would move the needle. And so you get sort of both of those angles.

Fuller: So, Dan, it’s fall 2022. Certainly, in terms of a macro indicator of the economy, it looks like we might be heading into a bit of a rough time: some headwinds in the economy, flattening growth, high interest rates, all the phenomena we’re all aware of and worried about. How do you expect that’s going to affect the population of workers that you are focused on, and how are you trying to prepare for what might be a little more slack labor market?

Johnston: I think there’s no doubt that we’re going to see a little more slack in the overall labor market in the years to come than we’ve seen in the most recent few years. With that said, there’s been this real shift in terms of how employers view their participation with their frontline workforce that I don’t see unwinding anytime in the near future, because in any market—whether it’s 2 percent unemployment or 10 percent unemployment—replacing trained talent is expensive. Those costs around bringing somebody up to being fully ramped, those costs around training, those costs around filling open roles, those don’t go away, even if you have a line outside of your building of qualified talent—something nobody has today. Secondly, I think that in sort of many pockets of the economy and of the frontline workforce, you see such a supply-and-demand imbalance in terms of skills—for example, CDL drivers or maintenance technicians or diesel mechanics—that even a little more slack in the overall labor market doesn’t fully adjust for this longitudinal skills gap that has been both created and is currently widening. And so you’ll continue to see an intense pressure to both hire and retain that talent. So where there is slack, it will impact the sort of low-wage, relatively low-skill, more entry-level end of the market first; and the higher-skill, sort of higher-skill shortage end of the spectrum will be the least impacted, if at all.

Fuller: Well, in light of that and everything else you’ve said, Dan, tell me about what do you think WorkStep’s future is like? How do you see it evolving the business, and what are the types of demands from both the worker and employer side that you’re aiming to address?

Johnston: Yeah, so we see WorkStep, again, as the de facto ally for the frontline worker today in North America and eventually globally. And, really, our role as we see it is, we’ve really gone from a place where large distributed companies didn’t listen really to their frontline workers—in any structured way, at any scale whatsoever—to a world sort of prior to today, where you might do a once annual all-company survey—see how everybody’s feeling at one time, populate those results, and try to make a few changes—to a world powered by technology where we can do much, much better than that. We can deploy continuous listening, such that we have the real-time drumbeat of the voice of our associates—the heartbeat of our organization—at all times across our entire company, where we can really analyze those results in real time to understand who’s at risk of leaving today, what’s driving people to leave, how do we deviate from our industry peers, and where are most pressing opportunities. We can then use those insights to drive meaningful action. What are the actions we can take against those most meaningful opportunities that can drive the biggest impact for our workforce? How can we then take those actions and make our team aware of them at scale, so they know where we are investing and making their experience better? And then finally, how do we loop right back to that continuous listening to understand how it’s going, what’s going well, and what we can learn from that?It’s basically the scientific process. You have a thesis, you collect data, you sort of take an experiment, you collect data that informs your thesis, you build a new thesis, and you continue to evolve. And that is the future of the employee experience, and what we seek to help our companies provide to their workers—which, again, helps these companies make the frontline a better place to work, which empowers frontline workers to live a better life. And that is the reason that we exist in the first place.

Fuller: Well, Dan Johnson, CEO, and founder of WorkStep, it’s really been a pleasure to hear about how you are bringing the voice of frontline workers to the C-suite and helping the C-suite make better business decisions about designing jobs that have a future and that people are excited to occupy.

Johnston: Awesome. Thank you for having me, Joe. I appreciate your time.

Fuller: We hope you enjoy the Managing the Future of Work podcast. If you haven’t already, please subscribe and rate the show wherever you get your podcasts. You can find out more about the Managing the Future of Work Project at our website hbs.edu/managingthefutureofwork. While you’re there, sign up for our newsletter.