The article left me with the impression that he was acquiring companies in order to acquire qualified engineers (and, likely, clients) while finding efficiencies by reducing the number of managers. Presumably there will be room for growth as long as there are companies to acquire, but it will suffer from diminishing returns.

Replicating his approach would be difficult since it is based upon the premise that engineers are actually creating value for the company and acknowledges that management is a cost centre. That seems to be diametrically opposed to the culture of many businesses. (That's not to dismiss the value of managers since they are necessary for the operation of a business. It's simply a recognition that clients pay for the engineer's product, rather than the management's labour.)

He didn’t just raise salaries... he cut out management too. It makes sense to me the bottom feeder testing companies might not be running very profitably and this strategy could work... pay better people marginally more and have fewer managers.

I guess it would depend on how underpaid the groups where profits are created are. Absent any other catalyst a random event of paying people more followed by a marked increase in productivity would be enough correlation to say "hey, I think this is probably the cause"

>How confidently can you associate cause and effect here?

You cannot. It depends if you’re buying commodified labor and selling commodity products. Walmart and McDonalds franchisees are not going to see much difference other than higher labor expenses and reduced sales due to higher prices at competitors.

Is this true?

When I worked as an assistant manager at Burger King, you could see employees that were more productive by a large factor. If paying them more led them to stay longer it would have been a big win.

The best could do the work of 2-3 people, if paying them 1.5x more means they stay, you more profits on lower labor costs.

What is hard to do is create a repeatable process for this. And trusting local management.

Equally important, when I work at Arby's the quality of some of the workers was questionable at best, but because of the pay rate the better workers soon found work elsewhere and most who were left clearly did not as good or fast of a job as they could.

I only stayed since I only had to work in the early morning and the work was less than a block from my house. Also the other worker "Dave" was studying robotics at the local college, it was amazing how much the other worker tried to put him down because he did not spend the night after work going out for drinks with them (neither did I).

Looking back, if the store had more workers like myself and Dave, I bet we could have increased the sales 20-50%.

There's something to be said for a food or retail establishment that is able to staff up with a cohort of smart local kids. Not saying the service is better or that they'll work harder, but it's nice to hear witty banter from national merit semifinalists enjoying (and especially not enjoying) their after-school jobs.

> Looking back, if the store had more workers like myself and Dave, I bet we could have increased the sales 20-50%.

The fact that there are tens of thousands of restaurants not hiring workers like yourself or Dave to increase sales 20% to 50% means there must be something preventing that. Such as insufficient number of workers like yourself or Dave at the wages they can pay and also sell at a low enough price, or the inevitability of workers like yourself to leave for greener pastures, or maybe sales would not go up 20% to 50%.

Either way, the market data is very clear for some businesses that they aren’t able to necessarily differentiate themselves at scale to earn enough profit to offset the costs.

The better workers move on to better restaurants where pay-for-performance is somewhat implicit, like tips in restaurants. You want your highly tipped waiters because they are the salespeople of your restaurant, and their commissions are a measurement of that.

Right, but what if people cannot afford or do not want to pay the amount required for better restaurants with better staff 80% of the time?

That’s what the current business landscape looks like to me when I see the various restaurant options.

There were clear differences in drive-tru with up selling that makes a huge difference too.

> you could see employees that were more productive by a large factor.

And you would never be able to pay enough to keep them and still sell at the low prices. They will move on to bigger and better things as soon as they can, and the proof is the astronomical turnover in almost the entire mid and low tier restaurant market. There’s a reason it has the widespread reputation of being the least desirable, dead end jobs.

The proof of my statement being true is reality. All the management at retail stores and restaurants and hotels are not stupid, they just know that the market for buyers willing to pay the extra marginal cost required for buying upper tier labor is too small, and that even with the high turnover, most customers are satisfied and unwilling to pay extra to reduce turnover.

It’s similar to how 80% of people’s needs are solved by tools from Harbor Freight rather than festool or snap on or other fancy tool brand.

Sorry, I think some of them are stupid.

For example: One reason I said we could increase sales is that repeatedly we suggested putting a menu list further from the order window so people could see and decide what to order before we asked for their order. Management refused to even listen. Often someone would drive up and then spend time reading the menu before deciding what to order.

Compare this to my local Dairy Queen, they have two menu displays. One right beside the order intercom and another two car lengths earlier, I often see people when they drive to the order area give their order right away because they know what they want, they already had time to make up their minds.

The fact is, in most places management sucks at their job.

There may be instances of lack of oversight at certain places, but specifically regarding the simple hypothesis of increasing pay for retail/hospitality/restaurant workers will result in more profit due to retaining better workers is shown not to work by the entire world not doing it.

The other aspects to consider are, are the customers willing to pay the extra marginal cost for the marginal increase in utility, and will objectively, will the cream of the crop stick around for these jobs?

It’s pretty well opined that customer service/retail/restaurant type jobs have the worst quality of life for those working in them. The amount of money needed to offset the quality of life issues at work is simply not possible for most restaurants.

Walmart and McDonalds think they are buying commoditized labor, but as In-N-Out, Costco, Dick's, Burgerville and many others have shown, paying above average wages and focusing on worker retention produces a better quality product as those employees gain experience and are emotionally invested in performing their job well.

Boeing is a great example where management has spent the past couple decades getting rid of their competent employees to move production to cheaper areas that produce planes which have all kinds of quality control issues (metal shavings left throught the plane, copious wiring faults, numerous structural issues, etc). The new Boeing workforce has minimal experience in aerospace and is not paid enough to stick around long term.

> Walmart and McDonalds think they are buying commoditized labor, but as In-N-Out, Costco, Dick's, Burgerville and many others have shown, paying above average wages and focusing on worker retention produces a better quality product as those employees gain experience and are emotionally invested in performing their job well.

In n Out, Costco, Dick’s, and Burgerville exist in the richer parts of town/country. You can figure out which side of town has more money based on which stores are there.

In N Out has opened new locations in poorer southern Oregon communities over the last few years. Dick's made a similar move opening their south end location.