The Right Thing To Do: Why More U.S. Firms Need to Learn from JP Morgan Chase
Originally appeared in The Hill on Aug. 4, 2016.
By Joseph Fuller and Matthew Sigelman
Everyone loves to hate Wall Street. This is especially true in a contentious election year, when the anti-business rhetoric runs shrill and genuine fears abound about the growing inequality in America. JP Morgan Chase’s recent announcement on “why we’re giving our employees a raise” instantly drew brickbats because the tone and timing could not be worse. It came on the same day that the Financial Times front page carried a story on how pay for big bank chief executives jumped nearly 8%—with Jamie Dimon leading the pack. Critics mocked the bank’s decision to raise the minimum salary for about 18,000 employees to $12.00-$16.50 per hour, when, in 2015, Jamie Dimon, as the highest-paid banking executive in the country, made more than 1,000 times that amount per hour.
We get the irony. But as data-driven observers of shared prosperity in America, we want to point out: there’s a baby in the bathwater. As part of the same announcement, JP Morgan Chase became one of the few companies in the U.S. to take public ownership for the career mobility of its entry-level employees. JP Morgan Chase is committing significant resources in order to train employees into a higher-paying career pathway within its consumer banking business. For example, its bank tellers are being trained to rise within the bank—some to the level of regional directors. These employees can thus aspire to far higher wages than any entry-level hike could provide and potentially, enjoy a long-term career at the bank.
We believe this deserves a nod. Many more U.S. firms need to emulate this example in order to reverse the tide of growing inequality in America. A bank teller is a classic “middle skills” job—a job that has historically required training or a credential beyond a high school diploma, but not a four-year degree. The Bureau of Labor Statistics forecasts that teller positions will decline by almost 50 percent in the next decade, a further example of a job that once provided a basis for economic independence disappearing under the inevitable weight of technological change and industry evolution. In every U.S. firm, there are such middle skills jobs. Yet, most CEOs are either unaware of the existence of such jobs or consider them inconsequential to their business success.
We believe middle skills jobs are critical to bridging the skills gap that is currently holding back the U.S. economy. Those jobs provide a pathway to middle class prosperity for average Americans. They also help businesses find the right talent needed in order to grow and compete globally. Unfortunately, few companies in the United States currently employ a strategy to strengthen their business model—as well as their local communities—by helping their middle-skills employees grow and prosper within their company.
The sad truth is that American employers have defaulted to bad habits over the last few decades. Most have come to rely on the “spot market” for workers—posting a position only when they need a worker and expecting a qualified candidate to be available “on demand” from the labor pool. Companies also increasingly rely on third parties, like Manpower and Kelly Services, to provide workers rather than “grow their own.” Few companies want to invest in training and grooming talent in entry-level positions. In our research, we very often hear the argument “why should I train someone so that they can go work for my competitor?”
We believe this is the wrong approach. It is neither in the best interest of the company or the community. In contrast, the commitment of companies like JPMorgan Chase to upgrade the skills of their own workers represents a classic win-win. For employers, the strategy to build a talent pipeline helps the firm attract and retain talent. It allows companies to promote people who have already demonstrated cultural fit with and commitment to the organization. It helps lower costs as playing the spot market for talent is expensive, particularly for jobs that are in high demand, such as cyber security specialists.
For workers with middle skills credentials like associates degrees and certificates, such an approach helps them break out of the trap of very limited upward mobility. Currently, many entry level jobs across industries, ranging from pharmacy technician to production positions, offer virtually no prospect for advancement. They are the bottom rungs of career "step ladders," not "suspension ladders." Creating customized career paths within an enterprise, offers workers in such roles, a path forward.
Nurturing home-grown talent also addresses the issue of “soft skills”—the interpersonal and cognitive skills essential to the employability of a candidate. Many employers complain about the lack of soft skills, when describing their struggles to find hires for middle skills roles. Soft skills are critical: Burning Glass research shows that one in every three skills cited in a job posting is a foundational skill, such as the ability to communicate and paying attention to detail. But few employers do anything to help employees develop these skills. By looking inward, companies can identify and promote incumbent middle skills workers who have already demonstrated those skills. At JP Morgan Chase, we can be sure that tellers who rise and grow within the organization will be those who were internally identified as the strongest with the soft skills required for the next level of the job.
Joseph Fuller is a Professor of Management Practice at the Harvard Business School and has been researching the U.S. labor market. In 2016, his research has been partially supported by a grant from the Dimon Foundation, which is unaffiliated with JPMorgan Chase. Matthew Sigelman is the CEO of Burning Glass Technologies, a labor market analytics firm.
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