Hack:
Increase salaries and get better performance

Teachers and customer service professionals have a lot in common. In families, children are the most valuable assets of any parent, and teachers are the people who ensure these assets grow and flourish. In business, customers are the most important assets of any business, and customer service professionals are the ones entrusted with caring for them and providing an ideal customer experience.

Recently, I have read a research report correlating teacher’s pay and performance in a number of countries. This made me think about how we view pay in customer service. The researchers focused on students in 8th grade and their math and reading skills, as measured by the Program for International Student Assessment (PISA). They found that students’ achievement levels are higher in countries where teachers are paid more (adjusted for differences in purchasing power between countries). In fact, the data suggests that a 1% increase in teacher pay is associated with an almost equal increase in percentile scores.

This correlation is not surprising, and although the study does not offer reasons, it is easy to come up with explanations: Higher salaries are likely to:

• Attract people with more competitive qualifications,
• Allow teachers to focus solely on teaching (as opposed to dividing their time and energy between teaching and other part time work),
• Enable teachers to feel like valued members of society and to receive more respect from students and parents.

Advanced economies that realize the strategic importance of their children’s education and understand the connection between compensation and performance invest more in their teachers. A key reason why, for example, Germany pays its teachers twice as much as Turkey is because the country knows that the only way it can successfully defend its status as a leading, innovation based economy against low cost competitors is through top notch education. And this can only be achieved by investing in top notch education professionals. They are willing to face higher costs in exchange for higher levels of student achievement. This is a trade off that most parents would make. Our children are our most important assets. We want the best education for them, and this is an area where we are hardly willing to compromise.

Another chart that I have been looking at is how salaries of teachers compare vs. other occupations. According to the Bureau of Labor Statistics occupations in the Education, Training, and Library category rank in the midfield across all occupational categories in terms of average salary. The average salary in the Education, Training and Library occupations was $46,140 in 2013. As most people would expect, this is much lower than management occupations and computer and mathematical occupations. But it is still higher than average salaries in many other job categories.

This is not surprising either. If a society sees children as its most important assets, it can be expected that the people entrusted with the care of these assets are fairly well paid.

For any business that sells products and/or services, clearly our customers are our most important assets. Without them, our business would have no purpose and would fail financially. So, I would expect that companies would make similar decisions about their customers as parents would about their children. If proud parents are willing to pay higher salaries to the people who take care of their children, wouldn’t proud companies also pay higher salaries to the people who make their customers happy and safeguard the customer experience?

Looking at the data provided by the Bureau of Labor Statistics, this hypothesis does not hold true. The BLS reported that in 2013, the nationwide median pay for a Customer Service Representative was $30,870 per year. Customer Service Representatives are part of the Office and Administrative Support Occupations category and they rank at the bottom of that category. This category also ranks 6 categories below Education, Training and Library occupations. Business and finance operations occupations carry average salaries that are almost twice as high. It is worthwhile to note that, on average, Sales and related occupations – the other function within companies that interfaces with customers – are paid even less than Customer Service representatives.