More on turnover reduction: profiling two companies’ efforts

The other day, Michael posted on a Business Week article on turnover reduction. The bottom-line impact of high turnover seems to be gaining recognition, as it should.

Once again, as he did on Valentine’s Day, Michael beat me to a timely subject, as I was about to mention a recent Wall Street Journal article on turnover, featuring Domino’s Pizza’s employee-retention efforts.

I’ve also dug into my spurl.net treasure chest of recent “blawgable” clips and found a story on what Cracker Barrel’s doing about turnover. Both interesting stories because the restaurant and fast food business typically suffers extremely high turnover, and these companies both report dramatic turnover reduction worth millions of dollars.

First, the Wall Street Journal piece on Domino’s:

“To keep employees, Domino’s decides it’s not all about pay” by Erin White (via Pittsburgh Post Gazette)

The article profiles a Domino’s regional manager in New Jersey and his quest to reduce turnover.

The dimensions of the problem described were astounding to me:

Store managers in the region were leaving every three to six months. Without a steady boss, workers there who answered phones, made pizzas and delivered orders had a turnover rate as high as 300 percent a year. . .
. . .
It costs Domino’s about $2,500 each time an hourly store worker leaves and about $20,000 each time a store manager quits. . .

Rather than focus turnover-reduction efforts on higher starting wages, the Domino’s CEO says:

“[Y]ou can’t overcome a bad culture by paying people a few bucks more.” He believes the way to attack turnover is by focusing on store managers — hiring more selectively, coaching them on how to create better workplaces, and motivating them with the promise of stock options and promotions.

When the CEO came aboard in 1999, “His first day at Domino’s, he asked about the company’s turnover rate. He was told it was 158 percent.” He then:

commissioned research that showed the most important factor in a store’s success wasn’t neighborhood demographics, packaging or marketing, but the quality of its store manager.

“When that position is turning over at a high rate, the ripple effect of that is enormous,” he says.By last year, turnover was down dramatically, though still high — at 107 percent.

Even in a simple fast-food job, hiring and training costs associated with turnover are substantial. At Domino’s, training takes 30 days to become a pizza-maker. “[I]t takes about 80 hours of work before a new order-taker is as reliable as an experienced one.”

Focusing on promoting, hiring and retaining better store managers, after identifying them as a critical variable in store financial success — and in reducing turnover – Domino’s adopted the following strategies:

Promotion from within. “Domino’s also stresses to store managers that most of its franchise owners came up through the ranks.”

Testing and training: “[A] 30-minute online evaluation of financial skills and management style.” Promotion “candidates then receive training on their weak points.”

Management tools: “To help managers keep track of their best and worst performers, Domino’s rolled out a new in-store computer system. The screens, which everyone in the store can see, constantly update statistics such as the average order size for each employee and how long it’s taking to get a pizza out the door.”

Better financial incentives: including “stock options to about 15 percent of store managers, based on criteria such as sales growth and customer service,” and profit-linked bonuses traditionally averaging about 30 percent of managers’ compensation.

Softer management style: “[H]ammering home that it’s not the pay that makes employees stick around, it’s their relationship with their manager.”

The profiled regional manager’s “goal is to get hourly workers to stay for at least three months. Once they do, they typically stay for about a year or two — and he doesn’t expect them to stay much longer.”

And from the Nashville Business Journal: “Turning around turnover counts; How Cracker Barrel put the sizzle back into job retention” by Dave Raiford

In 1999, Donald Turner returned to his role as chief operating officer of Cracker Barrel . . . With that return, says Rob Harig, Cracker Barrel senior vice president of human resources, came a renewed focus on employee turnover. . .

Not coincidentally, I suspect, with Cracker Barrel as with Domino’s, it is top execs outside HR who are credited with successfully putting a focus on turnover reduction.

The results reported:

At the close of fiscal year 2000, Cracker Barrel had a turnover rate for its hourly employees of 161 percent, whch isn’t outrageous for the restaurant sector. By the end of its fiscal 2004, the company had reduced that rate to 113 percent.

Interesting similarity between these numbers and those reported for Domino’s (158% to 107%).

Some of the Cracker Barrel turnover-reduction tips:

Cultivating a sense of belonging to the team: “Regardless of the task, the common thread for employees is a need to be valued and to be part of a larger whole.” “Shared expectations and how it feels to be part of the culture and how we support each other is a huge part of creating a sense of belonging and sense of affiliation.”

Providing flexibility: “The company changed its strategy of hiring mostly full-time staff in the 30-hour-per-week range and started looking at hiring more part-time employees to work the schedules the restaurants needed. Hiring more part-time employees also is attractive for workers who need flexible hours.”

Improved management recruitment and training: “On the managerial side of the restaurant’s operations, the turnover rate was reduced from nearly 32 percent in fiscal 2000 to 22.5 percent in fiscal 2004.”

Improved recruitment and hiring: “The company also began looking at how it finds prospective employees and worked with store managers on their hiring skills.”

Employee advancement system: “The company uses a system called PAR (personal achievement responsibility) to measure an employee’s progress from their hire date forward. The system is based on tenure, performance and knowledge. To advance to the next level, employees must pass a test.”

Open communications: “The company also conducts employee forums eight to 12 times yearly” and has “(intranet) chat rooms for our employees that senior management monitor every day.”

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