Did you know the average employee turnover rate at fast food joints can be as high as 300%? That equates to a store fully turning over its staff three times within a year. (And we wonder why fast food chains struggle to give us attentive and efficient service.)
High employee turnover rates not only compromise service to customers, it can also hurt a business financially. It costs a business like Domino’s Pizza $2,500 to train every new entry-level worker and in upwards of $20,000 to train a new store manager. And when you hire 180,000 workers a year, like Domino's was doing in the late 90s, we're talking huge financial costs.
So when David Brandon was named Domino’s CEO in 1999, he went on a crusade to reduce Domino’s 158% employee turnover rate. Brandon’s crusade has been a success. These days, Domino’s employee turnover rate hovers around an impressive 107%.
In reducing its employee turnover rate, Domino’s choose not to go the conventional path of paying workers more money. As Brandon put it, “If we had increased everybody’s pay 20%, could have moved the needle a little bit to buy a little loyalty? Maybe, but that’s not a long-term solution.” He went on to say, “… you can’t overcome a bad culture by paying people a few bucks more.”
Instead, Domino's chose to focus on retaining store managers more than store employees to reduce staff turnover. It is Domino's experience when store managers churn at high rates, it has a tremendous negative effect with store-level employee turnover rates.
So the Domino’s Theory to Keeping Employees is about ensuring store managers are (a) of better quality, (b) have better tools, and (c) are better incentivized.
(a) Hire Better Quality Store Managers
According to research commissioned by Dominos, the critical success factor of a Domino’s store is not location, location, location ... but rather ... store manager selection, selection, selection. One way Domino's selects better store managers is to have each candidate undergo an online test to measure their financial acumen and people management style.
(b) Give Store Managers Better Tools
Each Domino’s store has an in-store computerized tracking program which details store sales figures down to the employee level with stats like average order size per employee and the time it takes to get a pizza order out the door. These tools help Domino’s managers to better track their star performers and challenged performers.
(c) More Meaningfully Incentify Store Managers
Besides giving profit-based bonuses, Domino’s also doles out stock options to top-performing managers based upon customer service measurements and store sales growth gains.
Obviously, working in the fast food business never means high pay, even if a few bucks more are thrown in. However, how employees respond to management - not only their operational style, but also to their consistency and dedication - is extremely important. I've heard more people complain about their boss than their wage in almost every industry. It makes sense to equip management with the tools they need to motivate staff.
Posted by: Aleah | March 14, 2005 at 08:56 AM
I am glad to see that Domino’s didn’t fall for the trap of throwing more money at their retention issue. Seems they got it right when they keyed in on the importance of the manager. Could this be Buckingham in the real world?
Posted by: Tom Foster | March 14, 2005 at 04:58 PM
I used to work in the pizza biz as a driver (please god, never again) and I have to say that I observed the main thing contributing to a stores success was having good people, in the same store, for a long time.
I am sure that is true in all biz, but in the delivery biz its even more so. You have to have some knowledge of the demographics of your area and how to get around to route orders effectively as well as so you can keep your drivers out of the bad areas (safety wise, and money wise for the driver too as a rule).
Also, the good managers will build up relationships with customers that often follow them to your competitor if you mistreat them and they move on (yes, this happens in the pizza business alot).
I don't know how much Dominoes is really committed to "raising the bar" but I can tell you the first thing is to provide a REAL cut of the profit to the managers and don't try to screw them with the impossibly high, and ultimately meaningless QC numbers that are presently used to determine bonuses.
That manager will make or break YOUR brand name in the area, so why not treat him with deference and respect to his expertise, and give him a REAL incentive to work hard
(You have to put in at least 50 hours a week to do the job right, in conditions that are kinda grody, and often unsafe.)
Part of this is for the upper lever managers to stop using those minute by minute food/labor/service times printouts they get to micromanage the stores. If you have to be calling your manager every day to discuss his numbers the night before, you have someone in the wrong spot. But then, all that pressure starts from the top in the corporate level and flows down....
Some of you seem to be saying that paying people more money isn't the answer, and I agree to a point, but the managers need to know they will be rewarded if they work hard, are creative, and provide good service. Unfortunately, that is often not the case.
Another thing they could do to cut down their turnover is to cut down the drama (drugs, affairs, cat fights and general nonsense) that goes on in the average pizza delivery store, as this causes much much grief and turnover. This could be mitigated by hiring older, more mature people, which means a more money and a more respectful environment.
I myself don't give pizza delivery in its present form, with much of the capital and maintenance costs passed on to the driver (with him getting compensated via tips) much longer to last. Gas Prices are going up up up and it costs more and more now to deliver a pizza to someone who doesn't tip. But I suppose there will always be people willing to make less and less, as it is actually kinda fun, for the first few years anyways.
I was a driver for years, and many times I would get so pissed at the stupidity of various managers I would vow to become one and show the lamers how it should be done. But then I would have to stop and think about the long hours, the uncompensated responsibility, the drama from the Upper management and lack of support and the micromanaging, how often I saw the really good managers fired or driven away by the upper levels for dumb reasons, and how often they got screwed out their bonuses over silly QC issues that were obbiously designed to do just that, and I would say, "NO WAY!"
Posted by: todd yarling | March 15, 2005 at 01:12 PM