Human Resources | November 2011 | By Jordan Melnick

More than Minimum Wage

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While restaurant chains don’t usually publicize their turnover rates, there are several large brands, including Starbucks, Chipotle, and Panera, that are widely recognized as leaders when it comes to keeping employees happy. What they all have in common, analysts say, is a hip brand that people want to be associated with and a culture that encourages entry-level employees to see themselves at the beginning of a career, not merely a job.

“The key to our success there is the strength of our people culture,” Chipotle spokesman Chris Arnold wrote in an e-mail.

Chipotle’s is a culture that is built on identifying its highest performers and developing them into future leaders. Arnold says the chain has been “relentlessly focused” on that strategy and the effort has paid off. Chipotle promotes more than 90 percent of its managers from within the company, he says.

“Ultimately, it’s just about creating a culture and an organization that people want to be a part of,” Arnold wrote.

Pinning down a business’ culture can be like nailing Jell-O to a wall, but it nonetheless has a significant impact on how employees, especially younger ones, feel about where they are working.

“Any organization that provides training programs, career-path development, above-minimum-wage labor rates, and provides a culture and camaraderie that a lot of younger Millennials are looking for” is covering all the bases, says Darren Tristano, executive vice president of restaurant consulting firm Technomic.

Besides Starbucks, Tristano cites In-N-Out Burger and Pal’s Sudden Service, a chain with locations in northeast Tennessee and southwest Virginia, as examples of restaurants whose corporate culture gives them a leg up over the competition.

While certain big brands have figured out how to minimize the age-old problem of high restaurant turnover, a small pizza concept with two locations in the Chicago area has all but eradicated it.

Nick Sarillo, owner of Nick’s Pizza & Pub, estimates that more than 90 percent of his 200 employees have been with the company for more than a year and that 40 percent have worked for him for more than five years.

How?

“If I had to say one thing, I would say it’s the culture of our company,” Sarillo says.

In this case, culture has a defined meaning. It means, for example, that Sarillo grants his employees unprecedented access to the company’s financial books so they can see exactly how the store is doing, and how they can help it do better.

Another aspect of the culture at Nick’s Pizza & Pub is that employees chart their own “self-development path” by choosing to be trained for different jobs and earning raises along the way.

For example, a dishwasher may sign up to learn how to make pizza dough, which comes with a 25-cent raise. Other certifications include rolling dough, manning the salad or sandwich stations, and running the register. After three certifications, employees get a $1 raise and a new black hat distinguishing expert workers.

The ability to proactively earn raises is, of course, a big reason Sarillo’s employees are so loyal to his company, but they also like the variety that comes with being able to handle almost any job in the restaurant.

“They know they’re not going to be stuck washing dishes every day,” Sarillo says.

Above all, Sarillo attributes the low-turnover rates at his restaurants to the career path open to every Nick’s Pizza & Pub employee, something he thinks more restaurants should offer their workers.

“Most restaurants don’t support the individual to be successful, or invest as much in training as we do,” Sarillo says.

“As a result, they end up paying for turnover instead of investing in retention. Why I spend money and time on training is because it’s an investment in retention that ultimately creates less turnover, higher sales, and better service.”

In a slow economy with high food costs, raising all entry-level wages is not an option, and it is difficult to compete on price and product, Sarillo says. The most effective weapon in a restaurant’s arsenal is service.

“So many companies keep looking at external motivators” like wage, Sarillo says. “Beyond that, the real opportunity is to tap into the internal motivation of the individual. Once you do that by creating a positive place to work … your employees will do anything for you.”

That loyalty will outlast even this recession and put restaurants like Nick’s Pizza & Pub in a good position once unemployment drops and the labor market tightens up.

It may require considerable foresight for restaurant operators to look to a time past today’s economic malaise, but it is something restaurants would be wise to do, says Roberta Matuson, president of Human Resource Solutions, based in Northampton, Massachusetts, and the author of Suddenly in Charge.

“When we do pull out of this recession—and we will eventually—the people that you’ve invested in and trained will be out the door unless you treat them right now,” she says.

It’s a warning worth heeding:

With gas at more than $3.50 a gallon, a 50-mile bus ride costs a bit more than it did 30 years ago.