Industry News | June 11, 2009

From The Floor, QSR Symposium 2009: The Upside of the Down Economy

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There’s no question that the struggling economy has wreaked havoc on the restaurant industry. It has also, however, created an invaluable silver lining: nearly unprecedented abundance in the labor pool.

According to Joni Thomas Doolin, Founder and CEO of the HR tracking firm People Report, operators shouldn’t expect this boon to last long. But it will give restaurant operators the chance to “get that service-profit chain right”—and build a sustainable competitive advantage in the months and years to come, she told QSR Symposium attendees during her session entitled “Shifting Gears in a Downturn–Best Practices for Today and Tomorrow”, held yesterday in Las Colinas, Texas.

“We cannot afford to miss this market,” Doolin says. “Unless you were opening restaurants in the ‘70s and ‘80s, you’ve never seen this much talent available.” And in the service industry, she says, human talent is an extremely reliable predictor of overall success.

The expanded labor pool has already driven positive trends for many People Report client companies. “For the first time in more than a decade, we’ve seen an increase in termination for the reason of performance, rather than voluntary separation,” Doolin says “Managers are taking the time to evaluate performance and drop those employees who simply aren’t getting the job done.” The results speak for themselves: Companies in which 20 percent of terminations were based on poor performance saw negative comp sales in 2008, while companies with performance-based terminations of 32 percent were able to increase comp sales.

Termination for poor performance is just part of the equation, however. These employees have to be replaced with the best of the best, and this unique window of opportunity is closing fast.

“Sixty percent of the restaurant industry’s labor force under 25,” Doolin says. “But the percentage of 16 to 24-year-olds entering the workforce continues to decline.” At the same time, competition for these employees has increased dramatically—and it’s not just other restaurants who want them. “Retailers, healthcare providers and even car manufacturers like Hyundai are all vying for those entry-level workers we’ve trained so well.” According to Doolin, there are three imperatives for making the most of today’s market: technology, talent and trust. “Quick service restaurants are already ahead of the curve when it comes to technology in operations,” she says. “Now we need to use it to reach out to current and future employees, in a language they understand.”

In terms of talent, Doolin urges operators to “work really hard to find the absolute best of what’s available. In this market, it’s easier than ever to be lazy about this—don’t fall into that trap.”

Finally, trust. “The idea of trusting a business has really been eviscerated over the past ten years,” Doolin says. “But it’s the single most important lever we have in this business.” When employees trust their organizations—to do the right thing, to keep their promises, both large and small—they stay with their organizations.

“Young people in America have really sent us a message: ‘I want to trust. I want to be lead. And I want to be part of something that’s bigger than me.’ When we give them that, they will drive our businesses, long after the tide turns in the economy.”

— By Donna Goldwasser