Outside Insights | August 2014 | By Guest Author

Escaping the Burn-and-Churn Employee Treadmill

Develop a robust internal culture and incentives to reduce employee turnover.
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Social media restaurant communities are littered with conversations revolving around one of the most costly and frustrating elements of the business: employee turnover. Every LinkedIn group, Google+ community, and Facebook page dedicated to the industry sees its share of questions and answers as to how to make It stop.

If you've ever worked for a restaurant, as a staff member, manager, or owner, you are familiar with the problems. Employee turnover is astronomically expensive and impacts customer service in a major way. The old adage that it's more expensive to earn a new customer than to keep one also applies to your employees. This is one of the most crucial challenges quick-service restaurants face, yet the National Restaurant Association pegged the turnover rate in both the restaurant and accommodations sector at nearly 63 percent in 2013.

But there are two different versions of this tale: restaurants that struggle to keep workers employed, and those who have people waiting to get in. What determines which one your restaurant is?  First, let's look at a few scenarios in the restaurant Industry:

St. Louis–based Lion's Choice gets a lot of attention for its record setting employee retention, and it deserves every bit of it. Eighty percent of its 275 full-time employees have been with the company for 10 years or more, and the brand recently set a record of going an entire year without one employee leaving or being fired.

The point of an employee loyalty program is, of course, to gain your workers' dedication, but in doing so, you'll have to prove your dedication to them.

Lion's Choice offers full-time employees medical and dental insurance, a 401K program and match 50 percent, life insurance, family and medical leave, and paid vacations.

Now, compare that to one of the incredibly popular Millennial darlings, Chipotle, where employee turnover sits at the other end of the spectrum, at 80 percent annually. Complaints about working conditions and lack of training at the fast casual abound online, particularly on Glassdoor.  One complainant was so inspired he created a website to document both anonymous and 'registered' complaints about his former employer.

And Chipotle is not alone. McDonald's has become legendary for its customer service and 'friendliness' complaints, and although the chain would not verify its exact employee turnover rate, it is fair to surmise that its part-time workforce and high turnover is at least part of its customer service problem. And of course, with the general quick-service employee turnover rates as high as they are, it is clear that Chipotle and McDonald's have a lot of company.

What’s the primary difference between operators like Lion's Choice and the other restaurant organizations so challenged with employee turnover? Of course Lion's Choice is smaller than the other operations named, but Lion's Choice employees feel a loyalty to their employer that is reciprocated. The comments on Glassdoor by employees from the other companies named shows that they feel their employers see them as expendable, and the turnstile will keep spinning.

As the economy creeps toward a more stable situation, turnover will become even more of a headache as so-called “disposable” jobs are easier to come by. Anyone in the restaurant Industry understands that employee loyalty is more complicated than simply 'hiring the right person.' The list of issues includes that, plus pay and benefits, accommodating work hours since so many restaurant employees are students, comprehensive training, and a positive work environment.

If it was simple, would the vaulted Starbucks Corporation have a turnover rate cited at 65 percent by Rossi Norman Dias in a case study? He also puts other quick serves at 150 –400 percent. Dias names the culture of teamwork as a huge factor in employee morale and motivation.  

Virtual Next focuses on mobile customer loyalty programs, not employee loyalty, but because of the company’s experience, it understands the touch points that impact a person’s loyalty—there are a lot of similarities between customer and employee loyalty.

Just as important is a company’s culture. Operators should ask: Am I selling the brand internally to employees? What policies are am I setting? How do I reward positive behavior? Are those positive behaviors defined so employees know what’s expected?

When Virtual Next creates a successful customer loyalty program for a client, there are many components in addition to rewarding specific behaviors, such as ease of use of the program, how they are treated by restaurant employees, and their overall experience impact whether or not they return as loyal customers. Employees’ overall experience has a tremendous amount to do with whether they stay as well.

The point of an employee loyalty program is, of course, to gain your workers' dedication, but in doing so, you'll have to prove your dedication to them. In order to consider how the program could work, operators should acknowledge some of the greatest challenges their employees face, including low pay, lack of proper training, long and sometimes monotonous hours, and a negative or despondent culture.

Not every quick serve has the margins that Starbucks does, but there is still a lot a smaller operator can do to impact company culture. An internal loyalty program that tackled at least some of these issues it would include one of the following:

Rewards for group performance: Many employees who leave a quick-service job cite the work environment as a big issue, so building teamwork builds employee morale all around. By rewarding group work, you encourage a team atmosphere, which in turn raises morale.

Individual rewards: These could include incentives like extra breaks, free food, an earned prime parking spot, or an accrual system that worked towards a bonus day off.

The end results of creating a program, and therefore a culture that makes employees feel appreciated and happy, carries farther than simply cutting down on hiring expenses; happy employees create a better experience for your customers as well. The ROI on a program that makes your employees happy can’t be discounted.

Quick serves face some of the most challenging hiring and employee retention issues in any industry. And an internal loyalty program is not the magic elixir for all of turnover issues. Creating proper training and an attractive culture is a colossal undertaking, but there are quick serves out there doing just that, and some employees would quickly jump ship to any one of them if they thought the grass would be greener. Creating an internal loyalty program that sets you apart can be a major part of what keeps them on your team.

Bijan Shahrokhi is a technology entrepreneur and founder and CEO of Virtual Next, a mobile loyalty and payment solution for restaurants and retailers.