How one fast–food chain keeps its turnover absurdly low - by Bill Taylor
Many of us who are hungry for the latest dispatches from the war for talent look to Silicon Valley. We want to know Google’s secret to hiring the best people or Mark Zuckerberg’s one tip for hiring employees. But in a world where most companies don’t operate on the frontiers of digital transformation, and most employees aren’t tech geeks or app developers, our appetite for unconventional talent strategies should probably extend to more conventional parts of the economy. Like, say, an amazing fast-food chain called Pal’s Sudden Service.
At fist blush, there’s nothing all that amazing about Pal’s. It has 26 locations in northeast Tennessee and southwest Virginia, all within an 80-mile radius of its home base in Kingsport, Tennessee. It sells burgers, hot dogs, chicken sandwiches, fries, shakes—standard fast-food fare, although the taste and quality have a well-deserved reputation for excellence.
Dig deeper, though, and you see that nothing about Pal’s is standard for its business, or any business. The most obvious difference is its fanatical devotion to speed and accuracy. Pal’s does not offer sit-down service inside its restaurants. Instead, customers pull up to a window, place their orders face-to-face with an employee, pull around to the other side of the facility, take their bag and drive off. All this happens at a lightning pace—an average of 18 seconds at the drive-up window, an average of 12 seconds at the handout window to receive the order. That’s four times faster than the second-fastest quick-serve restaurant in the country.
But Pal’s is not just absurdly fast. It is also staggeringly accurate. You can imagine the opportunities for error as cars filled with bickering families or frazzled salespeople zip through in under 20 seconds. Yet Pal’s makes a mistake only once in every 3,600 orders. That’s ten times better the average fast-food joint, a level of excellence that creates unprecedented levels of customer loyalty, as well as loud acclaim from management experts. Indeed, back in 2001, Pal’s became the first restaurant company of any kind to win the prestigious Malcolm Baldrige Quality Award—an award that’s gone, over the years, to the likes of Cadillac, FedEx, and Ritz-Carlton.
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Ultimately, what’s truly intriguing about Pal’s, what allows this small company to cast such a large shadow, is the level of intelligence and intensity with which it approaches the human side of its business—how it hires, trains, and links its identity in the marketplace to its approach in the workplace. “If you watch professional athletes, everything they do looks so smooth and fluid,” says CEO Thomas Crosby. “But eventually you realize how much work went into that performance, all the training, all the skill-building, all the hours. It’s the same for us.”
So what can the rest of us learn from Pal’s? First, the best companies hire for attitude and train for skill. Pal’s 26 locations employ roughly 1,020 workers, 90 percent of whom are part-time, 40 percent of whom are between the ages of 16 and 18. It has developed and fine-tuned a screening system to evaluate candidates from this notoriously hard-to-manage demographic—a 60-point psychometric survey, based on the attitudes and attributes of Pal’s star performers, that does an uncanny job of predicting who is most likely to succeed. Among the agree/disagree statements: “For the most part, I am happy with myself.” “I think it is best to trust people you have just met.” “Raising your voice may be one way to get someone to accept your point of view.” Pal’s understands that character counts for as much as credentials, that who you are is as important as what you know.
Second, even great people need constant opportunities for improvement. Once Pal’s selects its candidates, it immerses them in massive amounts of training and retraining, certification and recertification. New employees get 120 hours of training before they are allowed to work on their own, and must be certified in each of the specific jobs they do. Then, every day on every shift in every restaurant, a computer randomly generates the names of two to four employees to be recertified in one of their jobs—pop quizzes, if you will. They take a quick test, see whether they pass, and if they fail, get retrained for that job before they can do it again. (The average employee gets 2 or 3 pop quizzes per month.)
“People go out of calibration just like machines go out of calibration,” CEO Crosby explains. “So we are always training, always teaching, always coaching. If you want people to succeed, you have to be willing to teach them.”
Which speaks to a third lesson: Leaders who are serious about hiring also have to be serious about teaching. Pal’s has assembled a Master Reading List for all the leaders in the company, 21 books that range from timeless classics by Machiavelli (The Prince) and Max DePree (Leadership Is an Art), to highly technical tomes on quality and lean management. Every other Monday, Crosby invites five managers from different locations to discuss one of the books on the Master List.
Meanwhile, every day, he identifies at least one subject he will teach to one person in the company. Actually, that’s a requirement for all leaders at Pal’s, who are expected to spend 10 percent of their time on teaching, and to identify a target subject and a target student every day. “All leaders are teachers, whether they realize it or not,” Crosby says. “So we have formalized a teaching culture. We teach and coach every day.”
The end result of Pal’s commitment to hiring smart and teaching continuously is that employees show the same sense of loyalty as its customers. Turnover is absurdly low. In 33 years of operation, only seven general managers (the people who run individual locations) have left the company voluntarily. Seven! Annual turnover among assistant managers is 1.4 percent, vanishingly low for a field where people jump from company to company and often exit the industry altogether. Even among front-line employees, turnover is just one-third the industry average.
“People ask me, ‘What if you spend all this time and money on training and someone leaves?’” Crosby says. “I ask them, ‘What if we don’t spend the time and money, and they stay?’”
That may be the most important lesson of all.
This is an American article by Bill Taylor and was published in the Harvard Business Review regarding the low turnover of employees at a fast food chain in the U.S. Traditionally these kinds of jobs experience problems in retaining staff as they are considered to be “dead-end” jobs, that is jobs without good career prospects.
It is written in an informal style and includes direct quotes from the main person concerned with running the business: CEO Thomas Crosby. Interestingly, this company presents numbers that are far better than other major fast-food chains and the author argues that this is due to the high level of training that the company practices as well as a careful selection process. It has long been held to be true that training is an excellent way of retaining and motivating staff.
This reminds me of an important study carried out by Elton Mayo, a management consultant in the 1920´s and 1930´who was responsible for the Hawthorne Experiments on employees at the western Electric Hawthorne factory in Cicero near Chicago. The main conclusion of the study was that productivity increased at the factory because people felt valued and the interaction with Mayo´s team had a direct effect on the behavior of employees.
Turnover: is used here to refer to the rate at which staff is replaced after leaving. It is also used to refer to stock that is replaced during a given period.
Tip: is used here as a synonym for recommendation. It can also be used as the money (usually 10%) given to waiters in restaurants.
Geek: someone who is intensely interested in a particular area; a computer geek.
Like, say: is an informal way of saying for instance or for example.
At first blush: means at first glance or at first examination.
Staggeringly: means shockingly
Bickering: to quarrel, fight.
Frazzled: to be tired or worn out; exhausted.
Randomly: something done without aim or method, left to chance.
A quiz: a brief informal examination.
Direct speech is used several times in this article. When the actual words a person speaks are used, they appear between speech marks. In indirect speech they are not used. For example:
Direct speech: “I´m tired” said John.
Indirect speech: John said he was tired or, John told me he was tired. (Notice that with the verb tell we always use an object pronoun)
Direct speech (interrogative): “How long have you lived here?”
Indirect speech: He asked me how long I had lived here.
Direct speech (imperative): “Don´t shout!”
Indirect speech: He told me not to shout.
Direct speech (future): “I will be back on Thursday”
Indirect speech: He said he would be back on Thursday.