How These Two Companies Solved High Employee Turnover

Tapcheck Team   January 30, 2024

Employee turnover is costly and disruptive, affecting the bottom line of the business and impacting company culture. But two companies managed to significantly lower their turnover rates through a combination of strategies, each with a common goal: looking for good people and treating them well.   

Pal’s Sudden Service: A Lesson in Rigorous Hiring and Training

Pal’s Sudden Service is a fast-food chain with locations in Tennessee and Virginia. Despite a zany exterior design and a menu full of off-the-wall versions on class drive-thru fare, Pal’s hiring strategy is no-joke. It focuses on attitude and cultural fit during a thorough interview process, which includes a 60-point psychometric survey to evaluate candidates. 

High effort? Sure. High impact? Absolutely. Pal’s boasts an annual turnover rate of just 1.4 percent, significantly lower than average in an industry defined by turnover.  

But hiring is just one piece of the puzzle. New employees at Pal’s undergo 120 hours of rigorous training, ensuring they are well-prepared for their roles. The company also emphasizes continuous learning, with regular retraining and recertification to maintain high standards of performance.  

The result? Customers at Pal’s are treated to an average service time of just 18 seconds at the drive-up window, plus an error rate of just one in every 3,600 orders. For comparison, Taco Bell‘s average service time was 221 seconds (about 3 and a half minutes) and Chick-fil-A’s 325 seconds (about 5 and a half minutes) according to a 2022 QSR magazine report.  

Starbucks: Brewing Success with Comprehensive Benefits and Career Opportunities

Starbucks is known globally for its coffee and friendly customer service but is lesser known for its commitment to its employees and its social impact. As of 2022, Starbucks has a turnover rate hovering around 65%, which may sound high but is significantly lower compared to other national chain retailers that experience 150% turnover rates. 

Starbucks implemented a few different strategies to improve retention over the year. They can be categorized as follow:  

  1. Offering Extensive Benefits: Mr. Schultz, the CEO of Starbucks prioritizes taking care of employees, offering insurance, vacation time, and other basic needs to make them feel valued and appreciated. This includes offering better than average pay; Starbucks declares that as of 2022, 100% of their employees earned more than the minimum wage, with an average of $17/hour for hourly employees, whom Starbucks calls “partners”, another key organizational difference in the employer-employee relationship at Starbucks (see #3 below).
  2. Providing Extensive Training: Training is key to employee success and retention.  Starbucks emphasizes career development. Over 23,000 employees are pursuing degrees through the Starbucks College Achievement Plan in partnership with Arizona State University, with tuition and fees covered upfront. This commitment to employee growth not only fosters loyalty but also aids in career progression within the company.
  3. Respecting Workers: It may sound basic but treating employees with respect is always fundamental. Starbucks uses a respect pyramid process which is like a ladder of how employees are treated. It starts with providing for employee’s basic needs and safety, through a decent wage or healthcare options, all the way to increasing self-esteem and self-actualisation through their education program. This caring process ensures respectful interactions throughout the company. 
    Starbucks Hierarchy of Needs

 

How Your Business Can Apply These Strategies

  1. Emphasize Cultural Fit in Hiring: Like Pal’s, businesses should prioritize cultural fit and attitude in their hiring processes. This approach ensures a cohesive work environment and aligns employees’ values with those of the company. One concrete way to apply this is to look at your current “most perfect” employee for the role you’re hiring and determine the characteristics that make this employee great. Once that’s done, you’ll be able to hire new employees based on those characteristics.
  2. Offer Competitive Benefits and Career Growth Opportunities: Following the example of those two companies, businesses should consider offering a competitive range of benefits and opportunities for career advancement. This not only attracts talent but also encourages long-term commitment. While offering higher salaries isn’t always possible, one benefit that has been shown to reduce turnover is earned wage access (EWA), a tool that allows employees access to their wages after they finish their shift. Effectively EWA allows employers to move to a daily pay schedule instead of weekly/bi-weekly. Tapcheck provides this benefit to employers and employees for free, if you’re an employer click here to learn more.
  3. Invest in Employee Training: While employers don’t need to go the length of Starbucks and provide paid tuition, a comprehensive training program, as demonstrated by Pal’s, can lead to greater efficiency and a lower error rate, which, in turn, contributes to employee satisfaction and retention. This training could extend beyond employee tasks, for example, employers could provide financial wellness training through third-party software, often for free and help employees improve their private lives outside work.
  4. Foster a Positive Work Environment: Both Pal’s and Starbucks prioritize a positive and respectful work culture. Creating an environment where employees feel valued and respected is key to retaining talent. This could be on/off-site team bonding exercises, employee awards or simply making the workplace environment more comfortable to work in.  

Pal’s Sudden Service and Starbucks provide compelling examples of how businesses can effectively reduce high turnover rates. By focusing on rigorous hiring and training processes, offering comprehensive benefits, and fostering a positive work culture, companies can create an environment where employees are motivated to stay and contribute to long-term success. 

 

Sources: 

https://hbswk.hbs.edu/item/pal-s-sudden-service-taking-fast-food-to-the-next-level  

https://gitnux.org/fast-food-employee-statistics/#:~:text=The%20fast%20food%20industry%20has,a%20half%20times%20per%20year. 

https://www.qsrmagazine.com/reports/2022-qsr-drive-thru-report/  

https://www.inc.com/will-yakowicz/fast-food-company-has-less-turnover-than-you.html  

https://www.fastcasual.com/news/starbucks-cutting-turnover-rates-via-benefit-enhancements/ 

https://stories.starbucks.com/uploads/2023/05/2022-Starbucks-Global-Environmental-Social-Impact-Report.pdf 

Motivational Strategies

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