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 Benefits and Opportunity
Starbucks is a globally-recognizable brand, known for their coffee, cafes, and iconic green packaging. Lesser known but perhaps more important is Starbucks' commitment to its employees and its social impact. In 2022, Starbucks had a turnover rate around 65%, much lower than the industry standard of turnover that routinely approaches 150% per year.
It's not just that coffee puts people in a better mood. The lower turnover is a direct result of former Starbucks CEO Howard Schultz's commitment to employee experience and opportunities for advancement.
Starbucks has built several components into their training and culture that puts experience and engagement at the forefront.
- Strong Pay and Benefits: Starbucks prioritizes taking care of employees. Their benefits packages are some of the best in the QSR industry, offering insurance, vacation time, and better than average pay. In November 2023, Starbucks announced pay raises for their entire workforce, ensuring all of their baristas and other staff would earn above or well-above their state's minimum wage. Starbucks also refers to their staff as “partners”, a seemingly small gesture but another key organizational difference in the employer-employee relationship.
- Providing Extensive Training: Training is key to employee success and retention, and Starbucks knew to emphasize career development from the beginning. Over 23,000 employees are pursuing degrees through the Starbucks College Achievement Plan in partnership with Arizona State University. This commitment to employee growth not only fosters loyalty but also aids in career progression within the company.
- Respecting Workers: It may sound simple, but treating employees with respect is a fundamental pillar of a healthy workplace culture. Starbucks uses a respect pyramid process, akin to a hierarchy of needs. 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.
How Your Business Can Apply These Strategies
- 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 “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.
- 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.
- Invest in Employee Training: While employers don’t need to go the length of Starbucks and provide paid tuition, or create a 60-step evaluation program like Pal’s, healthy training programs can lead to greater efficiency and employee satisfaction.
- 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.
