The New York Times ran an article on July 3rd titled: Paying Employees to Stay, Not to Go. Its focus was that some fast-food chains are discovering the advantages of offering workers better wages and the result is less turn over. The article accented the subject of minimum wage and how Boloco Burrito restaurants in New Hampshire and Shake Shack In New York, are willing to pay more to retain associates. The article got my attention and set my blog wheels in motion.
Management in too many businesses, fast food, retail, contact center, etc., fail to see the connection between keeping good associates and bottom-line profitability.
There are many reasons why paying your staff better than your competition makes sense. I took the liberty of quoting directly from the New York Times and added some thoughts of my own.
- “The No. 1 reason we pay our team well above the minimum wage is because we believe that if we take care of the team, they will take care of our customers,” said Randy Garutti, the chief executive of Shake Shack.
- Scott Newman, the restaurant’s manager, said that Boloco’s above-average pay enabled him to pick from among many talented job applicants, adding, “When you teach talented individuals, once they get it, they’ll be a rock star for you.”
- A major benefit of paying $15, he said, is “we don’t have any turnover. We don’t have to train people constantly, ”says Harry Moorhouse of Moo Cluck Moo restaurants in Michigan. His restaurants serve upscale hamburgers, chicken sandwiches and salads, and a full meal generally costs around $1.25 more than at McDonald’s.
- Products and services are becoming more complicated. It’s takes awhile for associates to learn about your companies specific policies and procedures and the technical nuances. Besides the costs of hiring and training new associates, not having front-line associates who are product experts will make it more difficult to deliver a superior customer experience.
- In some many businesses, especially retail, customers go back to the same coffee shop, apparel store or restaurant because the front-line associate recognizes them, gives them that special smile, knows their buying preferences and appreciates their business. When staff leaves, customer loyalty is broken.
In 1914, Henry Ford almost doubled the minimum daily wage in his factories from $2.34 to $5.00. At the time, other prominent businessmen thought he was crazy, but Henry understood that his factories had been plagued with very high turnover rates and excessive absenteeism. The factory jobs were monotonous and many employees found better alternatives. By offering better wages he made his jobs more competitive. The result was higher morale, lower employee turnover, and most importantly, productivity significantly increased. As he famously said, “ employees are customers too.”
One hundred years later, what have we learned? Many businesses have failed and haven’t learned the lessons of Henry Ford or other successful entrepreneurs. Keeping valuable employees on your company’s payroll makes good business sense. It’s the best investment. It will clearly provide an excellent ROI. When your customer-friendly, knowledgeable and reliable associates leave your organization and go to your competitor, it’s a double-whammy.