TURNING THE TIDE

BY DONNA HOOD CRECCA

Red Lobster takes its improved retention rates to the bank.

Management turnover at Red Lobster is down 20 percent from 1996 to 1998; hourly turnover decreased 11 percent during that same period. Those declines place the 669-unit Darden chain with the top performers in retention improvement among the 29 chains tracked by People Report, a human resource benchmarking service based in Dallas. More important is how they affect financial performance, says Edna Morris, executive vice president of operations.

Indeed, comparable store sales were up 5.4 percent the end of fiscal 1999, ended. May 30, the sixth consecutive quarter of gains. "There is a direct correlation between Red Lobster's human resources programs and improved margins and comparative sales," says Mitchell Speiser, senior equity analyst at Lehman Brothers, New York. "The chain's management has really boiled down its human resource developments into operating results."

Learning Curve

When Red Lobster hit hard times in the mid-'90s, turnover spiked, prompting management to examine its attributes as an employer. It launched a multifaceted effort to improve the employee's experience two years ago. First step was helping them understand their jobs. Red Lobster updated all its training materials, moving away from videotape to more individual, one-on-one instruction.

It redefined the roles and titles of unit management and designed specialized training for each. Newly named culinary managers study their "passion for the food;" service and beverage hospitality managers learn their specific contribution to the overall operation. "The specialized training gives people a better sense of their role and responsibilities, and gives them more ownership in the entire company," observes Ron Smith, a general manager in Ashtabula, Ohio.

Formal recognition programs are coupled with manager training on giving informal recognition. A toll-free number connects employees directly with President Richard Rivera's voicemail, guaranteeing a response in 24 hours. Reviews are done like clockwork, wages and benefits are competitive, and employees get a meal discount at both Red Lobster and sister Olive Garden. "These sound like disparate efforts but add these things up and they make a difference in the relationship," says Jim Lynde, senior vice president of people.

Human Capital

Average management turnover runs from 20 percent to 40 percent in casual dining, says Joni Doolin, president of People Report. *Red Lobster is now running about 25 percent, down from 35 percent two years ago. Hourly turnover averages 120 percent for People Report participants. Red Lobster's dropped from 135 percent to 120 percent.

Morris admits there's room for improvement. But the chain is already realizing savings from the reduced turnover. "We've examined the cost of recruiters and ads, the hours spent interviewing, the cost of training," says Morris. "To hire someone and then have that person go somewhere else is a financial loss. We're not taking that hit quite as hard anymore."

* Note: Specific Red Lobster numbers were provided by the company; People Report™ does not publicly report individual company results.