Gimme shelter

11 Novembe,r 2002

Report: Mgmt. turnover inches up, but retention rates remain solid
By Dina Berta

DALLAS - Turnover among managers is increasing slightly for a group of casual-dining and quick-service chains that nevertheless continue to lead the industry in employee retention, according to People Report, a firm that analyzes employment practices for restaurants.

The 56 companies that People Report tracks are witnessing the first increase in turnover since the Dallas-based firm began measuring retention rates six years ago.

A growing regard for quality-of-life issues since the tragedies of Sept. 11, 2001, and more trading of managers from one branch to another as chains open new units are among the top reasons why turnover is on the rise, said Joni Doolin, People Report's founder and chief executive.

"The No. 1 trend we are seeing in the workforce is this recentering, people seeking a work-life balance," Doolin said. Fifty-one percent of those surveyed in exit interviews cited quality of work and life as the reason for quitting, she noted.

Management turnover had declined steadily from 35 percent in 1996 to 25 percent last year, but this year turnover is up by 1 percent, Doolin disclosed during the sixth annual People Report Best Practices Conference, held recently at Maggiano's Little Italy restaurant in north Dallas. Nationally, the industry average for management turnover falls between 40 percent and 50 percent, according to published reports.

California Pizza Kitchen won People Report's award for best practices for restaurants with annual unit sales volumes between
$2 million and $4 million. Pictured above are, from left, Teresa Siriani, People Report president; Jan Barr of Chili's Grill & Bar,
conference chairperson; Jason Nemoy and Julie Carruthers, both of California Pizza Kitchen; and Joni Thomas Doolin,
founder and chief executive of People Report.

"We have made tremendous progress here as a group, but turnover is projected to increase this year," she said.

About 150 people, including human resources vice presidents and recruiters from such chains as Chili's, T.G.I. Friday's, Applebee's, El Pollo Loco, California Pizza Kitchen, Red Lobster and Buca di Beppo, attended the conference, which included Doolin's report on the industry and a panel discussion by HR executives.

Speeches also were made by Mary Adolf, president and chief operating officer of the National Restaurant Association Educational Foundation; Todd Deiner, president of Chili's Grill & Bar; and Wallace Doolin, chief executive of la Madeleine French Bakery and Café.

Bruce Tulgan, founder of Rainmaker Thinking Inc. and author of 12 books, including the recent "Winning the Talent Wars," discussed managing a multigenerational workforce.

Six companies also were recognized for having the best retention and management diversity among People Report members.

People Report member companies represent more than 6,700 units and total more than $20 billion in systemwide sales. They employ some 650,000 employees, including 56,000 store managers.

While average management turnover appears to be rising, annual turnover of hourly workers for those companies continues to decline and remain well below industrywide estimates. Hourly turnover has fallen from 134 percent for People Report members in 1996 to 124 percent last year. It's expected to drop to 112 percent this year, Doolin said. Nationally, average hourly turnover for the industry reportedly is around 150 percent.

Some of that lower turnover can be attributed to better employment practices, Doolin said. But there also is a concern that because of the uncertainty of the economy some employees are staying on the job longer, rather than risking not being able to find work if they leave, she added.

"We know people are not looking to companies to have long-term careers, but some may be looking at them for safe havens right now," she said.

Despite recession and low consumer confidence, the restaurant industry is fairing better than expected. While the NASDAQ and Dow Jones stock indexes are down 41 percent and 25 percent, respectively, since January, restaurant stocks are down only 2 percent. The rate of inflation continues to fall along with the cost of capital, which makes it favorable for some restaurant companies to continue expanding. That means a continued demand for employees, Doolin said.

Unit growth also may contribute to the slight rise in management turnover as restaurants continue to trade managers rather than find new sources for workers, she said.

Casual-dining and quick-service restaurants continue to promote heavily from within. The average assistant manager remains a white male in his early 30s with five years of management experience. He earns about $37,000 a year and stays with a company for nearly two and half years.

Quality of life and acquiring a balance between work and home also remain leading reasons, why managers leave their jobs, Doolin said.

Sixty percent of People Report members indicated the one change they have made since the 9/11 terrorist attacks is spending more time with family and friends, she said.

"Any employment policies and recruitment strategies have to consider these psychographics, or they are destined to fail," Doolin said.

People Report once again honored those companies that have beaten the average in retention and maintain diverse management staffs in terms of the number of women and minorities.

The awards were given by restaurant segment. El Pollo Loco took the Best People Practices Award for concepts generating annual unit sales volumes between $500,000 and $1 million and with per-person guest checks below $5.

From left: Jan Barr of Chili's Grill & Bar;
Pamela Milner of El Pollo Loco, a Best People Practices Award-winning company;
and Joni Thomas Doolin of People Report at the People Report Best Practices Conference.

Corner Bakery Cafe received the honor for concepts with average unit sales volumes below $2 million and guest checks below $10.

California Pizza Kitchen had the best practices for restaurants with annual unit sales volumes between $2 million and $4 million and guest checks between $10 and $15.

Maggiano's Little Italy received the honor for concepts with average unit sales volumes greater than $4 million and guest checks greater than $15.

In addition, People Report gave its Catalyst Award to Applebee's International for having made significant advances in employment practices. Applebee's lowered its management turnover from 30 percent to about 16 percent in a year, said the chain's chief people officer, Lou Kaucic.

Noting that restaurants that are involved in their communities have higher retention rates than do those that are less active, People Report created a new recognition category this year - the Heart of the Workplace Award. The honor was given to Restaurants Unlimited, whose many concepts include Palomino Euro Bistro and Horatio's, among others. Restaurants Unlimited had the lowest hourly turnover of all People Report members.

Rick Amero, director of staffing for Restaurants Unlimited, said the company's hourly turnover has averaged about 60 percent.

Restaurants Unlimited was recognized for its leadership last year in organizing the Dine for America campaign to raise money for injured restaurant employees and victim's families.