Turnover Turnaround

Deep in the throes of a rigorous battle against turnover, Taco Bell employs the power of analytics to help reshape its people strategies.

Wednesday, September 6, 2017
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Frank Tucker was working as manager of compensation and benefits at Rockwell Automation in Milwaukee, Wis., when a recruiter called to ask if he would be interested in heading west to be vice president of human resources at Taco Bell in Irvine, Calif. Tucker didn't think the company would offer the kind of growth opportunities he desired, so he responded with an emphatic "no." Still, the recruiter persisted until Tucker agreed to an interview. Ultimately, he accepted the job, but was determined to stay just one year.

That was 24 years ago. Flash forward to 2017, and Tucker is not only still working for Taco Bell, he's the company's chief people officer -- a job to which he was promoted in 2012. While his initial expectations for career satisfaction at the chain were low, he discovered that working for the nation's leading Mexican-inspired quick service restaurant company was rewarding.

"It's been a really great experience," says Tucker. "I enjoy it because of the people and the culture and because of what we do. It's infectious."

While his tenure at Taco Bell has been at the corporate level, Tucker hopes many of the company's front-line workers will have similar realizations -- that they, too, can carve out a fulfilling career path at the company that urges people to "Live Mas." However, he acknowledges that most people who come to work at a Taco Bell restaurant view it as a pit stop on the way to something else.

"Taco Bell is a first job for a lot of people," says Tucker. "In many cases, we know they are not going to stay with us for a long period of time. They'll get what they want to get out of it and move on."

Historically, according to the company, 50 percent of new store-level employees at the chain's company-owned restaurants quit within six months. (Figures are not available for the company's franchise restaurants, but Tucker believes it's "probably similar.") That's not particularly surprising, given that half of all Taco Bell employees are age 22 or younger and merely looking to earn some spending money, save up for their first car or pay for college. Seeking to help its young employees attain their educational goals, the company had long provided access to GED programs and discounted tuition at Excelsior College, an Albany, N.Y.-based nonprofit school that specializes in distance-learning degrees and certificate programs. Taco Bell also has several scholarship programs through which more than $75 million has been awarded to student workers. The company also had invested heavily in leadership-development programs for restaurant general managers, area coaches and shift leads.

Employees frequently voiced their appreciation for such programs -- which had been developed in response to employee-engagement surveys -- yet turnover continued to be a major problem. Tucker says the chain experienced a reprieve during the Great Recession, but turnover rates ticked back up as soon as the economy began to improve. By that point, HR had grown complacent and didn't take steps to address the problem until turnover approached pre-recession levels, says Bjorn Erland, who reports to Tucker as Taco Bell's vice president of people and experience. Not only had the recovery driven down unemployment rates, creating a greater comfort level for those thinking about jumping ship, but a political movement to raise the minimum wage to $15 was gaining steam. Seeking a competitive advantage for hiring the best candidates, store managers and field leaders were pressuring the organization to increase wages, but the chain already paid workers competitively -- above minimum wage in most locations.

Suspecting other factors were contributing to Taco Bell's turnover woes, Tucker and his team embarked in late 2015 on an analytics-fueled mission to identify the primary reasons people leave Taco Bell and create an integrated strategy that would reduce turnover, enhance hiring and boost employee satisfaction.

Trouble in Tacoland

A subsidiary of Louisville-based Yum Brands Inc., Taco Bell traces its roots back to 1952, when a young entrepreneur named Glen Bell began selling 19-cent tacos from the side window of his Taco-Tia taco stand in San Bernardino, Calif. Today, Taco Bell operates more than 7,000 stores -- 830 of which are company-owned -- and employs 210,000 people across both its company-owned and franchise locations. Over the years, the company has sought to cultivate a fun, hip image as the place to get quick, tasty and cheap food on the run. A string of catchy slogans -- "Make a Run for the Border," "Think Outside the Bun," and perhaps most famously, "Yo Quiero Taco Bell," complete with adorable Chihuahua mascot -- have served to bolster that effort. Yet in an industry where turnover is notoriously high, no amount of cool seemed capable of boosting retention.

Recognizing the need to dive deep into the metrics of the workforce, Tucker called upon Mercer, whose consultants had a long history of working with Yum Brands in a variety of capacities. (Yum also owns KFC and Pizza Hut restaurants.) Taco Bell's HR function was no stranger to data and analytics. In fact, the organization had "a fundamental orientation to data," according to Rick Guzzo, a partner with Mercer's Workforce Sciences Institute in Washington.

"They are quite sophisticated in their use of data for pricing and for tracking the customer experience," says Guzzo. "This was an opportunity to help them use their workforce data in new ways, to get to new solutions about how they could do things differently to bring down turnover and bring up restaurant performance."

According to Steve Gross, a senior partner in Mercer's Philadelphia office, Taco Bell's HR function already possessed a wealth of data, along with anecdotal information, but didn't have the analytical expertise to prove or disprove many of its beliefs. Embarking on their analytical journey, the company's HR leadership and Mercer paid particularly close attention to the issue of compensation. Specifically, Tucker and his team sought to answer two key questions: What was the effect of compensation on turnover? Would raising wages have any impact?

From Analysis to Action

Over a 13-month period, a team of Mercer consultants studied more than 500 company-owned Taco Bell restaurants with 20,000 employees. They analyzed business performance and workforce data to uncover what exactly made Taco Bell employees tick, what excited them, what frustrated them, and what the chain could do to lengthen their tenure. They supplemented the data with comments gathered from employee focus groups. According to Guzzo, the goal was to "make sense of what the numbers were telling us."

Not surprisingly, pay emerged as the single greatest factor, with 47 percent of employees citing it as a reason they would consider leaving Taco Bell. While they clearly considered their hourly wage important, Tucker says, the real issue was one of "overall compensation, which is more a function of hours than of wage rate." Many team members were frustrated because they were usually scheduled just a few hours a week, resulting in less-than-satisfactory take-home pay.

This led the team to re-examine a relatively recent change in staffing strategy that had resulted in a reduction in hours for some workers.

"Historically, we gave people quite a few hours because we wanted Taco Bell to be their primary job," he says. "But then we started hearing about this phenomenon where everybody is doing quasi-part-time jobs for lots of different places, so we shifted our staffing model to give people slightly fewer hours."

While some Taco Bell workers do prefer to be scheduled fewer hours because they are juggling more than one job, Tucker says, "we've found that is not the norm."

As they unpacked their findings, Tucker says, it became clear to the analysts from Taco Bell and Mercer that this was a significant issue for an important set of workers: those who form the "core group that makes sure the restaurant is run well, day-in and day-out, every day of the week" -- that is, those who view Taco Bell as their principal job, rather than a short-term fill-in. Out of this realization emerged a new initiative aimed at ensuring core team members are scheduled at least 100 hours per month, even if it means shifting hours away from those who are likely to be short-term employees.

"What Mercer was proposing was taking some hours from individuals who were potentially going to leave anyway and moving those hours to folks who were more of a consistent group that is going to stay," says Erland. "It was really [a matter of] looking at the overall hours within the restaurant more strategically and utilizing those hours with your core people who were probably going to perform at a higher level than someone who is not coming into the restaurant and performing the role that often."

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With so many employees leaving Taco Bell before they could even be considered part of that core group, Mercer's Gross wasn't surprised to discover employees lacked sufficient training during their initial weeks and months on the job. This finding emerged not only through data analysis and focus groups, but through observation. Gross witnessed the problem firsthand when he visited a Taco Bell inside a Minneapolis airport.

"I saw this poor woman trying to make tacos, looking at a binder that pictured what the tacos should look like, and then looking up at a computer monitor that showed the backlog of orders," says Gross. "All the while, there was a supervisor looking over her shoulder."

Delving into Taco Bell's training practices, Gross says, the Mercer team uncovered an "uneven practice of how quickly people were trained to do their jobs and how much was self-training versus formal on-the-job training." They discovered the quicker new hires were trained to proficiency in the required food handling and customer service duties, the more likely they were to stay with the company.

Likewise, recognizing the role each restaurant general manager plays in keeping employees in "the family," Erland's team began discouraging area coaches from engaging in the popular practice of moving GMs from "A" restaurants to "F" restaurants in the hopes of turning the lower-performing restaurant around. Often, the result was two mediocre restaurants and the loss of valued employees.

A Fact of Life

For Erland and Tucker, the need to get turnover under control increased sharply in November 2016, when CEO Brian Niccol announced a plan to expand Taco Bell by 2,000 restaurants and add 100,000 jobs as part of a larger initiative to reach $15 billion in global sales by 2022. Early signs are positive: In the past five years, Taco Bell has grown from $7 billion in global sales to $10 billion.

In an industry where turnover runs 150 to 200 percent on average, the enormity of adding 100,000 workers is evident to HR consultants like David Lewis, president and CEO of Operations Inc. in Norwalk, Conn.

"When you do the math, it really makes you raise your eyebrows," says Lewis. "In order to have net 100,000 new employees, you have to take that number and multiply it by somewhere between a factor of five and 10 to get there."

In what seems a tacit admission of that fact, Taco Bell recently pledged to hire 1.5 million people between the ages of 16 and 24 over the next 10 years. The acknowledgement that turnover is a fact of life is further articulated in the chain's new "Start with Us, Stay with Us" campaign, designed to help people envision a career with Taco Bell -- or at least recognize how their time at the chain helps prepare them for future endeavors. According to Guzzo, it's a mantra and mind-set that was long perceived, but had not previously been articulated.

" 'Start with Us, Stay with Us' was borne of the notion that you are always going to have high turnover," says Guzzo. "The notion is, 'We are a good place to start because we are going to help you grow, we are going to grow your life skills and we are going to do things that will launch you into successful careers.' "

So far, Taco Bell's strategy seems to be working. Without giving specifics, the chain reports that turnover has been reduced in both Q1 and Q2 of 2017, compared to the same periods last year. Perhaps more importantly, 1,500 more team members are receiving at least 25 hours per week, compared to last year. Moving forward, Tucker says, the key is going to be keeping up this kind of turnover-busting momentum, while staffing an ever-growing legion of restaurants.

"The trickiest part is figuring out the right balance and making sure we don't focus on one to the exclusion of the other," says Tucker. "It's going to require us being really thoughtful about how we do both well simultaneously."

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