HBR: How One Fast-Food Chain Keeps Its Turnover Rates Absurdly Low

In this blog post Bill Taylor explains why Pal’s Sudden Service has a low turnover. They hire for attitude and train for skill. New employees get 120 hours of training before they work on their own. This one is my favorite: employees are given pop quizzes on the specific job they perform. Does your company spend time training, teaching, and coaching? What are your thoughts on pop quizzes from your employer? Is your personal growth keeping up with your company’s pace of growth? Below is a blog from the Harvard Business Review by Bill Taylor.

How One Fast-Food Chain Keeps Its Turnover Rates Absurdly Low

Many of us who are hungry for the latest dispatches from the war for talent look to to Silicon Valley. We want to know Google’s secret to hiring the best people or Mark Zuckerberg’s one tip for hiring employees. But in a world where most companies don’t operate on the frontiers of digital transformation, and most employees aren’t tech geeks or app developers, our appetite for unconventional talent strategies should probably extend to more conventional parts of the economy. Like, say, an amazing fast-food chain called Pal’s Sudden Service.

At first blush, there’s nothing all that amazing about Pal’s. It has 26 locations in northeast Tennessee and southwest Virginia, all within an 80-mile radius of its home base in Kingsport, Tennessee. It sells burgers, hot dogs, chicken sandwiches, fries, shakes—standard fast-food fare, although the taste and quality have a well-deserved reputation for excellence.

Dig deeper, though, and you see that nothing about Pal’s is standard for its business, or any business. The most obvious difference is its fanatical devotion to speed and accuracy. Pal’s does not offer sit-down service inside its restaurants. Instead, customers pull up to a window, place their orders face-to-face with an employee, pull around to the other side of the facility, take their bag and drive off. All this happens at a lightning pace—an average of 18 seconds at the drive-up window, an average of 12 seconds at the handout window to receive the order. That’s four times faster than the second-fastest quick-serve restaurant in the country

But Pal’s is not just absurdly fast. It is also staggeringly accurate. You can imagine the opportunities for error as cars filled with bickering families or frazzled salespeople zip through in under 20 seconds. Yet Pal’s makes a mistake only once in every 3,600 orders. That’s ten times better the average fast-food joint, a level of excellence that creates unprecedented levels of customer loyalty, as well as loud acclaim from management experts. Indeed, back in 2001, Pal’s became the first restaurant company of any kind to win the prestigious Malcolm Baldrige Quality Award—an award that’s gone, over the years, to the likes of Cadillac, FedEx, and Ritz-Carlton.

Ultimately, what’s truly intriguing about Pal’s, what allows this small company to cast such a large shadow, is the level of intelligence and intensity with which it approaches the human side of its business—how it hires, trains, and links its identity in the marketplace to its approach in the workplace. “If you watch professional athletes, everything they do looks so smooth and fluid,” says CEO Thomas Crosby. “But eventually you realize how much work went into that performance, all the training, all the skill-building, all the hours. It’s the same for us.”

So what can the rest of us learn from Pal’s? First, the best companies hire for attitude and train for skill. Pal’s 26 locations employ roughly 1,020 workers, 90 percent of whom are part-time, 40 percent of whom are between the ages of 16 and 18. It has developed and fine-tuned a screening system to evaluate candidates from this notoriously hard-to-manage demographic—a 60-point psychometric survey, based on the attitudes and attributes of Pal’s star performers, that does an uncanny job of predicting who is most likely to succeed. Among the agree/disagree statements: “For the most part, I am happy with myself.” “I think it is best to trust people you have just met.” “Raising your voice may be one way to get someone to accept your point of view.” Pal’s understands that character counts for as much as credentials, that who you are is as important as what you know.

Second, even great people need constant opportunities for improvement. Once Pal’s selects its candidates, it immerses them in massive amounts of training and retraining, certification and recertification. New employees get 120 hours of training before they are allowed to work on their own, and must be certified in each of the specific jobs they do. Then, every day on every shift in every restaurant, a computer randomly generates the names of two to four employees to be recertified in one of their jobs—pop quizzes, if you will. They take a quick test, see whether they pass, and if they fail, get retrained for that job before they can do it again. (The average employee gets 2 or 3 pop quizzes per month.)

“People go out of calibration just like machines go out of calibration,” CEO Crosby explains. “So we are always training, always teaching, always coaching. If you want people to succeed, you have to be willing to teach them.”

Which speaks to a third lesson: Leaders who are serious about hiring also have to be serious about teaching. Pal’s has assembled a Master Reading List for all the leaders in the company, 21 books that range from timeless classics by Machiavelli (The Prince) and Max DePree (Leadership Is an Art), to highly technical tomes on quality and lean management. Every other Monday, Crosby invites five managers from different locations to discuss one of the books on the Master List.

Meanwhile, every day, he identifies at least one subject he will teach to one person in the company. Actually, that’s a requirement for all leaders at Pal’s, who are expected to spend 10 percent of their time on teaching, and to identify a target subject and a target student every day. “All leaders are teachers, whether they realize it or not,” Crosby says. “So we have formalized a teaching culture. We teach and coach every day.”

The end result of Pal’s commitment to hiring smart and teaching continuously is that employees show the same sense of loyalty as its customers. Turnover is absurdly low. In 33 years of operation, only seven general managers (the people who run individual locations) have left the company voluntarily. Seven! Annual turnover among assistant managers is 1.4 percent, vanishingly low for a field where people jump from company to company and often exit the industry altogether. Even among front-line employees, turnover is just one-third the industry average.

“People ask me, ‘What if you spend all this time and money on training and someone leaves?’” Crosby says. “I ask them, ‘What if we don’t spend the time and money, and they stay?’”

That may be the most important lesson of all.

HBR: The Best Ways to Hire Salespeople

How are you hiring salespeople? Do you use talent assessments to insure your they are successful? The Northeastern Retail Lumber Association (NRLA) has a great tool to assess your salespeople. Click on this link to get more information. NRLA/LMS Below is a blog from the Harvard Business Review by Frank V. Cespedes and Daniel Weinfurter.

The Best Ways to Hire Salespeople

Many firms talk about talent management, but few deal systematically with a basic fact: average annual turnover in sales is 25 to 30%. This means that the equivalent of the entire sales organization must be hired and trained every four years or so, and that’s expensive.

Consider these stats. Direct replacement costs for a telesales employee can range from $75,000 to $90,000, while other sales positions can cost a company as much as $300,000. Moreover, these figures don’t reflect the lost sales while a replacement is found and trained. In sectors like medical devices, big capital equipment, and many professional services, including these opportunity costs can push turnover cost to $1 million or more per event.

The challenge is compounded by the fact that there is no easily identified resource pool for sales positions. According to Howard Stevens in Achieve Sales Excellence, more than 50% of U.S. college graduates, regardless of their majors, are likely to work in sales. But of the over 4,000 colleges in this country, less than 100 have sales programs or even sales courses. And, even if companies are lucky enough to find qualified grads, the increased data and analytical tasks facing many sales forces mean that productivity ramp-up times have increased. Each hire is now a bigger sunk cost for a longer time.

Bottom line: companies typically spend more on hiring in sales than they do anywhere else in the firm. So how do you improve the returns on this investment? Here are four places to start:

Hire for the task. In business, you hear so many opinions about what makes for a good salesperson. But most are a bland summary of the Boy Scout Handbook, with traits like extroversion, assertiveness, empathy, modesty, and an “achievement orientation.” These platitudes are often reflected in firms’ competency lists and are so broad that, at best, they simply remind us that people tend to do business with people they like (but not always and not as often as many sales trainers assume). At worst, these abstractions are irrelevant to the execution of business strategy, and they make hiring, in sales and other functions, a classic example of the cloning bias: managers use these slogans to hire in their own image.

Selling jobs vary greatly depending on the product or service sold, the customers a salesperson is responsible for, the relative importance of technical knowledge, and the people contacted during sales calls. A review of hundreds of studies about sales productivity finds that “[t]he results of this research have simply failed to identify behavioral predispositions or aptitudes that account for a large amount of variance in performance for salespeople. In addition, the results of this research are quite inconsistent and, in some cases, even contradictory.” Common stereotypes about a “good” salesperson (e.g., pleasing personality, hard-wired for sociability, and so on) obscure the realities you face.

Selling effectiveness is not a generalized trait. It’s a function of the sales tasks, which vary according to the market, your strategy, the stage of the business (i.e., startup or later stage), the customers targeted by your strategy, and buying processes at those customers. This is true even for firms in the same industry. Think about the difference between sales tasks at Nordstrom, where personalized service and advice are integral to strategy execution, and Costco, where low price and product availability make sales tasks less complex and variable.

The first step in smart hiring and productivity is understanding the relevant sales tasks in your market and strategy and then reflecting those tasks in hiring criteria and a disciplined hiring process.

Focus on behaviors. Research based upon thousands of exit interviews shows that a primary cause of poor performance and turnover is poor job fit. People, especially salespeople with a variable pay component, become frustrated when they’re hired for tasks that are a poor fit with their skills and preferences. Conversely, as the saying goes, “You hire your problems.” Zappos CEO Tony Hseih estimates that bad hires have cost his firm $100 million. Famously, Zappos will pay people to leave voluntarily after a few months on the job.

The key is to focus on the behaviors implied by the sales tasks. In many firms, this means upgrading assessment skills. Managers are excessively confident about their ability to evaluate candidates via interviews. In reality, studies indicate a low correlation (generally, less than 25%) between interview predictions and job success, and some indicate that interview processes actually hurt in hiring decisions: the firm would have done better with blind selection procedures! The best results, by far, occur when those making hiring decisions can observe the potential hires’ job behaviors and use a recruitment process based on a combination of factors, as illustrated in the following graphic:

There are many ways to do this, including simulations, interviewing techniques, or (as at Zappos) providing an incentive for self-selection after recent hires experience the required behaviors. Especially in expensive sales-hiring situations, many organizations could emulate the practice used by investment banks and consulting firms when hiring MBAs: the summer job is, in effect, an extended observation by multiple people at the firm of the candidate’s abilities before a full-time offer is extended.

Then, immerse reps in the tasks they will encounter in working with customers. At HubSpot, which provides web-based inbound marketing services to businesses, Mark Roberge has sales hires spend a month in classroom-style training but also doing what their customers do: create a website from scratch and keep that site populated with relevant content. Roberge notes, “they experience the actual pains and successes of our primary customers: professional marketers who need to generate leads online. As a result, our salespeople are able to connect on a far deeper level with our prospects and leads.”

Be clear about what you mean by relevant “experience.” Previous experience is the most common criterion used by sales managers in talent assessment. In one survey, over 50% of respondents cited “selling experience within the industry” as their key selection criterion, and another 33% cited “selling experience in [an] other industry.” Driving this view is a perceived trade-off between hiring for experience and spending money on training. But because selling effectiveness depends upon a company’s sales tasks, “experience” is an inherently multidimensional attribute. It may refer to experience with any (or any combination of) the following:

  • A customer group: e.g., a banker or other financial services recruit hired by a software firm to call on financial firms; or, in health care, firms sell different products, but many sell to hospitals.
  • A technology: an engineer or field-service tech hired to sell a category of equipment.
  • Another part of the organization: a service rep moved to sales because internal cross-functional support is a key sales task and that rep “knows the people and the organization.”
  • A geography or culture: a member of a given nationality or ethnic group who knows, and has credibility within, the norms of the relevant customer’s culture.
  • Selling: an insurance agent or retail associate with experience in another sales context.

The relevance of each type varies with your sales tasks. So consider what type is, and is not (see below), relevant, and require the people doing sales hiring to clarify what they mean by experience.

On-going talent assessments. Markets have no responsibility to be kind to your firm’s strategy and sales approach. It is leadership’s responsibility to adapt to markets and develop the competencies required today, not yesterday.

As organizations confront new buying processes, required competencies are changing. The figure below, based on an extensive database of company sales profiles, indicates the changing nature of sales competencies at many firms. Competencies that, only a decade ago, were considered essential are now lower in priority.

Does this mean that developing leads, qualifying prospects, and adapting to different buyer motivations are no longer important? No. Rather, as one should expect in a competitive activity where success is ultimately measured by relative advantage, the focus of productivity improvement in sales is shifting. Yesterday’s sales strengths have become today’s minimum skill requirements.

This underscores the need for on-going talent assessments to stay in-touch with changing tasks and required behaviors. The good news is that the tools for doing such assessments, based on behavioral research findings, are more available and have more granularity and practicality for sales leaders. Conducting a skills inventory and determining the best fit for your sales tasks need not be the standard mix of folklore, various embedded biases by front-line managers, and the content-free platitudes about “selling” that populate many blogs. And it is increasingly necessary because companies must ultimately be worthy of real talent.

It’s often said that many firms maintain their equipment better than they do their people. If so, you ultimately get what you don’t maintain, especially in sales.

Turning Soft Skills into Core Skills: 3 Ways to Get Started

Blanchard LeaderChat

People Management Flow Chart In the field of learning and development, we typically refer to technical skills as hard skills and behavioral skills as soft skills. While soft skills are less tangible than hard skills, they are actually more valuable for a potential leader to acquire. Without the skills of communication, engagement, and empowerment, leaders are not able to direct and support people in the accomplishment of goals.

For this reason, I prefer to label these as core skills instead of soft skills. I’ve been using the term for 25 years, since I first heard a speaker extol their virtues. After the session, I suggested to the presenter that if these skills are so central to communication and maximizing effectiveness and contribution, they might be better regarded as core skills. To make a long story short, both the speaker and I used that term from that day on.

People are invariably the most expensive…

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Teach Someone a Lesson — Agile Selling

Teaching is a very important skill needed to advance your career. Do you offer a teaching lesson every week? Below is an excerpt from Agile Selling: Get Up to Speed Quickly in Today’s Ever-Changing Sales World by Jill Konrath.

Teach Someone a Lesson

Agile Selling: Get Up to Speed Quickly in Today's Ever-Changing Sales World
Agile Selling: Get Up to Speed Quickly in Today’s Ever-Changing Sales World

Maybe it’s time you teach someone a lesson. Hey-I’m not talking about being vindictive or seeking revenge! There may be some people who elicit that feeling in you, but we’re not going to go there. Instead, we’re going to focus on a super simple but highly effective strategy with big payback for you: teaching others in order to solidify your own knowledge.

The first time I ever trained someone else was early in my first year of sales. My boss, Diane, instructed me to go on a sales can with Alice, a trainee who had uncovered a really good sales opportunity while prospecting. As a newbie, it was highly unlikely that she’d close the deal without assistance. Diane asked me to show Alice what to do and to make sure we got the business.

Aargh! I was not ready for that. I was still fairly new myself, plus I didn’t know much about the other vendors. But clearly coming in second was not an option. For the next two days, I immersed myself in learning everything I could about the other two competitors. I studied how they stacked up against us. I talked to experienced reps to find out about pricing. Finally, planned out how I’d engage the prospect in a conversation that made us the obvious choice.

Before we went to the meeting, I reviewed everything with Alice. I outlined competitive strengths and weaknesses. I overviewed our plan for the meeting. I answered her questions to the best of my knowledge. With that prep, Alice and I went to the prospect’s office. Two hours later, we walked out with a signed contract. I was never so relieved in my whole life.

Here’s what closed that deal: I took a crash course in two competitors and became an overnight expert. In order to teach Alice, I had to really think through my meeting strategy step-by-step. Then I had to figure out how to explain to her what I was going to do in the meeting and why. Because I wanted to look good in front of Alice, my boss, and the prospect, I actually leapfrogged in my own sales development.

It seems strange to recommend teaching others while you’re still learning yourself. After all, we so quickly defer to the experts. However, the upside can be huge. As the Roman philosopher Seneca wrote nearly two thousand years ago, “By teaching, we learn.”

Annie Murphy Paul, author of Brilliant: The New Science of Smart writes about a program at the University of Pennsylvania in which students are responsible for teaching a specific subject to a computerized character. She writes, ”As they prepare to teach, they organize their knowledge, improving their own understanding and recall.” Doing this helps them find gaps in their own learning too, and they’re more motivated to master the material.

That’s exactly what happened to me. Teaching really challenged me to learn quickly. I felt really good about it. Alice learned. I got better. Consequently, we got the order that day.

After Alice, I had a string of trainees at Xerox. Each one increased my skill level. I became a conscious competent about what I was doing. In other words, I knew what worked, but it wasn’t second nature to me yet. Doing it right required me to pay close attention to all the steps involved. By teaching, I accelerated my learning significantly.

To this day, I teach so I can learn. You might want to give it a try. Think about what you really want to (or need to) learn about in more depth right now. What is it? Who could you teach it to? It doesn’t have to be people in your own company. Get creative. But most of all start teaching so you learn faster.

 

Increasing Engagement of Front line Employees

This topic is very important to create loyal customers. Engaged employees go the extra mile to deliver and provide better experiences for the customers. They come up with creative processes, service improvements and remain with their employers for longer tenures, which reduces turnover and its related costs. Your employees can deliver an enormous payoff to the business, by creating passionate customers who buy more, stay longer and tell their friends, all of which generates sustainable growth.

Increasing Engagement of Front line Employees

By Kevin Eikenberry

Yesterday, while facilitating a leadership discussion with a group of managers and owners at a conference for the Lumbermens Merchandising Corporation, the topic of engaging the front line employees came up. In effect, the question was asked, ” How do I get a truck driver to engage with the business and think about their work differently?”

Of course, the question isn’t really about truck drivers, but it is a common question I get, and it is based on two mental mistakes.

  • People ask the question from their perspective, and don’t consider the perspective of the other person (or make wild assumptions about it).
  • People assume others don’t want the same things they do.

Both of these mistakes lead to the honest confusion that underlies the question.

So just how do I engage front line employees?

Everyone operates from the view of the world they see.  If you are, for example, a truck driver, there are certain things you see and think about everyday – your experiences and thoughts create your perspective. Do you and your front line folks share the same experiences and therefore thoughts? Of course not!  So in order for them to see things differently, you need to help them see different things.

Strategy:  Help people see a new perspective. Give them a chance to see the numbers. Give them a chance to sit in on different conversations. Help them see the bigger picture. Will they see it immediately? Not necessarily, but be patient, they will if you give them time, support, and encouragement. It’s like the opposite of the show Undercover Boss – when the CEO sees a new perspective, they have a new understanding.

If you think you are different because of your job, education, or station in life, get a grip. Yes, every human being is different with a unique set of wants and needs, yet at the heart, we are all human. We want many of the same things from our work, regardless of our job title.   Here is a good list for starters. (Read it if you aren’t sure what I mean).

Strategy:  If you want to engage people, especially if you aren’t sure how, ask them. Ask them some questions, then listen. Don’t get into problem solving, justification, or excuse mode. Shut up and listen. Find out what they need. Engage them from their current perspective. You’ll learn something, and you will move in the direction of a more engaged employee.

There is a lot more that could be said (and done), but this is a good start.

Now go and get started!

What is Great Leadership?

What do you think is at the root of great leadership? I’d like to know what you think.

What is Great Leadership?

The Great Game of Business by Jack Stack

I think that it’s all too common these days to pick up a newspaper or a business magazine and read all about visionary and charismatic leaders in the mold of someone like Jack Welch. It’s like the individual guy or gal at the top gets all the credit for a company’s success. We’ve gotten into the habit of making CEOs into rock stars.

At the same time, when a company gets into trouble, it’s also the guy or gal in charge who takes the fall due to a “failure of leadership” or some such.

But that’s not how Edward Deming, one of the great business thinkers of all time, saw great leadership. (If you don’t know him, check out his Wikipedia page here: http://en.wikipedia.org/wiki/W._Edwards_Deming#cite_ref-new_22-1>) For Deming, great leadership wasn’t about individuals at all. As he wrote in his book, The New Economics for Industry, Government, Education:

It is management’s job to direct the efforts of all components toward the aim of the system. The first step is clarification: everyone in the organization must understand the aim of the system, and how to direct his efforts toward it.

Similarly, in his book Built to Last (a successor to Good to Great),Jim Collins took a deep look at why some companies thrive over the long run while others crash and burn. One of the key differences he found was between companies who were run by “time tellers” or by “clock builders” which he defined this way:

Having a great idea or being a charismatic visionary leader is “time telling”; building a company that can prosper far beyond the presence of any single leader and through multiple product life cycles is “clock building.”

In other words, great leadership isn’t about individuals – it’s about creating a system where everyone knows what they need to do to thrive. You don’t need to tell everyone the time if you teach him or her how to build the clock.Collinseven takes aim at Jack Welch in his book, saying that Welch was effective as a leader because he was simply a product of the GE culture – not the other way around.

Look, I believe that people as a whole hate to be “managed” and told what to do. The goal, therefore, should be to have a system in place where people can manage and lead themselves. Rather than boosting up or tearing down individuals, therefore, the system should be about getting to the root causes of problems and enabling anyone – not just charismatic and visionary leaders – to come up with the solutions. That’s what The Great Game of Business is: a leadership system.

What do you think? What do you think is at the root of great leadership?

Leaders Who Listen

Mountain State University
Image via Wikipedia

As a leader are you Listening?

Leaders Who Listen

Mountain State University LeaderTalk by MSU on6/22/11

by Vanetta Phifer
Often leaders spend a great deal of time communicating visions and objectives, creating agendas, facilitating meetings, engaging in conversations, responding to emails, developing important letters and documents, giving directions, providing motivational speeches and responding to questions. After all this, many leaders are frustrated when these communications receive verbal responses of support, yet turn out the “same old” results. This behavior is common in many organizations. The effectiveness of communication is evaluated by the end result; consequently if a leader is not experiencing intended outcomes, communication style must change. At what point does the leader take the time to listen? How much time will a leader spend preparing the message instead of hearing the message?

A leader can build an entire new world off of what is communicated but not said. Some leaders get used to followers stroking egos and telling them what they want to hear yet become aggravated when intended communication doesn’t bring about a change. Margaret Wheatley, in Leadership and the New Science (McGraw-Hill, 1994), states that it is beneficial to positive change to let go of a present form so a new one can emerge in a form better suited to the demands of the present environment.

What connections of communication do you need to let go? What is your organization telling you? Are you listening to early warning signs of where change is needed? Do you spend more time talking with the same people and expecting different results? Leaders who listen will hear not only what is being said, but what is not said. Your universe is speaking —

L = Look for those quiet or unknown
I = Interact with these individuals in an informal dialogue
S = Seek for sincerity and truth
T = Truth breeds freedom
E = Expect challenges
N = Necessitate change

Vanetta Phifer works as the program coordinator for MSU’s Organizational Leadership program and is currently finishing up her first semester in the Doctor of Executive Leadership program.