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Chipotle Tries a New Answer to Its Worker Churn Problem: Team Bonuses

Daniel B. Kline, The Motley Fool

The low unemployment conditions prevailing in the U.S. today have given workers at the bottom of the wage scale some extra leverage. If you don't like your job in fast food or retail -- or indeed, any entry-level position -- you won't find it too hard to go down the street and land a new one -- possible at a higher hourly rate.

That's a problem for Chipotle (NYSE: CMG), which has a promote-from-within culture: Traditionally, 95% of its managers have started out as store crew members and moved up through the ranks. If employees don't stick around, however, they miss out on those opportunities to move from entry-level slots making below $30,000 a year to positions that can pay over $100,000.

To reduce staff churn, the fast-casual Mexican chain has decided to give employees an additional incentive to stay: It's offering bonuses to its hourly workers that could equal an extra month's salary over the course of a year.

People wait in line at a Chipotle.

Chipotle is offering bonuses to its workers if they stay with the company and their stores meet their goals. Image source: Chipotle.

How is Chipotle paying?

The restaurant chain, which has over 70,000 employees and about 2,500 locations, will award bonuses at the end of each quarter to employees whose stores meet their sales goals, Nation's Restaurant News (NRN) reported. Ideally, these bonuses -- a week's worth of pay, as calculated for each individual -- will help the chain reduce its 145% annual turnover rate. To qualify, workers will have to be employed at the chain for the full quarter.

"They are rewarding their staff for building their business while being guest-facing brand champions, which is typically only given to management," restaurant consultant Jenny Companion told NRN.

This type of bonus gives workers a reason not to job hop for slight increases in pay -- assuming the bonus targets are reasonably attainable. And leaving in the latter part of a quarter will be less appealing to workers who know that would mean sacrificing money they've already more or less earned.

Most importantly, this program should boost crew members' sense of responsibility to the team, and by extension, their restaurant. By creating a group incentive to deliver the best possible service -- and to encourage your coworkers to do the same -- these bonuses should lead to increased customer satisfaction.

It's just a start

Retaining workers for longer periods helps any company operate more efficiently. For Chipotle crew members, that can reflect something as fundamental as developing the muscle memory for hand-building a burrito or working a cash register. And skilled line workers later become managers who truly understand all the details of their restaurants' daily operations, which makes the company stronger.

In this low unemployment economy, though, offering the lure of bonuses may not be enough to significantly boost worker retention. Chipotle -- which has stressed to the Motley Fool in emails that it offers benefits well beyond its hourly wages -- should consider increasing its minimum hourly wage to the $15 standard.

That rate has not yet been commonly adopted, but some larger companies have already gotten there or pledged to reach it within the next few years. It's possible that $15 an hour will soon become the floor for any company that hopes to attract the highest-quality entry-level and hourly workers -- people whom businesses can train up and develop into their next generations of management.

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Daniel B. Kline has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Chipotle Mexican Grill. The Motley Fool has a disclosure policy.