At Dominos Pizza, company-wide turnover is 158 percent. That means Dominos must recruit, hire, and train 180,000 people a year just to fill its company's 114,000 jobs. And, with that much turnover, you can't consistently produce a quality product. Making and delivering pizza may seem simple, but up the ante to making and delivering one million pizzas each night, as Dominos does, and all of a sudden it's not quite so easy, especially if you're always working with inexperienced employees. For instance, even a simple job like taking orders has a learning curve when you're taking 45 to 50 orders an hour. In fact, a new order taker usually requires 80 hours (two full weeks of work) to become as reliable as an experienced one. Until they learn their jobs, new workers make lots of mistakes such as getting orders wrong, giving out the wrong change, and showing up at customers' homes with the wrong pizza. Those mistakes are costly in two ways.
First, if the order is wrong, late, or missing, customers get angry and may not do business with you again. According to the University of Michigan's American consumer satisfaction index, Domino's ranks in the bottom half of fast-food companies. Second, to right those wrongs, Dominos often says the pizza is free-"Our fault, no charge."-and that hurts profits. That much turnover is costly in other ways as well. For one thing, it costs time and money to find and hire new workers. Domino's estimates that it costs them $2,500 to replace each hourly worker who leaves, and $20,000 to replace a store manager. Then all those new workers must be trained, and that takes time and money. At Dominos, each new worker spends the first 30 days in training, learning to take orders, handle the cash register, make pizza dough, and, ultimately, how to make a pizza in less than a minute. When everything is considered, turnover is costing the company several hundred million dollars a year, or just over 15% percent to 20% percent of revenues. The question is what to about it.
Robert Chabot, who owns RAM Pizza, a series of Domino's franchise stores, says, "This business is all about who you hire. It's about people: those who want to do it (good work) and those who don't." Consequently, Chabot relies heavily on employee referrals to first identify good job applicants. Chabot assumes that if current employees are satisfied with their jobs, they'll tell their family and friends about their positive work experiences, and those people will in turn want to work for him and RAM pizza (i.e., Domino's). He also pays employees $25 for each person they recommend who gets hired and then stays for 90 days.
Dominos also is doing a much better job of screening and selecting potential managers. Anyone who wants to manage a Domino's store has to pass a 30-minute online test of their financial and management skills. If you're not familiar with financial concepts such as "break-even" and "cash flow," and you're not sure how to handle poorly performing employees (hint: yelling and screaming isn't the preferred answer), then you're unlikely to pass the test.
Your task:
You and your team have been hired by Dominos to improve on the turnover problem. Building on what you have learned this year about management, planning and decision making, motivation, teams, culture, human resource management, and strategy, what kind of a plan can you put together to help Dominos solve this extremely expensive problem? Why?