Can This Turnover Number from McDonalds (44%) Be Right?

I’m not a big user of McDonald’s, but I get that the rest of America is.  I’m usually looking for a leaner option when I’m out and about, although I’ve been known to slide through the drive through to order plain hamburgers from time to time – a lean option that is pretty reasonably priced in my area ($.90 per)…

But enough about my sensitive tastes.  The WSJ recently did a feature on the home of Ronald McDonaldRonald  thinking through an employment brand revamp, to better engage employees and cut turnover.

Their current annualized turnover number?  44% per the article.  Can that be right?  I would have guessed it much higher.  From the WSJ via the wire at the Baltimore Sun:

"Such numbers can mean big money for McDonald’s. A senior executive recently put the chain’s annual employee turnover at 700,000 – or nearly 44 percent of the company’s 1.6 million employees worldwide.

Managerial turnover is around 20 percent globally, while that of crew members averages 80 percent to 90 percent, with significant differences by country, Floersch said. He wouldn’t disclose statistics for individual markets but pointed to China and Germany as having among the lowest annual turnover.

McDonald’s is putting particular emphasis on deterring people from quitting within the first three months of being hired. If they stay beyond that, their productivity – and the company’s return on its training investment – both improve.

Also, the fewer new employees a restaurant manager needs to recruit, the more money that store is likely to make. An experienced crew and manager can add as much as $100,000 to its annual sales, the company estimates. And low turnover can save perhaps $10,000 in annual overhead.

To cut turnover, managers are interviewing crew and other employees to determine what they value most about their jobs, and what might be done to improve them.

One key topic these days is health insurance. "We’re working with our owner-operators to provide medical coverage at reasonable rates," Floersch said.

Because of its size, McDonald’s can obtain a significantly lower group rate from its primary health insurer, the Blue Cross & Blue Shield Association. So far about 70 percent of its franchisees are under the company’s umbrella plan. The amount of an employee’s co-pay is determined by the franchise."

So, I thought the 44% number overall was low – after all, aren’t the majority of their workers the folks on the line within the retail locations.  If you gave me the 80 or 90% number, I would have accepted that – but 44%?  Maybe that’s the global number and the loyal Chinese worker is making up for the 150% burn rate stateside.

Interesting to see MickyD’s pointing to health insurance as a pillar of their retention efforts, which has long been an arrow in the Starbucks engagement quiver and value proposition.  Looks like the big barrier to that will be convincing the McDonald’s franchisees to cover the majority of the cost on behalf of employees.  Starbucks doesn’t have that problem, since all stores are company owned.

It’ll be interesting to see if stores who pay 70-90% of the cost see reduced turnover when compared to franchises who pay only 30-50% of the cost. 

Sign me up for the PPO, and while I’m here, super-size that value meal for me…. 

FOT Background Check

Kris Dunn
 Kris Dunn is Chief Human Resources Officer at Kinetix and a blogger at The HR Capitalist and the Founder and Executive Editor of Fistful of Talent. That makes him a career VP of HR, a blogger, a dad and a hoops junkie, the order of which changes based on his mood. Tweet him @kris_dunn. Oh, and in case you hadn't heard the good word, he's also jumped into the RPO game as part owner of a rising shop out of ATL, Kinetix. Not your mama's recruiting process outsourcing, that's for sure... check 'em out.

6 Comments

  1. Jessica Lee says:

    i used to be embarrassed to admit it… but my first job was actually at mickey d’s. while on the surface it seems like a crap place to be and how can anyone stay there that long when you smell like french fries for hours after leaving “the office”… you learn a lot of great things working there. for high school students, it’s a great opportunity to learn team building, customer service… and it’s a humbling work experience to boot.
    i would be curious about how demographics play a role in the retention factor too. for a store that employs many high school students or immigrants, i suspect retention is higher as my hunch is that folks in those two categories would stay longer.
    on the starbucks note, i heard howard schultz at a lecture once and he claimed that sbux spends more money on health insurance for employees than they do on coffee beans. amazing!

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  2. J Lee and I are fellow mickey d’s alumni! Whoo hoo…sweet!
    I will concur with her opinion on working for McDonalds. Awesome experience on the whole.

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  3. KD says:

    I wish I could have worked there growing up. I had to drive 70 minutes to get to the nearest MickyD’s. Similar to where Maren lives now…
    JLee – crazy true point on the demographics front. Let’s take immigration out for a second and just talk about the labor pool. Is is better to get folks who are thrilled to get the $8 an hour, or should you try and get folks like you coming up.
    Reduced turnover vs. potential upgrading service skills?
    What’s the call?
    KD

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  4. I am not a customer of McD’s as I am trying to watch my girlish figure. That said, if I were a customer I don’t suspect that seeing the same faces day in and day out from a customer perspective is all that important. Such a thing is only important when more significant transactins are taking place such as in banking (an industry that has serious turnover issues in the Teller population – Chase comes to mind as having some of the worst turnover).
    It is also not a rocket science job where training new talent takes eons to complete. I think it would be better to get people how are up and coming and improve overall service. The difference between McD’s, Burger King, Sonic, Wendy’s etc. is not all that much about product as much as it is service, speed and quality of food. Putting more gap between you and your competitors can only be accomplished with better talent to execute in these critial areas.

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  5. chris says:

    It’s good to see an article about turnover that actually spends some time on impact.. Ultimately the high-turn v. low-turn argument hinges on which is more *profitable* – which is a function of changes in both revenues AND expenses (too often when people discuss turnover they focus exclusively on one).
    As for KD’s question – you’ve just highlighted another wrinkle to the high-turn v. low-turn argument. Focusing hiring on one group as opposed to the other changes the cost/benefit calculation.
    I would venture to guess that at the store level (note the 44% turn included non-store employees too) you’d want the “coming up”-types. At some point a cashier or cook can be employed too long (raises, etc. increase their pay to the point it exceeds their marginal contribution). Assuming you do everything else right in the hiring process (wow! a big assumption), the “coming up”-type worker should stay long enough to be profitable, but also leave before they become a net loss.

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  6. Dave Koontz says:

    I worked at McDonald’s in the 70s (yes, I’m that old). In my observation productivity went down for younger workers after the job became easy. McDonald’s constantly changed procedures, I believe, in an effort to keep people from becoming too comfortable. I doubt that McDonald’s is making any effort to retain employees for longer than a year or so.

    Reply

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