Giving 'McJobs' more appeal

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Chain offers group health, 401(k), other benefits to reduce turnover

May 08, 2008|By The Wall Street Journal

McDonald's Corp. is working hard to redefine "McJob," a word various dictionaries define as unstimulating, low-paying employment with few prospects.

While it hasn't yet convinced lexicographers that such descriptions are demeaning, erroneous and unfair, the fast-food giant is taking steps aimed at "getting people thinking differently" about being a McDonald's employee, Rich Floersch, the company's chief human resources officer, said.

Those initiatives seek to make a "McJob" something that members of its multitudinous work force do with pride - and keep them from jumping to another employer.

McDonald's campaign also is certain to be watched by other restaurateurs for success in combating employee turnover, a chronic and costly industry problem.

At many U.S. McDonald's, crew members are being offered health insurance at group rates, along with computerized English-language classes and other life-enhancing skills that can be learned during breaks or after shifts.

And in company-owned restaurants, employees can establish 401(k) retirement accounts in which McDonald's increases its contribution over time, depending on that year's profits.

In the United Kingdom, where the slogan "Not bad for a McJob" appears on posters in McDonald's restaurants, as well as recently on a video screen in London's Piccadilly Circus, benefits being touted include flexible hours, educational training and, for managers, company cars.

Since the campaign began, turnover at U.K. stores is down 20 percent, Floersch said.

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.

The company also has developed job-hiring tools designed to reduce subjectivity in the selection process and weed out poor prospects.

A questionnaire that applicants fill out correlates well between high scores and future success, Floersch said. Answers are sorted by colors: Green means the manager definitely should interview the person; red means don't waste your time.

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