My god... the pizza people get the marketing implications of employee management and churn more than law firms do

Every now and then I simply want to weep. Mostly because "Little House on the Prairie" reruns can really get to me now that I've got my own family. But sometimes it's because I read an article on business management and it just reminds me of how far the legal industry has to go until it catches up to... Domino's Pizza.

There's a nice post over at Brand Autopsy about how Domino's Pizza CEO David Brandon, when he was hired in 1999, went on a crusade to lower employee churn. In the fast food business, yearly worker churn can go as high as 300%. That's a huge drain on resources and a big, bad marketing black-eye.  So he reduced Domino's 158% churn to 107%. How? Read on...

You may recall a post I wrote a month or so back ("When your only tool's a $115k hammer...") about how I think that bragging on how much you pay your first year associates is bad marketing mojo. I also said that trying to build a good roster of young attorneys based solely on monetary incentives was unwise. I also said... never mind. You can go read the whole she-bang-a-bang if you like.

My point is this -- you don't build and maintain a great team simply by paying them more.

And Domino's Pizza proves my point. What were CEO David Brandon's keys to successfully lowering employee churn?

• Hire Better Managers: According to their research, the critical success factor of a  store is  manager selection. One way Domino's selects better store managers is to have each candidate undergo an online test to measure their financial acumen and people management style.
• Give Managers Better Tools: Each store has computerized tracking programs detailing store sales figures down to the employee level with stats like average order size per employee and the time it takes to get a pizza order out the door. These tools help managers to track, reward and encourage employees.
• Incentivize Managers More Meaningfully : Besides profit-based bonuses, Domino’s also gives  stock options to top-performing managers based on customer service measurements and store sales growth gains.

Let's be clear -- although all of these programs directly affect managers, they decreased the churn of all Domino's  store employees, not just the managers. When the store managers were better chosen, better equipped and better encouraged, they provided an environment where the overall employee churn dropped by a third. A third! That's huge! HUGE! Are you with me on this? And study after study shows that high employee satisfaction -- which is always indirectly proportionate to low employee churn -- is one of the best drivers of customer satisfaction.

What does this mean for law firms?

The partner on my shoulder says, "Bah! Restaurants! Pizzerias! Fast food, at that. We work in a profession. A calling. There's no relationship whatsoever."

I beg, as usual, to differ with my imaginary partner. In fact, I would say that if the relationship of good management to employee satisfaction is important for workers in a fairly simple, rote-work environment, it will be significantly more important in a high-stress, knowledge-based, service-oriented environment such as that of most law firms.

Look at it this way; the number of tasks that need to be managed in a Domino's  is relatively limited. The volume of management "stimuli" is fairly low. But even so, Domino's  has shown that good, well equipped managers help to keep their employees happy and reduce churn.

How many more managerial tasks are there at a law firm? How many more times does a young associate, a paralegal, a secretary or an employee at a firm need to rely on the guidance of a partner or firm manager for direction?  I would say that your typical law firm is hundreds, if not thousands of times more complex a place to work than a Domino's.

And yet law firms do almost nothing in terms of training, equipping and rewarding their partners in terms of their roles as managers of associates and employees. In fact, I don't think I am aware of ever having heard of a firm that had, as part of their partnership track, a requirement that associates undergo any kind of training in personnel, project or group management [If you have a good example, I'd love to hear and/or blog about it; please email me]. Like so many other skills at law firms, associates either pick it up by osmosis... or they don't. Which mostly means that they don't.

Look at your firm: how many members of your management committee have any real experience managing people, projects, groups, processes? Other than directly within the practice of law, I mean. Has your managing partner ever had more direct reports than a secretary before being put in charge of the entire firm? Does your director of facilities have more experience managing people than your MP? Are these questions making you uncomfortable?

What does associate churn cost your firm? How much could you save every year if you invested some time and money in training your partners how to better manage people?

Managing your firm takes different skills than practicing law. If you have more than 10 lawyers in your firm, you owe it to yourself, your attorneys and your employees to spend a little bit of time learning how to behave like a business, rather than a pack of practitioners who simply share copiers, coffee machines and letterhead.

If Domino's  Pizza can do it, why can't you?

Comments

[Rob Hyndman]

Andy,

You're right of course, and it should happen, but after 10 years in the big firms pounding that drum my view is that it never will. Biglaw understands $ today, and little else. Investing for the future - no, they don't get it.

Partly, this is the natural consequence of an organizational structure that does not reward planning for the future.

Eg - if they were public co's, doing this would at some point translate into even small improvements in the bottom line, which the analysts would respond to, improving stock price for the benefit of the owners. Even small improvements would matter, because on a discounted cash flow basis small improvements, forecasted into the future, make a big impact on current value.

But a partnership does not see into the future that way because the partners see tomorrow, and maybe the day after, and no further. I'm hyperboling to make a point, but you get my meaning. The incentive to manage well just isn't there. Their incentive, as they see it, is to do whatever it takes to jack up earnings today, so that they increase the draw tomorrow. "The long term? heck, in the long term we're all dead."

I think it's about that attitude.

Cheers,
Rob

[Andy Havens]

Rob: good comment, and all too true. One of the things that makes that true, in many cases, is that power at firms goes up geometrically with age. And as a partner ages, he has ever less financial incentive to take the long view of firm economic health. If you've only got 5 years left until retirement, you've got very little stake in a plan with a 10-year payout.

The "age = power" factor also contributes to the problems firms have in adapting to change. There's a great Harvard Business Review article from more than a decade ago titled "Teaching Smart People to Learn." In it they point out that the higher you go in an organization, the less likely it is that people will be positioned to learn well. For one thing, they are usually people who are very smart, and, thus, are conditioned to believe that they always know best. For another, their subordinates (don't you love that term?) will both feel that a) the boss knows best, and b) it's dangerous to contradict the boss. This is true in spades at most law firms.

So you have this neat package at big firms where the people in charge have little or no financial incentive to invest in changes that might make the firms better/stronger/faster/more efficient, and a social structure where the leaders are both isolated from and intolerant of change.

And, to top it all off, we have Hildebrandt PRAISING the industry for "keeping expense growth flat" at 7.7%.

The mind reels.

[Shawn Struck]

Yeah, the blessing and the bane of the lawyer and law firm mindset seems to be the worshipping of consistency and precedent.

[Jim Logan]

The Pizza People have a fundamental advantage...they recongize they're a business.

[Didier]

Unfortunately as one of Mr. Brandon's pizza delivery drivers, I don't see anything good about his strategies.

All of the items that Domino's Pizza is stated to have done since Mr. Brandon's ascent to the CEO position...have done nothing to benefit the lowest paid of the employees (the ones the companies have to replace over and over).

None of these things do anything but get the average manager to be more of a jerk to the employees while he/she is sitting in the office. Management is getting paid more, the Area Managers are getting paid more, God knows Mr. Brandon is getting paid LOTS more....meanwhile the actual people in the trenches are working for sub-poverty level wages.

[Andy Havens]

While I agree with Didier that pizza driving is tough, underpaid work -- as is much of the work in the food service industries -- you can't argue that Brandon's strategies have worked to reduce line-level employee churn. Some part of what the store managers are doing must be having a positive effect on employees and drivers, or else they would be quitting just as fast as they were before he put his changes in place, or even faster.

I did my time in food service back in high-school and college. It's hard work. But one of the things most of us knew was that if we quit working at the place where we were, we'd probably be able to get a similar job at a different chain just up Route 9 a mile or so. I know that's not going to be the case for everyone. But one of the reasons that employee churn in the food industry is so high, is because skills are very portable; which is a good thing for workers.

Marketing is always a two way street, though. If there are ways that you -- Didier -- can think of to improve the situation, please reply and let us know.