Human resource management at Chipotle

Fast food restaurants are interesting cases to examine from an operations perspective. On the one hand, it’s a competitive business and shaving seconds off serving customers at the drive through or reducing food wastage by a small percentage can have huge consequences. (See, for example, this post on Taco Bell.) On the other, the firms in the market are not completely interchangeable so it is intriguing to see where they differ. We have, for example, posted in the past on how Pret A Manger manages it people.  Now Time has a profile of Steve Ells, the founder of Chipotle that highlights how the burrito chain selects and develops its people (The Fast-Food Ethicist, Jul 23).

The rapidly growing restaurant chain has 13 official characteristics every employee must have, and four of them basically mean happy. But if Miranda thinks I’m not qualified to make burritos because of insufficient cheeriness, then there is no way Steve Ells, the founder and a co-CEO of the company, could get a job at Chipotle either.

Sitting at the unfinished-wood conference table at Chipotle’s small, sparse, exposed-brick offices in New York City, Ells at 46 is skinny, fashionable, passionate, exacting, candid, digression-proof, smile-free and unwilling to suffer even fools who are writing a long profile about him. The reason his employee-incentive program works, Ells explains, is that it makes happy people pleasers behave more like him. Miranda is one of about 300 restaurateurs–promoted from Chipotle’s 1,300-plus managers–who get stock options, a company car and, most important, $10,000 for each employee they develop into a general manager. The program has spiked profits at the restaurateurs’ branches. “That’s because restaurateurs started firing their low performers,” Ells brags. “And their mediocre performers. What fast-food place ever lets go of mediocre performers?” Seriously, Ells could never land a Chipotle lettuce-dicing gig.

There are some interesting points here. It is interesting that they have such generous incentives aimed at the managers. This may related to two factors. First, Chipotle does not franchise. One of the arguments for selling franchise is that the local owner has a personal incentive to invest and grow the business. Here, despite being a mere employee, there is a reason to clean house and up expectations of a given restaurant’s staff. Second, the chain is growing, which means that there’s going to be some where for that new general manager to go. That is, a manager is not per se training his or her replacement but rather developing the talent that the chain needs to maintain its growth. That also points out a limitation. This policy may not work as well as the business matures and has fewer opportunities for new managers.

The Time article has another interesting point: Chipotle’s employees actually cook in the restaurant.

Another way Chipotle is different from fast food is that the people who work at its restaurants actually cook–which means some locations are better than others. In the morning I spent in a Chipotle kitchen, my co-workers were chopping lettuce, dicing onions, even pouring oil slowly into a blender for the salad dressings they make twice each day. No one lasts very long at Chipotle without acquiring fairly good knife skills. (There’s a good reason everyone wears chain-metal gloves when they cut.) There’s no freezer, so ingredients are delivered several times a week. Employees have to adjust recipes on the fly, depending on how big the avocados are or how hot the peppers are at different times of the year. When each batch of guacamole is made, all the employees have to taste it to see if it needs more lime, salt or cilantro. “We’ve got to be the only fast restaurant that tastes,” Ells says. “What are you going to do to taste a Big Mac? Taste a squirt of that sauce that comes out of those guns? No one made it! So they’re not going to taste it.”

That suggests that the firm’s success is more closely tide to the skill and training of its staff than most fast food restaurants. At McDonald’s or Taco Bell, the processes are highly specified so they can run despite the people. Here, the people are key to making everything work and all the more reason to clear out under-performers as quickly as possible.

Finally, this post would incomplete if it did not include the absolute best quote of the article.

Though Ells says he gained a lot from his relationship with McDonald’s, his animosity toward its system is clear. It was because of his experience with the company that he decided to build open kitchens so people could see where their meal is coming from. When I ask him if he learned anything else from his time there, he adds this: “Clowns are scary f—ers.”