Domino’s Pizza At Domino’s Pizza, Company­wide Turnover Is 158 Percent. That Means

question 89

Multiple Choice

Domino’s Pizza
At Domino’s Pizza, company­wide turnover is 158 percent. That means Domino’s 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 Domino’s 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 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. Indeed, according to the University of Michigan’s American consumer satisfaction index, Domino’s ranks in the bottom half of fast­food companies. Second, to right those wrongs, Domino’s often says the pizza is free—“Our fault, no charge.”—and that hurts profits. So 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 $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 Domino’s, 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 an astonishing 15 percent to
20 percent of revenues. The question, of course, is what to do 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.
Domino’s is also doing a much better job of screening and selecting potential managers. Anyone who wants to manage a Domino’s store has to pass a 30­minute online test of their financial and management skills. If you’re not familiar with financial concepts such as “break­even” 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.

-Refer to Domino's. One new pay method Domino's implemented to combat its problems is a store­profitability bonus. On average, the store-profitability bonuses add 30 percent, or about $10,000, to the $32,000 base pay for the managers of Domino's stores that perform well. These bonuses are a form of ________.

• A) piecework pay
• B) hierarchical pay
• C) sales commission
• D) payroll deductions
• E) profit sharing

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Definitions:

Depreciable Cost

The amount of an asset’s cost that will be allocated to depreciation expense over its useful life, determined by the difference between the asset’s initial cost and its residual value.

Acquisition Cost

The total cost incurred to acquire an asset or service, including purchase price and all other expenses related to acquisition.

Depreciation Method

A systematic approach used to allocate the cost of a tangible asset over its useful life, reflecting its consumption, wear and tear, or obsolescence.

Stockholders' Equity

The interest left in a firm's assets after liabilities are deducted, reflecting the stake of the company's owners.