Turns out paying people a higher wage and giving them more benefits makes them work motivated.
McDonald’s (MCD) on Friday reported its third straight increase in quarterly comparable sales, helped by moves such as bringing back All-Day breakfast and offering new menu options.
But another move by McDonald’s is behind this reversal of fortune for the hamburger chain, which had posted two years of declines through last fall: higher wages and tuition help for employees.
Last year, McDonald’s announced it would raise the average hourly rate for workers at the U.S. restaurants it owned to $9.90 from $9.01 starting July 2015, with average wages climbing above $10 per hour by the end of 2016. The company also said it would allow those employees to earn up to five days of paid vacation every year following one year of employment. The goal was to galvanize restaurant staff at a time of major and frequent changes.
And taking a page out of Starbucks’ (SBUX) book, McDonald’s last year also launched its “Archways to Opportunity” set of programs to provide assistance to restaurant employees pursuing their educational goals, whether finishing high school diploma or going to college. Some 5,000 McDonald’s workers are currently tapping the program.
Such moves are reducing the loss of good workers, and helping McDonald’s improve order accuracy, speed of service and the overall impression customers have of service, McDonald’s CEO Steve Easterbrook told Wall Street analysts on Friday on a call to discuss the company’s quarterly results. (McDonald’s sales at U.S. restaurants open at least a year rose 5.4%.)
“The improvements we made to our compensation and benefits package to employees in U.S.-company operated restaurants, along with expanding Archways to Opportunity … have resulted in lower crew turnover and higher customers satisfaction scores,” Easterbrook said.
He added: “Customers in the U.S. are noticing a difference.” Easterbrook said customer satisfaction scores have rise 6 percentage points in the last year.
His counterparts at Walmart (WMT) have also said the raises (the lowest wage at Walmart is $10) at that retailer have helped lower turnover, and improved customer satisfaction by given workers more incentives. Walmart has also seen U.S. comparable sales rise for several quarters.
It’s worth noting though that the wages at Walmart and McDonald’s remain very far from the $15 level many advocates and government officials are pushing for. Still, so far the raises seem enough to get employees on board to help with the huge task of keeping these chains’ turnaround going.